10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2019

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-15369

WILLIS LEASE FINANCE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	68-0070656
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

4700 Lyons Technology Parkway	Coconut Creek	Florida	33073
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code (561) 349-9989

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.01 par value per share	WLFC	Nasdaq Global Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.   Yes ☐  No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes ☐  No  ☒

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 ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated Filer	☒
Non-Accelerated Filer	☐	Smaller Reporting Company	☒
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

The aggregate market value of voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2019) was approximately $178.3 million (based on a closing sale price of $58.32 per share as reported on the NASDAQ Stock Market).

The number of shares of the registrant’s Common Stock outstanding as of March 9, 2020 was 5,855,913.

DOCUMENTS INCORPORATED BY REFERENCE

The Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders is incorporated by reference into Part III of this Form 10-K.

WILLIS LEASE FINANCE CORPORATION

2019 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

	PART I
Item 1.	Business	3
Item 1A	Risk Factors	8
Item 1B	Unresolved Staff Comments	21
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	22
	PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters	22
Item 6.	Selected Financial Data	23
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other Information	31
	PART III
Item 10.	Directors and Executive Officers of the Registrant	31
Item 11.	Executive Compensation	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31
Item 13.	Certain Relationships and Related Transactions	31
Item 14.	Principal Accountant Fees and Services	31
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	31
Item 16.	Form 10-K Summary	35

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PART I

ITEM 1.     BUSINESS

INTRODUCTION

Willis Lease Finance Corporation with its subsidiaries (“WLFC” or the “Company”) is a leading lessor and servicer of commercial aircraft and aircraft engines. Our principal business objective is to build value for our shareholders by acquiring commercial aircraft and engines and managing those assets in order to provide a return on investment, primarily through lease rent and maintenance reserve revenues, as well as through management fees earned for managing assets owned by other parties. As of December 31, 2019, we had a total lease portfolio consisting of 263 engines and related equipment, 12 aircraft, 10 other leased parts and equipment and one marine vessel with 85 lessees in 41 countries with an aggregate net book value of $1,650.9 million. In addition to our owned portfolio, as of December 31, 2019, we managed a total lease portfolio of 450 engines, aircraft and related equipment for other parties.

Willis Aeronautical Services, Inc. (“Willis Aero”) is a wholly-owned subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines.

Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 422 engines, excluding WLFC engines, under management as of December 31, 2019.

Currently, an independent committee established by our Board of Directors is reviewing and negotiating a proposal from our Chief Executive Officer and largest investor (individually and together with an entity controlled by him, the “Willis Parties”) and our Senior Vice President, Corporate Development (together with the Willis Parties, the “Group”) to acquire the Company pursuant to a merger. The Group has not yet submitted a complete proposal for consideration by the independent committee, including indicative financing terms. Consummation of any merger transaction will be subject to approval by the independent committee of the terms of a complete proposal submitted for consideration as well as the execution of definitive merger documentation. There can be no assurance regarding the terms and details of any transaction, that any future proposal by the Group will be made, that any proposal made by the Group will be accepted by the independent committee or that any merger transaction will ultimately be consummated.

We are a Delaware corporation, incorporated in 1996. Our executive offices are located at 4700 Lyons Technology Parkway, Coconut Creek, Florida 33073. We transact business directly and through our subsidiaries unless otherwise indicated.

We maintain a website at www.willislease.com where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available without charge, as soon as reasonably practicable following the time they are filed with or furnished to the SEC. The SEC also maintains an electronic Internet site that contains our reports, proxies and information statements, and other information that we file or furnish at http://www.sec.gov.

We separate our business into two reportable segments, Leasing and Related Operations and Spare Parts Sales. Our business activities by reportable segment are described below.

Leasing and Related Operations

Our 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. These spare engines are required for various reasons including requirements that engines be inspected and repaired at regular intervals based on equipment utilization. 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. Commercial aircraft operators and others in the industry generally estimate that the total number of spare engines needed is around 10% of the total number of installed engines. Industry research suggests that there are nearly 48,000 engines installed on commercial aircraft. Accordingly, it is estimated that there are 4,800 spare engines in the market, including both owned and leased spare engines.

Our 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. It enters into sale and lease back transactions with operators of aircraft and providers of engine maintenance cost per hour services. We also purchase 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).

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Total revenues from our Leasing and Related Operations reportable segment was 86.3% and 88.2% of the respective total consolidated revenue for the years ended December 31, 2019 and 2018, respectively.

At December 31, 2019, approximately 83% of our on-lease engines, aircraft, and related equipment (all of which we sometimes refer to as “equipment”) by net book value are leased and operated internationally. Substantially all leases relating to this equipment are denominated and payable in U.S. dollars, which is customary in the industry. Future leases may provide for payments to be made in euros or other foreign currencies. In 2019, we leased our equipment to lessees domiciled in eight geographic regions.

Spare Parts Sales

Our wholly owned 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. The launch of this business segment in 2013 positioned our Company to provide end-of-life solutions for the growing supply of surplus aircraft and engines. With the establishment of Willis Aero, we are able to manage the full lifecycle of our lease assets, enhance the returns on our engine portfolio and create incremental value for our shareholders.

INDUSTRY BACKGROUND - THE DEMAND FOR LEASED AIRCRAFT ENGINES

Historically, commercial aircraft operators owned rather than leased their spare engines. As engines become more powerful and technically sophisticated, they also become more expensive to acquire and maintain. In part due to cash constraints on commercial aircraft operators and the costs associated with engine ownership, commercial aircraft operators have become more cost-conscious and now utilize operating leases for a portion of their spare engines and are therefore better able to manage their finances in this capital-intensive business. Engine leasing is a specialized business that has evolved into a discrete sector of the commercial aviation market. Participants in this sector need access to capital, as well as specialized technical knowledge, in order to compete successfully.

Growth in the spare engine leasing industry is dependent on two fundamental drivers:

• the number of commercial aircraft, and therefore engines, in the market; and

• the proportion of engines that are leased, rather than owned, by commercial aircraft operators.

We believe both drivers will increase over time.

Increased number of aircraft, and therefore engines, in the market

We believe that the number of commercial and cargo aircraft, and hence spare engines, will increase. Boeing projects 3.4% annual growth in the global commercial jet fleet, doubling the current fleet to over 50,660 aircraft by 2038. Aircraft equipment manufacturers have predicted such an increase in aircraft to address the rapid growth of both passenger and cargo traffic in the Asian markets, as well as demand for new aircraft in more mature markets. While we believe these predictions are accurate over the long term, should a global health emergency, such as the coronavirus outbreak (COVID 19), develop that materially disrupts the airline industry or slows down passenger growth in China and elsewhere, such growth and demand may be negatively impacted over the short to medium term. See “Risk Factors” below.

Increased lease penetration rate

Spare engines provide support for installed engines in the event of routine or other engine maintenance or unscheduled removal. The number of spare engines needed to service any fleet is determined by many factors. These factors include:

• the number and type of aircraft in an aircraft operator’s fleet;

• the geographic scope of such aircraft operator’s destinations;

• the time an engine is on-wing between removals;

• average shop visit time; and

• the number of spare engines an aircraft operator requires in order to ensure coverage for predicted and unscheduled removals.

We believe that commercial aircraft operators are increasingly considering their spare engines as significant capital assets, where operating leases may be more attractive than finance leases or ownership of spare engines. We believe that currently 35% of the spare engine market falls under the category of leased engines. Industry analysts have forecast that the percentage of leased engines is likely to increase over the next 15 years as engine leasing follows the growth of aircraft leasing. We believe this is due to the increasing cost

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of newer engines, the anticipated modernization of the worldwide aircraft fleet and the significant cost associated therewith, and the emergence of new niche-focused airlines which generally use leasing in order to obtain their capital assets.

ENGINE LEASING

As of December 31, 2019, all of our leases to air carriers, manufacturers and MROs are operating leases with the exception of two leases entered into during the first quarter of 2019 which are classified as notes receivable under Accounting Standards Update (“ASU”) 2016-02 (“ASU 2016-02”). Under operating leases, we retain the potential benefit and assume the risk of the residual value of the equipment, in contrast to finance leases where the lessee has more of the potential benefits and risks of ownership. Operating leases allow commercial aircraft operators greater fleet and financial flexibility due to the relatively small initial capital outlay necessary to obtain use of the aircraft equipment, and the availability of short and long term leases to better meet their needs. Operating lease rates are generally higher than finance lease rates, in part because of the lessor retained residual value risk.

We describe all of our current leases as “triple-net” operating leases. A triple-net operating lease requires the lessee to make the full lease payment and pay any other expenses associated with the use of the engines, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes. The leases contain detailed provisions specifying the lessees’ responsibility for engine damage, maintenance standards and the required condition of the engine upon return at the end of the lease. During the term of the lease, we require the lessee to maintain the engine in accordance with an approved maintenance program designed to meet applicable regulatory requirements in the jurisdictions in which the lessee operates.

We try to mitigate risk where possible. For example, we make an analysis of the credit risk associated with the lessee before entering into any significant lease transaction. Our credit analysis generally consists of evaluating the prospective lessee’s financial standing by utilizing financial statements and trade and/or banking references. In certain circumstances, we may require our lessees to provide additional credit support such as a letter of credit or a guaranty from a bank or a third party or a security deposit. We also evaluate insurance and expropriation risk and evaluate and monitor the political and legal climate of the country in which a particular lessee is located in order to determine our ability to repossess our engines should the need arise. Despite these guidelines, we cannot give assurance that we will not experience collection problems or significant losses in the future. See “Risk Factors” below.

At the commencement of a lease, we may collect, in advance, a security deposit normally equal to at least one month’s lease payment. The security deposit is returned to the lessee after all lease return conditions have been met. Under the terms of some of our leases, during the term of the lease, the lessee pays amounts to us based on usage of the engine, which is referred to as maintenance reserves or use fees, which are designed to cover the expected future maintenance costs. For those leases in which the maintenance reserves are reimbursable to the lessee, maintenance reserves are collected and are reimbursed to the lessee when qualifying maintenance is performed. Under longer-term leases, to the extent that cumulative use fee billings are inadequate to fund expenditures required prior to return of the engine to us, the lessee is obligated to cover the shortfall.

During the lease period, our leases require that maintenance and inspection of the leased engines be performed at qualified maintenance facilities certified by the FAA or its foreign equivalent. In addition, when an engine becomes off-lease, it undergoes inspection to verify compliance with lease return conditions. Our management believes that our attention to our lessees and our emphasis on maintenance and inspection helps preserve residual values and generally helps us to recover our investment in our leased engines.

Upon termination of a lease, we will either enter into a new lease, sell or part out the related engines or airframe. The demand for aftermarket engines for either sale or lease may be affected by a number of variables, including:

• general market conditions;

• regulatory changes (particularly those imposing environmental, maintenance and other requirements on the operation of engines);

• changes in demand for air travel;

• fuel costs;

• changes in the supply and cost of aircraft equipment; and

• technological developments.

The value of a particular used engine or airframe varies greatly depending upon its condition, the maintenance services performed during the lease term and, as applicable, the number of hours or cycles remaining until the next major maintenance is required. If we are unable to lease or sell engines on favorable terms, our financial results and our ability to service debt may be adversely affected. See “Risk Factors” below.

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The value of a particular model of engine is heavily dependent on the status of the types of aircraft on which it is installed. We believe values of engines tend to be stable so long as the host aircraft for the engines as well as the engines themselves are still being manufactured. Prices will also tend to remain stable and even rise after a host aircraft is no longer manufactured so long as there is sufficient demand for the host aircraft. However, the value of an engine begins to decline rapidly once the host aircraft begins to be retired from service and/or parted out in significant numbers. Values of engines also may decline because of manufacturing defects that may surface subsequently.

As of December 31, 2019, we had a total lease portfolio consisting of 263 engines and related equipment, 12 aircraft, 10 other leased parts and equipment and one marine vessel with a net book value of $1,650.9 million. As of December 31, 2018, we had a total lease portfolio consisting of 244 engines and related equipment, 17 aircraft and 10 other leased parts and equipment, with a net book value of $1,673.1 million.

As of December 31, 2019 minimum future rentals under non-cancelable operating leases of these engines, related equipment and aircraft assets were as follows:

Year	(in thousands)
2020	$	155,970
2021	95,015
2022	59,033
2023	33,418
2024	21,287
Thereafter	14,754
	$	379,477

As of December 31, 2019, we had 85 lessees of commercial aircraft engines and related equipment, aircraft, and other leased parts and equipment in 41 countries. We believe the loss of any one customer would not have a significant long-term adverse effect on our business. We operate in a global market in which our engines are easily transferable among lessees located in many countries, which stabilizes demand and allows us to recover from the loss of a particular customer. As a result, we do not believe we are dependent on a single customer or a few customers, the loss of which would have a material adverse effect on our revenues.

In 2011 we 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 fifty percent interest in the joint venture. WMES owned a lease portfolio of 36 engines and five aircraft with a net book value of $306.0 million as of December 31, 2019. Our investment in the joint venture was $44.1 million as of December 31, 2019.

In 2014 we entered into an agreement with China Aviation Supplies Import & Export Corporation (“CASC”) to participate in a joint venture named CASC Willis Engine Lease Company Limited (“CASC Willis”), a new joint venture based in Shanghai, China. Each partner holds a fifty percent 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. During 2016, CASC was reorganized, with portions of its partnership interest in CASC Willis being transferred to three Chinese airlines and another government-owned entity. The 2016 CASC reorganization resulted in no voting structure change to the joint venture. CASC Willis owned a lease portfolio of four engines with a net book value of $49.2 million as of December 31, 2019. Our investment in the joint venture was $13.8 million as of December 31, 2019. 

AIRCRAFT LEASING

As of December 31, 2019, we owned and leased four Boeing 737 aircraft, five A319-111 aircraft, two A319-112 aircraft, and one A319-200 aircraft with an aggregate net book value of $138.9 million.

Our 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, we reimburse the lessee for costs incurred up to but not exceeding maintenance reserves the lessee has paid to us. Maintenance reserves are designed to cover the expected maintenance costs. The lessee is also responsible for compliance with all applicable laws and regulations with respect to the aircraft. We require our lessees to comply with FAA requirements. We periodically inspect our leased aircraft. Generally, we require 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 our remedies and rights in the event of a default by the lessee and specific

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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 subsidiary, Willis Aero. Willis Aero primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment from third parties or from the leasing portfolio. This business segment enables our Company to provide end-of-life solutions for the growing supply of surplus aircraft and engines, as well as manage the full lifecycle of our lease assets, enhance the returns on our engine portfolio and create incremental value for our shareholders.  As of December 31, 2019, spare parts inventory had a carrying value of $41.8 million.

ASSET MANAGEMENT

Willis Asset Management is a wholly-owned subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 422 engines, excluding WLFC engines, under management as of December 31, 2019.

COMPETITION

The markets for our products and services are very competitive, and we face competition from a number of sources. These competitors include aircraft engine and aircraft parts manufacturers, aircraft and aircraft engine lessors, airline and aircraft service and repair companies and aircraft and aircraft engine spare parts distributors. Many of our competitors have substantially greater resources than us. Those resources may include greater name recognition, larger product lines, complementary lines of business, greater financial, marketing, information systems and other resources. In addition, equipment manufacturers, aircraft maintenance providers, FAA certified repair facilities and other aviation aftermarket suppliers may vertically integrate into the markets that we serve, thereby significantly increasing industry competition and negatively impacting the Company. We can give no assurance that competitive pressures will not materially and adversely affect our business, financial condition or results of operations.

We compete primarily with aircraft engine manufacturers as well as with other aircraft engine lessors. It is common for commercial aircraft operators and MROs to utilize several leasing companies to meet their aircraft engine needs and to minimize reliance on a single leasing company.

Our competitors compete with us in many ways, including pricing, technical expertise, lease flexibility, engine availability, supply reliability, customer service and the quality and condition of engines. Many of our competitors have greater financial resources than we do, or are affiliates of larger companies. We emphasize the quality of our portfolio of aircraft engines, supply reliability and high level of customer service to our aircraft equipment lessees. We focus on ensuring adequate aircraft engine availability in high-demand locations, dedicate large portions of our organization to building relationships with lessees, maintain close day-to-day coordination with lessees and have developed an engine pooling arrangement that allows pool members quick access to available spare aircraft engines.

INSURANCE

In addition to requiring full indemnification under the terms of our leases, we require our lessees to carry the types of insurance customary in the air transportation industry, including comprehensive third party liability insurance and physical damage and casualty insurance. We require that we be named as an additional insured on liability insurance with ourselves and our lenders normally identified as the loss payee for damage to the equipment on policies carried by lessees. We monitor compliance with the insurance provisions of the leases. We also carry contingent physical damage and third party liability insurance as well as product liability insurance.

GOVERNMENT REGULATION

Our 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 our business operations. All aircraft operated in the United States must be maintained under a continuous condition-monitoring program and must periodically undergo thorough inspection and maintenance. The inspection, maintenance and repair procedures for commercial aircraft are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians. The FAA can suspend or revoke the authority of air carriers or their licensed personnel for failure to comply with regulations and ground aircraft if their airworthiness is in question.

While our leasing and reselling business is not regulated, the aircraft, engines and related parts that we purchase, lease and sell must be accompanied by documentation that enables the customer to comply with applicable regulatory requirements. Furthermore, before parts may be installed in an aircraft, they must meet certain standards of condition established by the FAA and/or the equivalent regulatory agencies in other countries. Specific regulations vary from country to country, although regulatory requirements in other countries are

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generally satisfied by compliance with FAA requirements. With respect to a particular engine or engine component, we utilize FAA and/or EASA certified repair stations to repair and certify engines and components to ensure marketability.

Governmental regulations where the related airframe is registered, and where the aircraft is operated, stipulate noise and emissions levels restrictions. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with Stage III noise requirements. In addition to the current Stage III compliance requirements, the United States and the International Civil Aviation Organization, or “ICAO,” have adopted a more stringent set of “Stage IV” standards for noise levels which apply to engines manufactured or certified from 2006 onward. At this time, the United States regulations do not require any phase-out of aircraft that qualify only for Stage III compliance, but the European Union has established a framework for the imposition of operating limitations on non-Stage IV aircraft.

As of December 31, 2019, most of the engines in our lease portfolio are Stage IV engines and are generally suitable for use on one or more commonly used aircraft.

We believe that the aviation industry will be subject to continued regulatory activity. Additionally, increased oversight will continue to originate from the quality assurance departments of airline operators. We have been able to meet all such requirements to date, and believe that we will be able to meet any additional requirements that may be imposed. We cannot give assurance, however, that new, more stringent government regulations will not be adopted in the future or that any such new regulations, if enacted, would not have a material adverse impact on us.

FINANCING/SOURCE OF FUNDS

We, directly or through our Willis Engine Structured Trust II, III, and IV (“WEST II”, “WEST III”, “WEST IV”) asset-backed securitizations (“ABS”) typically acquire engines with a combination of equity capital and funds borrowed from financial institutions. In order to facilitate financing and leasing of engines, each engine is generally owned through a statutory or common law trust that is wholly-owned by us or our subsidiaries. We usually borrow up to 85% of an engine purchase price. Substantially all of our assets secure our related indebtedness. We typically acquire engines from airlines, engine manufacturers or from other lessors. From time to time, we selectively acquire engines prior to a firm commitment to lease or sell the engine, depending on the price of the engine and market demand with the expectation that we can lease or sell such engines in the future. Additionally, for discrete financing purposes, we will enter into bi-lateral and preferred financing arrangements from time to time.

EMPLOYEES

As of December 31, 2019, we had 232 total employees and 218 full-time employees (excluding consultants), in sales and marketing, technical service and administration. None of our employees are covered by a collective bargaining agreement and we believe our employee relations are satisfactory.

ITEM 1A.    RISK FACTORS

The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially and adversely affected.

RISKS RELATING TO OUR BUSINESS

Risks Related to Our Operations

We are affected by the risks faced by commercial aircraft operators and MROs because they are our customers.

We operate as a supplier of engines, aircraft and related parts (“aviation equipment”) to commercial aircraft operators and MROs and are indirectly impacted by all the risks facing commercial aircraft operators and MROs today. The ability of each lessee to perform its obligations under the relevant lease and the demand of companies to purchase aviation equipment will depend primarily on the lessee’s (or in the case of parts and materials, the purchaser’s) financial condition and cash flow. This may be affected by factors beyond our control, including:

• general economic conditions in the countries in which our customers operate, including changes in gross domestic product;

• demand for air travel and air cargo shipments;

• increased competition;

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• the availability of government support, which may be in the form of subsidies, loans (including export/import financing), guarantees, equity investments or otherwise;

• changes in interest rates and the availability and terms of credit available to commercial aircraft operators including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in fuel hedging contracts and the ability of airlines and MROs to make or refinance principal payments as they come due;

• geopolitical and other events, including concerns about security, terrorism, war, pandemics and similar public health concerns and political instability; 

• changing political conditions, including risk of rising protectionism and imposition of new trade barriers;

• inclement weather and natural disasters;

• environmental compliance and other regulatory costs, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations;

• cyber risk, including information hacking, viruses and malware;

• labor contracts, labor costs and strikes or stoppages at commercial aircraft operators;

• operating costs, including the price and availability of fuel, maintenance costs, and insurance costs and coverages;

• technological developments;

• airport access and air traffic control infrastructure constraints;

• industry capacity, utilization and general market conditions; and

• market prices for aviation equipment.

To the extent that our customers are negatively affected by these risk factors, we may experience:

• a decrease in demand for some types of aviation equipment in our portfolio;

•greater credit risks from our customers, and a higher incidence of lessee defaults and corresponding repossessions;

• an inability to quickly lease engines and aircraft on commercially acceptable terms when these become available through our purchase commitments and regular lease terminations;

• shorter lease terms, which may increase our expenses and reduce our utilization rates; and

• fewer opportunities to manage aviation equipment for other companies, and/or less profitable terms.

Our operating results vary and comparisons to results for preceding periods may not be meaningful.

Due to a number of factors, including the risks described in this ITEM 1A, our operating results may fluctuate. These fluctuations may also be caused by:

•the timing and number of purchases and sales of engines or aircraft;

• the timing and amount of maintenance reserve revenues recorded resulting from the termination of long term leases, for which significant amounts of maintenance reserves may have accumulated;

•the termination or announced termination of production of particular aircraft and engine types;

•the retirement or announced retirement of particular aircraft models by aircraft operators;

•the operating history of any particular engine, aircraft or engine or aircraft model;

•the length of our operating leases; and

•the timing of necessary overhauls of engines and aircraft.

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These risks may reduce our utilization rates, lease margins, maintenance reserve revenues and proceeds from engine and aircraft sales, and result in higher legal, technical, maintenance, storage and insurance costs related to repossession and the cost of engines being off-lease. As a result of the foregoing and other factors, the availability of engines and aircraft for lease or sale periodically experiences cycles of oversupply and undersupply of given engine or aircraft models. The incidence of an oversupply of engines or aircraft may produce substantial decreases in lease rates and the appraised and resale value of aviation equipment and may increase the time and costs incurred to lease or sell engines.

We anticipate that fluctuations from period to period will continue in the future. As a result, we believe that comparisons to results for preceding periods may not be meaningful and that results of prior periods should not be relied upon as an indication of our future performance.

We and our customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.

Licenses and consents

We and our customers operate in a highly regulated industry. A number of our leases require specific governmental or regulatory licenses, consents or approvals. These include consents for certain payments under the leases and for the export, import or re-export of our engines or aircraft. Consents needed in connection with future leasing or sale of our engines or aircraft may not be received timely or have economically feasible terms. Any of these events could adversely affect our ability to lease or sell engines or aircraft.

Civil aviation regulation

Users of engines and aircraft are subject to general civil aviation authorities, including the FAA and the EASA, who regulate the maintenance of engines and issue airworthiness directives. Airworthiness directives typically set forth special maintenance actions or modifications to certain engine and aircraft types or series of specific engines that must be implemented for the engine or aircraft to remain in service. Also, airworthiness directives may require the lessee to make more frequent inspections of an engine, aircraft or particular engine parts. Each lessee of an engine or aircraft generally is responsible for complying with all airworthiness directives. However, if the engine or aircraft is off lease, we may be forced to bear the cost of compliance with such airworthiness directives, and if the engine or aircraft is leased, subject to the terms of the lease, if any, we may be forced to share the cost of compliance.

Environmental regulation

Governmental regulations of noise and emissions levels may be applicable where the related airframe is registered, and where the aircraft is operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with Stage III noise requirements. In addition to the current Stage III compliance requirements, the United States and the ICAO have adopted a more stringent set of “Stage IV” standards for noise levels which apply to engines manufactured or certified from 2006 onward. At this time, the United States regulations do not require any phase-out of aircraft that qualify only for Stage III compliance, but the European Union has established a framework for the imposition of operating limitations on non-Stage IV aircraft. These regulations could limit the economic life of our engines and aircraft or reduce their value, could limit our ability to lease or sell the non-compliant engines or aircraft or, if modifications are permitted, require us to make significant additional investments in the engines or aircraft to make them compliant.

The United States and other jurisdictions are imposing more stringent limits on the emission of nitrogen oxide, carbon monoxide and carbon dioxide emissions from engines, consistent with ICAO standards. These limits generally apply only to engines manufactured after 1999. In 2005, the European Union launched an Emissions Trading System limiting greenhouse gas emissions by various industries and persons, including aircraft operators.  Concerns over global warming, climate change or other environmental issues could result in more stringent limitations on the operation of older, non-compliant engines and aircraft.

Failure to comply with anti-corruption laws, trade controls, economic sanctions and similar laws and regulations could subject us to penalties and other adverse consequences.

Our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (“FCPA”) and other anti-bribery laws in other jurisdictions, [including the UK Bribery Act 2010,] export controls and economic sanctions programs, including those administered by the U.S. Department of State, U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the Bureau of Industry and Security (“BIS”) of the Department of Commerce.

As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, we must comply with various laws and regulations relating to the

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export of products and technology from the U.S. and other countries having jurisdiction over our operations. Obtaining the necessary export license or other authorization for a particular lease may be time-consuming and may result in the delay or loss of leasing opportunities.

We are also subject to certain economic and trade sanctions programs that are administered by OFAC, which prohibit or restrict transactions to or from or dealings with specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially-designated nationals of those countries. It is possible that, without our knowledge, engines or other equipment that we export end up in the possession of individuals or entities that have been designated by OFAC or are located in a country subject to sanctions.

We have established policies and procedures designed to assist with our compliance with these laws and regulations. However, maintaining and enhancing our policies and procedures in response to changing laws and regulations or business circumstances can be costly and place restrictions on our operations, and we cannot guarantee that the precautions we take will prevent violations of anti-corruption and trade control laws and regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, the costs associated with responding to a government investigation and remediating any violations can be substantial. Accordingly, violations could adversely affect, among other things, our reputation, business, financial condition, results of operations and cash flows.

Our aircraft, engines or parts could cause bodily injury or property damage, exposing us to liability claims.

We are exposed to potential liability claims if the use of our aircraft, engines or parts is alleged to have caused bodily injury or property damage. Our leases require our lessees to indemnify us against these claims and to carry insurance customary in the air transportation industry, including liability, property damage and hull all risks insurance on our engines and on our aircraft at agreed upon levels. We can give no assurance that one or more catastrophic events will not exceed insurance coverage limits or that lessees’ insurance will cover all claims that may be asserted against us. Any insurance coverage deficiency or default by lessees under their indemnification or insurance obligations may reduce our recovery of losses upon an event of loss.

Our financial reporting for lease revenue may be adversely impacted by the new model for lease accounting, as well as any future change to current tax laws or accounting principles pertaining to operating or other lease financing.

Our lessees enjoy favorable accounting and tax treatment generally by using operating leases. Changes in tax laws or accounting principles that make operating leases less attractive to our lessees could have a material adverse effect on demand for our leases and on our business.

Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”).  If there are future changes in GAAP with regard to how we and our customers must account for leases, it could change the way we and our customers conduct our businesses and, therefore, could have the potential to have an adverse effect on our business.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The FASB issued ASU 2016-02 to increase transparency and comparability among organizations recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, lessors will account for leases using an approach that is substantially equivalent to existing GAAP for sales-type leases, direct financing leases and operating leases. Unlike current guidance, however, a lease with collectability uncertainties may be classified as a sales-type lease. If collectability of lease payments, plus any amount necessary to satisfy a lessee residual value guarantee, is not probable, lease payments received will be recognized as a deposit liability and the underlying assets will not be derecognized until collectability of the remaining amounts becomes probable. The amendments in this accounting standard update are effective for the Company on January 1, 2019, with early adoption permitted. The Company has adopted this accounting standard update effective January 1, 2019. The Company has adopted the standard using the optional transition method with no restatement of comparative periods and a cumulative effect adjustment, if any, recognized as of the date of adoption.

We may not be adequately covered by insurance.

By virtue of holding title to engines and aircraft, parties suffering damage as a result of malfunction of an engine or aircraft may assert that lessors are strictly liable for losses resulting from the operation of the engines and aircraft. Such liability may be asserted even under circumstances in which the lessor is not directly controlling the operation of the relevant aircraft. While we maintain contingent insurance covering losses not covered by our lessees’ insurance, such coverage may not be available in circumstances where the lessees’ insurance coverage is insufficient. In addition, if a lessee is not obligated to maintain sufficient insurance, we may incur the costs of additional insurance coverage during the related lease. We are required under certain of our debt facilities to obtain political risk insurance for leases to lessees in specified jurisdictions. We can give no assurance that such insurance will be available at commercially reasonable rates, if at all.

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We and our lenders generally are named as additional insureds on liability insurance policies carried by our lessees and are usually the loss payees for damage to our engines and aircraft. However, an uninsured or partially insured claim, or a claim for which third-party indemnification is not available, could have a material adverse effect upon us. A loss of an aircraft where we lease the airframe, an engine or other leased equipment could result in significant monetary claims for which there may not be sufficient insurance coverage.

Natural disasters, public health emergencies, such as the outbreak of the COVID-19 virus, and other business disruptions could cause significant harm to our customer base, which may materially adversely affect our business, results of operations, and financial condition.

Our business could be adversely impacted by the effects of public health emergencies such as the recent coronavirus (COVID-19) outbreak in Asia, which has spread to other parts of the world, including North America and Europe, and has already significantly impacted the airline industry. The current concerns related to COVID-19 have resulted in a number of countries imposing travel restrictions and mandatory quarantine periods for people traveling from affected regions, causing significant economic disruption, a reduction in commercial airline traffic and flight cancellations. The continuing spread of the virus to other countries and regions may result in the imposition of additional restrictions, increased flight cancellations and greater reluctance to travel, all of which may lead to greater economic disruption and a broader adverse impact on air travel and the aviation industry, resulting in lower demand for leases of our aircraft and engines and possibly impacting the ability of our lessees to satisfy their payment obligations to us. The International Air Transport Association recently estimated that the airline industry may lose up to $113 billion in sales due to reductions in air travel and flight cancellations as a result of the coronavirus.

Our U.S. and international operations and warehouse facilities are also susceptible to losses and interruptions caused by floods, hurricanes, earthquakes, typhoons, and similar natural disasters, as well as power outages, telecommunications failures, and similar events.

A decrease in air travel, lack of demand for air travel or downturn in the aviation industry caused by public health emergencies or natural disasters could result in lower utilization of our engine and aircraft assets, which could in turn materially and adversely affect our business, financial condition and results of operations. In addition, the occurrence of natural disasters and health emergency or similar events in any of the regions in which we operate could disrupt the operations of our business.

Risks Related to Our Aviation Assets

The value and lease rates of our engines and aircraft could decline.

The value of a particular model of engine depends heavily on the types of aircraft on which it may be installed and the supply of available engines. We believe values of engines tend to be relatively stable so long as there is sufficient demand for the host aircraft, and the demand for aircraft depend on numerous factors, including age, technology, and customer preference. We believe the value of an engine begins to decline rapidly once the host aircraft begins to be retired from service and/or used for spare parts in significant numbers. Certain types of engines and aircraft may be used in significant numbers by commercial aircraft operators that are currently experiencing financial difficulties. If such operators were to go into liquidation or similar proceedings, the resulting over-supply of engines and aircraft from these operators could have an adverse effect on the demand for the affected engine and aircraft types and the values of such aviation equipment.

Upon termination of a lease, we may be unable to enter into new leases or sell the affected aviation equipment on acceptable terms.

We directly or indirectly own the aviation equipment that we lease to customers and bear the risk of not recovering our entire investment through leasing and selling the applicable aircraft and engines. Upon termination of a lease, we seek to enter a new lease or to sell or part-out the applicable aviation equipment. We also selectively sell aviation equipment on an opportunistic basis. We cannot give assurance that we will be able to find, in a timely manner, a lessee or a buyer for aviation equipment coming off-lease or for the associated parts. If we do find a lessee, we may not be able to obtain satisfactory lease rates and terms (including maintenance and redelivery conditions) or rates and terms comparable to our current leases, and we can give no assurance that the creditworthiness of any future lessee will be equal to or better than that of the existing lessees of our engines. For engine leases with terms of 12 months or less, which as of December 31, 2019 constituted approximately 52.3% of our leased engines, we may frequently need to remarket such engines. We face the risk that we may not be able to keep our engines on lease consistently.

Although leases of engines account for most of our revenue, leases of aircraft expose us to greater risks than leases of engines and these risks could materially impact our financial condition and results of operations.

We are exposed to a number of risks related to our aircraft leasing activities. For example, leases of aircraft subject us to greater maintenance risks because the maintenance fees we charge may not cover aircraft maintenance costs that may be higher than anticipated. In addition, we face greater credit risk from lessees in this business as our aircraft lessees may file for bankruptcy which could result in us incurring greater losses with respect to aircraft than with respect to engines. Moreover, aircraft technology is constantly improving and, as a result, aircraft of a particular model and type tend to become obsolete and less in demand over time, when newer, more advanced

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and efficient aircraft become available. Consequently, we may experience difficulty in leasing or selling aircraft. Any of these risks could have a material adverse impact on our financial condition and results of operations.

We carry the risk of maintenance for our leased assets. Our maintenance reserves may be inadequate or lessees may default on their obligations to perform maintenance, which could increase our expenses.

Under most of our engine and aircraft leases, the lessee makes monthly maintenance reserve payments to us based on the asset’s usage and management’s estimate of maintenance costs. A certain level of maintenance reserve payments on the WEST II, WEST III and WEST IV engines are held in related engine reserve restricted cash accounts. Generally, the lessee under long term leases is responsible for all scheduled maintenance costs, even if they exceed the amounts of maintenance reserves paid. Ninety of our leases comprising approximately 23.8% of the net book value of our on-lease assets at December 31, 2019 do not provide for any monthly maintenance reserve payments to be made by lessees, and we can give no assurance that future leases of our engines or aircraft will require maintenance reserves. In some cases, including engine and aircraft repossessions, we may decide to pay for refurbishments or repairs if the accumulated use fees are inadequate.

We can give no assurance that our operating cash flows and available liquidity reserves, including the amounts held in the reserve restricted cash accounts, will be sufficient to fund necessary engine and aircraft maintenance. Actual maintenance reserve payments by lessees and other cash that we receive may be significantly less than projected as a result of numerous factors, including defaults by lessees. Furthermore, we can provide no assurance that lessees will meet their obligations to make maintenance reserve payments or perform required scheduled maintenance or, to the extent that maintenance reserve payments are insufficient, to cover the cost of refurbishments or repairs.

Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft and our ability to lease the engines and aircraft in a timely manner following termination of the leases.

The value and income producing potential of an engine or aircraft depends heavily on it being maintained in accordance with an approved maintenance system and complying with all applicable governmental directives and manufacturer requirements. In addition, for an engine or aircraft to be available for service, all records, logs, licenses and documentation relating to maintenance and operations of the engine or aircraft must be maintained in accordance with governmental and manufacturer specifications.

Our leases make the lessees primarily responsible for maintaining the engines or aircraft, keeping related records and complying with governmental directives and manufacturer requirements. Over time, certain lessees have experienced, and may experience in the future, difficulties in meeting their maintenance and recordkeeping obligations as specified by the terms of our leases.

Our ability to determine the condition of the engines or aircraft and whether the lessees are properly maintaining our assets is generally limited to the lessees’ reporting of monthly usage and any maintenance performed, confirmed by periodic inspections performed by us and third-parties. A lessee’s failure to meet its maintenance or recordkeeping obligations under a lease could result in:

• a grounding of the related engine or aircraft;

• a repossession that would likely cause us to incur additional and potentially substantial expenditures in restoring the engine or aircraft to an acceptable maintenance condition;

• a need to incur additional costs and devote resources to recreate the records prior to the sale or lease of the engine or aircraft;

• loss of lease revenue while we perform refurbishments or repairs and recreate records; and

• a lower lease rate and/or shorter lease term under a new lease entered into by us following repossession of the engine or aircraft.

Any of these events may adversely affect the value of the engine or aircraft, unless and until remedied, and reduce our revenues and increase our expenses. If aviation equipment is damaged during a lease and we are unable to recover from the lessee or though insurance, we may incur a loss.

The advent of superior engine and aircraft technology and higher production levels could cause our existing portfolio of aviation equipment to become outdated and therefore less desirable.

As manufacturers introduce technological innovations and new types of engines and aircraft, certain engines and aircraft in our existing portfolio of aviation equipment may become less desirable to potential lessees or purchasers. This next generation of engines and aircraft is expected to deliver improved fuel consumption and reduced noise and emissions with lower operating costs compared to current-technology aircraft.

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The introduction of new models of engines and aircraft and the potential resulting overcapacity in supply, could adversely affect the residual values and the lease rates for our engines and aircraft, our ability to lease or sell our engines and aircraft on favorable terms, or at all, or result in us recording future impairment charges.

Our customers face intense competition and some carriers are in troubled financial condition.

As a general matter, commercial aircraft operators with weak capital structures are more likely than well-capitalized operators to seek operating leases, and, at any point in time, investors should expect a varying number of lessees and sub-lessees to experience payment difficulties. As a result of such commercial aircraft operators’ weak financial condition and lack of liquidity, a portion of lessees over time may be significantly in arrears in their rental or maintenance payments and may default on their lease obligations. Given the size of our portfolio of engines and aircraft, we expect that from time to time some lessees will be slow in making, or will fail to make, their payments in full under their leases. As of December 31, 2019, we had an aggregate of approximately $2.7 million in lease rent and $3.8 million in maintenance reserve payments more than 30 days past due. Our inability to collect receivables or to repossess engines, aircraft or other leased equipment in the event of a default by a lessee could have a material adverse effect on us.

We may not correctly assess the credit risk of each lessee or may not be in a position to charge risk-adjusted lease rates, and lessees may not be able to continue to perform their financial and other obligations under our leases in the future. A delayed, reduced or missed rental payment from a lessee decreases our revenues and cash flow and may adversely affect our ability to make payments on our indebtedness or to comply with financial covenants in our loan documents (see “Our Financing Facilities Impose Restrictions on our Operations”). While we typically experience some level of delinquency under our leases, default levels may increase over time, particularly as our portfolio of engines and aircraft ages and if economic conditions deteriorate.

Various airlines have filed for bankruptcy in the United States and in foreign jurisdictions, with some seeking to restructure their operations and others ceasing operations entirely. In the case of airlines that are restructuring, such airlines often reduce their flights or eliminate the use of certain types of aircraft and the related engine types. Applicable bankruptcy laws often allow these airlines to terminate leases early and to return our engines or aircraft without meeting the contractual return conditions. In that case, we may not be paid the full amount, or any part, of our claims for these lease terminations. Alternatively, we might negotiate agreements with those airlines under which the airline continues to lease the engine or aircraft, but under modified lease terms. If requests for payment restructuring or rescheduling are made and granted, reduced or deferred rental payments may be payable over all or some part of the remaining term of the lease, although the terms of any revised payment schedules may be unfavorable and such payments may not be made.  In the case of an airline which has ceased operations entirely, in addition to the risk of nonpayment, we face the enhanced risk of deterioration or total loss of an engine or aircraft while it is under uncertain custody and control. In that case, we may be required to take legal action to secure the return of the engine or aircraft and its records or, alternatively, to negotiate a settlement under which we can immediately recover the engine or aircraft and its records in exchange for waiving subsequent legal claims.

We may not be able to repossess an engine or aircraft when the lessee defaults, and even if we are able to repossess the engine or aircraft, we may have to expend significant funds in the repossession, remarketing and leasing of the asset.

When a lessee defaults and such default is not cured in a timely manner we typically seek to terminate the lease and repossess the engine or aircraft. If a defaulting lessee contests the termination and repossession or is under court protection, enforcement of our rights under the lease may be difficult, expensive and time-consuming. We may not realize any practical benefits from our legal rights and we may need to obtain consents to export the engine or aircraft. As a result, the relevant asset may be off-lease or not producing revenue for a prolonged period. In addition, we will incur direct costs associated with repossessing our engine or aircraft. These costs may include legal and similar costs, the direct costs of transporting, storing and insuring the engine or aircraft, and costs associated with necessary maintenance and recordkeeping to make the asset available for lease or sale. During this time, we will realize no revenue from the leased engine or aircraft, and we will continue to be obligated to pay any debt financing applicable to the asset. If an engine is installed on an airframe, the airframe may be owned by an aircraft lessor or other third party. Our ability to recover engines installed on airframes may depend on the cooperation of the airframe owner.

Risks Related to Our Orders of New Engines

We have committed to purchase new engines in 2020 with an aggregate value of up to $104.4 million. Our ability to lease these assets on favorable terms, if at all, may be adversely affected by risks to the commercial airline industry generally. If we are unable to obtain commitments for the remaining deliveries or otherwise satisfy our contractual obligations to the engine manufacturers, we will be subject to several potential risks, including:

• forfeiting advance deposits, as well as incurring certain significant costs related to these commitments such as contractual damages and legal, accounting and financial advisory expenses;

• defaulting on any future lease commitments we may have entered into with respect to these engines, which could result in monetary damages and strained relationships with lessees;

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• failing to realize the benefits of purchasing and leasing the engines; and

• risking harm to our business reputation, which would make it more difficult to purchase and lease engines in the future on agreeable terms, if at all.

Risks Relating to Our Capital Structure

Our future growth and profitability will depend on our ability to acquire aviation equipment and make other strategic investments.  As a result, our inability to obtain sufficient capital to finance these acquisitions would constrain our ability to grow our portfolio and to increase our revenues.

Our business is capital intensive and highly leveraged. Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow against our portfolio of engines, aircraft and strategic investments is dependent, in part, on the appraised value of such engines, aircraft and investments. If the appraised value of our portfolio declines, we may be required to either refrain from borrowings or reduce the principal outstanding under certain of our debt facilities.

A significant increase in our cost to acquire engines and aircraft, or in our cost of strategic investments, due to increased interest expense or cost of capital will make it more difficult for us to make accretive acquisitions. The disruptions may also adversely affect our ability to raise additional capital to fund our continued growth. Although we have adequate debt commitments from our lenders, assuming they are willing and able to meet their contractual obligation to lend to us, market disruptions may adversely affect our ability to raise additional equity capital to fund future growth, requiring us to rely on internally generated funds. This would lower our rate of capital investment.

We can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or expand our credit facilities, could result in increased funding costs and would limit our ability to:

• meet the terms and maturities of our existing and future debt facilities;

• add new equipment to our portfolio;

• fund our working capital needs and maintain adequate liquidity; and

• finance other growth initiatives.

Our financing facilities impose restrictions on our operations.

We have, and expect to continue to have, various credit and financing arrangements with third parties. These financing arrangements are secured by all or substantially all of our assets. Our existing credit and financing arrangements require us to meet certain financial condition tests. Our revolving credit facility prohibits our purchasing or redeeming stock, or declaring or paying dividends on shares of any class or series of our common or preferred stock if an event of default under such facility has or will occur and remains uncured. The agreements governing our debt, including the issuance of notes by WEST II, WEST III and WEST IV, also include restrictive financial covenants. A breach of those and other covenants could, unless waived or amended by our creditors, result in a cross-default to other indebtedness and an acceleration of all or substantially all of our debt. We have obtained such waivers and amendments to our financing agreements in the past, but we cannot provide any assurance that we will receive such waivers or amendments in the future if we require them. If our outstanding debt is accelerated at any time, we likely would have little or no cash or other assets available after payment of our debts, which could cause the value or market price of our outstanding equity securities to decline significantly and we would have few, if any, assets available for distributions to our equity holders in liquidation.

We are exposed to interest rate risk on our leases, which could have a negative impact on our margins.

We are affected by fluctuations in interest rates. Our lease rates are generally fixed, and a portion of our debt bears variable rate interest based on one-month London Interbank Offered Rate (“LIBOR”), so changes in interest rates directly affect our lease margins. From time to time, we seek to reduce our interest rate volatility and uncertainty through hedging with interest rate derivative contracts with respect to a portion of our debt. Our lease margins, as well as our earnings and cash flows may be adversely affected by increases in interest rates. To the extent we do not have hedges or other derivatives in place or if our hedges or other derivatives do not mitigate our interest rate exposure from an economic standpoint, we would be adversely affected by increasing interest rates. As reported by Intercontinental Exchange, the one-month LIBOR was approximately 1.76% and 2.50% on December 31, 2019 and December 31, 2018, respectively.

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Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates on our current or future indebtedness and may otherwise adversely affect our financial condition and results of operations.

Certain of our indebtedness is made at variable interest rates that use LIBOR (or metrics derived from or related to LIBOR), as a benchmark for establishing the interest rate. On July 27, 2017, the United Kingdom’s Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. These reforms may cause LIBOR to cease to exist, new methods of calculating LIBOR to be established, or alternative reference rates to be established. The potential consequences cannot be fully predicted and could have an adverse impact on the market value for or value of LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us. Changes in market interest rates may influence our financing costs, returns on financial investments and the valuation of derivative contracts and could reduce our earnings and cash flows. In addition, any transition process may involve, among other things, increased volatility or illiquidity in markets for instruments that rely on LIBOR, reductions in the value of certain instruments or the effectiveness of related transactions such as hedges, increased borrowing costs, uncertainty under applicable documentation, or difficult and costly consent processes. This could materially and adversely affect our results of operations, cash flows, and liquidity. We cannot predict the effect of the potential changes to LIBOR or the establishment and use of alternative rates or benchmarks.

An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability.

A significant portion of our outstanding debt bears interest at floating rates. As a result, to the extent we have not hedged against rising interest rates, an increase in the applicable benchmark interest rates would increase our cost of servicing our debt and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

In addition, we regularly refinance our indebtedness. If interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity and cash flows could be materially and adversely affected.

We have risks in managing our portfolio of engines to meet customer needs.

The relatively long life cycles of aircraft and jet engines can be shortened by world events, government regulation or customer preferences. We seek to manage these risks by trying to anticipate demand for particular engine and aircraft types, maintaining a portfolio mix of engines that we believe is diversified and that will have long-term value and will be sought by lessees in the global market for jet engines, and by selling engines and aircraft that we expect will experience obsolescence or declining usefulness in the foreseeable future.

The WEST II securitization facility includes restrictions and limitations on the sale of engines in that facility including, among others, that (i) the net proceeds from any individual engine sale must be at least 105% of the debt allocated under the facility to that engine, and (ii) the aggregate appraised value of the facility’s engines sold through September 2019 cannot exceed 20% of the total appraised value of the facility’s engines at the inception of the facility plus the value of capitalized modifications to the engines since then, and cannot exceed 30% thereafter. We can give no assurance that we can successfully manage our engine portfolio to reduce these risks.

The WEST III securitization facility includes restrictions and limitations on the sale of assets in that facility including, with respect to pro forma limitations on assets subject to part-out agreements, a 15% limitation on sales prior to August 2019 and 20% thereafter, and also, in certain situations, with respect to a 25% limit on assets sold below a specific dollar threshold.

The WEST IV securitization facility includes restrictions and limitations on the sale of assets in that facility including, with respect to pro forma limitations on assets subject to part-out agreements, a 15% limitation on sales prior to August 2020 and 20% thereafter, and also, in certain situations, with respect to a 25% limit on assets sold below a specific dollar threshold.

Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

In addition to being capital intensive and highly leveraged, our business also requires that we maintain sufficient liquidity to enable us to contribute the non-financed portion of engine and aircraft purchases as well as to service our payment obligations to our creditors as they become due, despite the fact that the timing and amounts of payments under our leases do not match the timing under our debt service obligations. Our restricted cash is unavailable for general corporate purposes. Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash and available credit under our credit facilities. Our liquidity could be adversely impacted if we are subjected to one or more of the following: a significant decline in lease revenues, a material increase in interest expense that is not matched by a corresponding increase in lease rates, a significant increase in operating expenses, or a reduction in our available credit under our credit facilities. If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired as could our ability to make dividend payments or other distributions to our equity holders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Position, Liquidity and Capital Resources.”

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RISKS RELATING TO THE COMMON STOCK TRADING PRICE

The Company’s Common Stock trading price may be affected by numerous factors that may impose a financial risk on the Company’s stockholders.

The trading price of our common stock may fluctuate due to many factors, including:

• risks relating to our business described in this Annual Report;

• sales of our securities by a few stockholders or even a single significant stockholder;

• general economic conditions;

• changes in accounting mandated under GAAP;

• quarterly variations in our operating results;

• our financial condition, performance and prospects;

• changes in financial estimates by us;

• the level, direction and volatility of interest rates and expectations of changes in rates;

• the market for securities similar to our common stock; and

• changes in our capital structure, including additional issuances by us of debt or equity securities.

In addition, the U.S. stock markets have experienced price and volume volatility that has affected many companies’ stock prices, often for reasons unrelated to the operating performance of those companies.

RISKS RELATING TO OUR FOREIGN OPERATIONS

A substantial portion of our lease revenue comes from foreign customers, subjecting us to divergent regulatory requirements.

For the year ended December 31, 2019, 79% of our lease revenue was generated by leases to foreign customers. Such international leases present risks to us because certain foreign laws, regulations and judicial procedures may not be as protective of lessor rights as those which apply in the United States. We are also subject to risks of foreign laws that affect the timing and access to courts and may limit our remedies when collecting lease payments and recovering assets. None of our leased engines have been expropriated; however, we can give no assurance that political instability abroad and changes in the policies of foreign nations will not present expropriation risks in the future that are not covered by insurance.

Substantially all of our leases require payments in U.S. dollars but many of our customers operate in other currencies; if foreign currencies devalue against the U.S. dollar, our lessees may be unable to make their payments to us.

Substantially all of our current leases require that payments be made in U.S. dollars. If the currency that our lessees typically use in operating their businesses devalues against the U.S. dollar, those lessees could encounter difficulties in making payments in U.S. dollars. Furthermore, many foreign countries have currency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases may provide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon conversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and increase the volatility of our earnings. If payments on our leases are made in foreign currency, our risks and hedging costs will increase.

We operate globally and are affected by our customers’ local and regional economic and other risks.

We believe that our customers’ growth and financial condition are driven by economic growth in their service areas. The largest portion of our lease revenues comes from Europe. European airline operations are among the most heavily regulated in the world. At the same time, low-cost carriers have exerted substantial competitive and financial pressure on major European airlines. Low-cost carriers are having similar effects in North America and elsewhere.

Our operations may also be affected by political or economic instability in the areas where we have customers.

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We may not be able to enforce our rights as a creditor if a lessee files for bankruptcy outside of the United States.

When a debtor seeks protection under the United States Bankruptcy Code, creditors are automatically stayed from enforcing their rights. In the case of United States-certificated airlines, Section 1110 of the Bankruptcy Code provides certain relief to lessors of aircraft equipment. Section 1110 has been the subject of significant litigation and we can give no assurance that Section 1110 will protect our investment in aircraft or engines in the event of a lessee’s bankruptcy. In addition, Section 1110 does not apply to lessees located outside of the United States and applicable foreign laws may not provide comparable protection.

Liens on our engines or aircraft could exceed the value of such assets, which could negatively affect our ability to repossess, lease or sell a particular engine or aircraft.

Liens that secure the payment of repairers’ charges or other liens may, depending on the jurisdiction, attach to engines and aircraft. Engines also may be installed on airframes to which liens unrelated to the engines have attached. These liens may secure substantial sums that may, in certain jurisdictions or for limited types of liens, exceed the value of the particular engine or aircraft to which the liens have attached. In some jurisdictions, a lien may give the holder the right to detain or, in limited cases, sell or cause the forfeiture of the engine or aircraft. Such liens may have priority over our interest as well as our creditors’ interest in the engines or aircraft, either because they have such priority under applicable local law or because our creditors’ security interests are not filed in jurisdictions outside the United States. These liens and lien holders could impair our ability to repossess and lease or sell the engines or aircraft. We cannot give assurance that our lessees will comply with their obligations to discharge third-party liens on our assets. If they do not, we may, in the future, find it necessary to pay the claims secured by such liens to repossess such assets.

In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not be able to exercise our ownership rights over the engine.

In some jurisdictions, an engine affixed to an aircraft may become an accession to the aircraft, so that the ownership rights of the owner of the aircraft supersede the ownership rights of the owner of the engine. If an aircraft is security for the owner’s obligations to a third-party, the security interest in the aircraft may supersede our rights as owner of the engine. This legal principle could limit our ability to repossess an engine in the event of a lessee bankruptcy or lease default while the aircraft with the engine installed remains in such a jurisdiction. We may suffer a loss if we are not able to repossess engines leased to lessees in these jurisdictions.

Changes to trade policy, tariff, sanction and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.

Changes in U.S. or international, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories or countries where we currently conduct our business, could adversely affect our business. The executive branch of the United States government has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on corporations or countries, and other government regulations affecting trade between the U.S. and other countries that will affect the manner in which we conduct our business. Trading partners of the United States have also implemented and threatened to implement retaliatory tariffs and/or other impediments to trade.

As a result of new or threatened tariffs, sanctions and/or impediments to trade, both from the United States and other countries, there may be greater restrictions and economic disincentives on international trade. The new or threatened tariffs, sanctions and other changes in trade policy could trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing tariffs and/or economic sanctions on certain U.S. goods. We do a significant amount of business that would be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry and the global demand for our products and services, and as a result, could have an adverse effect on our business, financial condition and results of operations.

The effects of the United Kingdom’s withdrawal from the European Union (“Brexit”), including trade agreements, are not yet known and the uncertainty creates challenges and risks which may adversely affect our business.

On June 23, 2016, the UK voted in favor of a referendum to leave the European Union, commonly referred to as “Brexit” and the UK ceased to be a member of the European Union on January 31, 2020. A transition period through December 31, 2020 has been established to allow the UK and the European Union to negotiate the terms of the UK’s withdrawal. However, there is continued uncertainty surrounding the future relationship between the UK and European, including any trade agreements between them, which could adversely affect European and worldwide economic and market conditions, and contribute to instability in global financial and foreign exchange markets. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Laws to replace or replicate. The ultimate effects of Brexit will depend on the specific terms of any agreement the UK and the European Union reach to provide access to each other’s respective markets.

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We have a presence in certain European Union countries, including Ireland, England, Wales and France. During 2019, we derived approximately 79% of our core leasing revenue from international business. The consequences of Brexit could introduce significant uncertainties into global financial markets and adversely impact the markets in which we and our customers operate.

RISKS RELATED TO OUR SMALL SIZE AND CORPORATE STRUCTURE

Intense competition in our industry, particularly with major companies with substantially greater financial, personnel, marketing and other resources, could cause our revenues and business to suffer.

The engine and aircraft leasing industry is highly competitive and global. Our primary competitors include GE Capital Aviation Services, Shannon Engine Support Ltd., Pratt &Whitney, Rolls-Royce Partners Finance and Engine Lease Finance Corporation.

Our primary competitors generally have significantly greater financial, personnel and other resources, as well as a physical presence in more locations, than we do. In addition, competing engine lessors may have lower costs of capital and may provide financial or technical services or other inducements to customers, including the ability to sell or lease aircraft, offer maintenance and repair services or provide other forms of financing that we do not provide. We cannot give assurance that we will be able to compete effectively or that competitive pressures will not adversely affect us.

There is no organized market for the spare engines or the aircraft we purchase. Typically, we purchase engines and aircraft from commercial aircraft operators, engine manufacturers, MROs and other suppliers. We rely on our representatives, advertisements and reputation to generate opportunities to purchase and sell engines and aircraft. The market for purchasing engine and aircraft portfolios is highly competitive, generally involving an auction bidding process. We can give no assurance that engines and aircraft will continue to be available to us on acceptable terms and in the types and quantities we seek consistent with the diversification requirements of our debt facilities and our portfolio diversification goals.

Substantially all of our assets are pledged to our creditors.

Substantially all of our assets are pledged to secure our obligations to creditors. Our revolving credit banks have a lien on all of our assets, including our residual interests in WEST II, WEST III and WEST IV. Due to WEST II’s, WEST III’s and WEST IV’s bankruptcy remote structure, that interest is subject to the prior payments of WEST II’s, WEST III’s and WEST IV’s debt and other obligations. Therefore, our rights and the rights of our creditors to participate in any distribution of the assets of WEST II, WEST III and WEST IV upon liquidation, reorganization, dissolution or winding up will be subject to the prior claims of WEST II’s, WEST III’s and WEST IV’s creditors. Similarly, the rights of our shareholders are subject to satisfaction of the claims of our lenders and other creditors.

We may be unable to manage the expansion of our operations.

We can give no assurance that we will be able to manage effectively the current and potential expansion of our operations, or that if we are successful expanding our operations that our systems, procedures or controls will be adequate to support our operations, in which event our business, financial condition, results and cash flows could be adversely affected.

Any acquisition or expansion involves various risks, which may include some or all of the following:

• incurring or assuming additional debt;

• diversion of management’s time and attention from ongoing business operations;

• future charges to earnings related to the possible impairment of goodwill and the write down of other intangible assets;

• risks of unknown or contingent liabilities;

• difficulties in the assimilation of operations, services, products and personnel;

• unanticipated costs and delays;

• risk that the acquired business does not perform consistently with our growth and profitability expectations;

• risk that growth will strain our infrastructure, staff, internal controls and management, which may require additional personnel, time and expenditures; and

• potential loss of key employees and customers.

Any of the above factors could have a material adverse effect on us.

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Compliance with the regulatory requirements imposed on us as a public company results in significant costs that may have an adverse effect on our results.

As a public company, we are subject to various regulatory requirements including, but not limited to, compliance with the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Compliance with these regulations results in significant additional costs to us both directly, through increased audit and consulting fees, and indirectly, through the time required by our limited resources to address such regulations. We have complied with Section 404a of the Sarbanes-Oxley Act since December 31, 2007, completing our annual assessment of internal controls over financial reporting. We have complied with Section 404b of the Sarbanes-Oxley Act since December 31, 2009, and our independent registered public accounting firm audits our internal controls over financial reporting. Such compliance requires us to incur additional costs on audit and consulting fees and requires additional management time that may adversely affect our results of operations and cash flows.

We are subject to governmental regulation and our failure to comply with these regulations could cause the government to withdraw or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.

Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair and operation of all aircraft operated in the United States and equivalent regulatory agencies in other countries, such as the EASA in Europe, regulate aircraft operated in those countries. We include, with the aircraft, engines and related parts that we purchase, lease and sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. Specific regulations vary from country to country, although regulatory requirements in other countries are generally satisfied by compliance with FAA requirements. With respect to a particular engine or engine component, we utilize FAA and/or EASA certified repair stations to repair and certify engines and components to ensure marketability. The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations. New and more stringent government regulations, if adopted and enacted, could have an adverse effect on our business, financial condition and results of operations. In addition, certain product sales to foreign countries require approval or licensing from the U.S. government.  Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.

We are effectively controlled by one principal stockholder, who has the power to contest the outcome of most matters submitted to the stockholders for approval and to affect our stock prices adversely if he were to sell substantial amounts of his common stock.

Charles F. Willis, IV is the founder of WLFC, has served as Chief Executive Officer and a Director since our incorporation in 1985, served as President until July 2011, and has served as Chairman of the Board of Directors since 1996. Mr. Willis has over 45 years of experience in the aviation industry which includes serving as President of Willis Lease’s predecessor, Charles F. Willis Company, which purchased, financed and sold a variety of large commercial transport aircraft and provided consulting services to the aviation industry,  Assistant Vice President of Sales at Seaboard World Airlines, a freight carrier, and various positions at Alaska Airlines, including positions in the flight operations, sales and marketing departments. As our founder and Chief Executive Officer, Mr. Willis brings to the Board significant senior leadership, sales and marketing, industry, technical and global experience, as well as a deep institutional knowledge of the Company, its operations and customer relations.

As of December 31, 2019, Mr. Willis beneficially owned or had the ability to direct the voting of 2,925,211 shares of our common stock, representing approximately 46% of the outstanding shares of our common stock. As a result, Mr. Willis effectively controls us and has the power to contest the outcome of substantially all matters submitted to our stockholders for approval, including the election of our board of directors. In addition, future sales by Mr. Willis of substantial amounts of our common stock, or the potential for such sales, could adversely affect the prevailing market price of our common stock.

If the negotiation over a possible “take-private” transaction involving our company is not completed, our business could be harmed and our stock price could decline.

Since June 2019, an independent committee established by our board of directors has been reviewing and negotiating proposals from our Chief Executive Officer and largest investor and our Senior Vice President, Corporate Development to acquire the Company pursuant to a merger that would result in our becoming a privately-held company, or the “potential transaction.” While the parties are negotiating in good faith a potential transaction, a complete proposal has not been submitted for consideration by the independent committee, including indicative financing terms, and there can be no assurance regarding the terms and details of any transaction, that any future proposal will be made, that any proposal will be accepted by the independent committee or that any take-private transaction will ultimately be consummated. If the negotiations cease or the potential transaction is terminated, the market price of our common stock will likely decline since it may reflect the publicly disclosed prices communicated to independent committee over the course of negotiations. In addition, our stock price may decline as a result of the fact that we have incurred and will continue to incur significant expenses related to the potential transaction prior to its execution or closing that will not be recovered if the potential transaction is not completed. As a consequence of the failure of the potential transaction to be completed, as well as of some or all of these potential effects of the termination

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of the potential transaction, our business could be harmed in that concerns about our viability are likely to increase, making it more difficult to retain employees and existing customers and to generate new business.

The possibility of an imminent “take-private” transaction could harm our business, revenue and results of operations.

While negotiations with the independent committee are continuing and potential transaction appears to be imminent, it creates uncertainty about our future. As a result of this uncertainty, customers may decide to delay, defer, or cancel purchases of our products pending completion of the potential transaction or termination of the potential transaction. If these decisions represent a significant portion of our anticipated revenue, our results of operations and quarterly revenues could be substantially below the expectations of investors.

In addition, while negotiations are ongoing and the potential transaction appears to be imminent, we are subject to a number of risks that may harm our business, revenue and results of operations, including:

• the diversion of management and employee attention and the unavoidable disruption to our relationships with customers and vendors may detract from our ability to grow revenues and minimize costs;

• we have and will continue to incur significant expenses related to the potential transaction prior to its completion; and

• we may be unable to respond effectively to competitive pressures, industry developments and future opportunities.

Our business might suffer if we were to lose the services of certain key employees.

Our business operations depend upon our key employees, including our executive officers. Loss of any of these employees, particularly our Chief Executive Officer, could have a material adverse effect on our business as our key employees have knowledge of our industry and customers and would be difficult to replace.

We are the servicer and administrative agent for the WEST II, WEST III and WEST IV facilities and our cash flows would be materially and adversely affected if we were removed from these positions.

We are the servicer and administrative agent with respect to engines in the WEST II, WEST III and WEST IV facilities. We receive monthly fees of 11.5% as servicer (3.5% of which is subordinated in the cases of WEST III and WEST IV) and 2.0% as administrative agent of the aggregate net rents actually received by WEST II, WEST III and WEST IV on their engines. We may be removed as servicer and or administrative agent of our WEST II, WEST III and WEST IV facilities by an affirmative vote of a requisite number of the WEST II, WEST III and WEST IV note holders. Such vote could happen upon the occurrence of certain specified events as outlined in the WEST II, WEST III and WEST IV servicing and administrative agency agreements.

As of December 31, 2019, we were in compliance with the financial covenants set forth in the WEST II, WEST III and WEST IV servicing and administrative agency agreements. There can be no assurance that we will be in compliance with these covenants in the future or will not otherwise be terminated as servicer or administrative agent for the WEST II, WEST III and WEST IV facilities. If we are removed from such role with those facilities, our expenses would increase as our consolidated variable interest entities (“VIE’s”) WEST II, WEST III and WEST IV, would have to hire an outside provider to replace the servicer and administrative agent functions, and we would be materially and adversely affected. Consequently, our business, financial condition, results of operations and cash flows would be adversely affected.

Provisions in Delaware law and our charter and bylaws might prevent or delay a change of control.

Certain provisions of law, our amended certificate of incorporation, bylaws and amended rights agreement could make the following more difficult: (1) an acquisition of us by means of a tender offer, a proxy contest or otherwise, and (2) the removal of incumbent officers and directors.

Our board of directors has authorized the issuance of shares of 6.5% Series A Preferred Stock and 6.5% Series A-2 Preferred Stock, by us and to Development Bank of Japan Inc. (“DBJ”) with American Stock Transfer and Trust Company, serving as rights agent. The rights agreement could make it more difficult to proceed with and tends to discourage a merger, tender offer or proxy contest. Our amended certificate of incorporation also provides that stockholder action can be taken only at an annual or special meeting of stockholders and may not be taken by written consent and, in certain circumstances relating to acquisitions or other changes in control, requires an 80% super majority vote of all outstanding shares of our common stock. Our bylaws also limit the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.    PROPERTIES  

Our principal offices are located in Coconut Creek, Florida where we own 56,000 square feet of office and warehouse space. We also own 30,000 square feet of office and warehouse space in Bridgend, Wales, UK. We sub-lease 7,124 square feet of office and warehouse space for our operations in San Diego, California. We lease 5,952 square feet of office space in Dublin, Ireland.  We also lease facilities for sales and operations in Larkspur, CA; London, UK; Shanghai, China; Singapore; and Blagnac, France.

The Company’s Leasing and Related Operations segment conducts business in all of the properties above. The Spare Parts segment primarily conducts business in the Coconut Creek, Florida facility.

ITEM 3.    LEGAL PROCEEDINGS

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.    MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Our Common Stock is listed on the NASDAQ Stock Market under the symbol WLFC. As of March 9, 2020, there were approximately 2,229 shareholders of record of our Common Stock.

We have not made any dividend payments to our common shareholders since our inception as all available cash has been utilized for the business. We have no intention of paying dividends on our common stock in the foreseeable future. In addition, certain of our debt facilities contain negative covenants which, in certain situations, prohibit us from paying any dividends or making distributions of any kind with respect to our common stock. The Series A-1 and Series A-2 Preferred Stock carry a quarterly dividend at the rate per annum of 6.5% per share, with a $20.00 liquidation preference per share.

The following table outlines our Equity Compensation Plan Information:

Plan Category	Number of securities to be issued upon exercise of outstanding  options, warrants and rights	Weighted-average exercise  price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under  equity compensation  plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Plans Not Approved by Shareholders:
None	n/a	n/a	n/a
Plans Approved by Shareholders:
Employee Stock Purchase Plan	—	n/a	62,932
2007 Stock Incentive Plan	—	n/a	—
2018 Stock Incentive Plan	—	n/a	615,196
Total	—	n/a	678,128

The 2007 Stock Incentive Plan (the “2007 Plan”) was adopted in May 2007. Under this 2007 Plan, a total of 2,800,000 shares were authorized for stock-based compensation available in the form of either restricted stock awards (“RSAs”) or stock options. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date. As of December 31, 2019, there were no stock options outstanding under the 2007 Plan.

The 2018 Stock Incentive Plan (the “2018 Plan”) was adopted in May 2018. Under this 2018 Plan, a total of 800,000 shares were authorized for stock-based compensation, plus the number of shares remaining under the 2007 Plan and any future forfeited awards under the 2007 Plan, in the form of RSAs. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the

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cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date.

As of December 31, 2019, the Company had granted 279,400 RSAs under the 2018 Plan and has 615,196 shares available for future issuance. The fair value of the restricted stock awards equaled the stock price at the grant date.

Effective December 31, 2018, the Board of Directors approved the renewal of the existing common stock repurchase plan extending the plan through December 31, 2020 and amending the plan to allow for repurchases of up to $60.0 million of the Company’s common stock until such date. Repurchased shares are immediately retired. During 2019, the Company repurchased 72,324 shares of common stock for approximately $3.6 million at a weighted average price of $49.29. At December 31, 2019, approximately $56.4 million was available to purchase shares under the plan. In June 2019, the Company suspended repurchases under its 10b5-1 plan and no repurchases were made between that date and December 31, 2019. As of December 31, 2019, the total number of common shares outstanding was approximately 6.4 million.

ITEM 6.    SELECTED FINANCIAL DATA

Not applicable.

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

OVERVIEW

Forward-Looking Statements. This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others: the effects on the airline industry and the global economy of events such as terrorist activity, changes in oil prices and other disruptions to the world markets; trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors; risks associated with owning and leasing jet engines and aircraft; our ability to successfully negotiate equipment purchases, sales and leases, to collect outstanding amounts due and to control costs and expenses; changes in interest rates and availability of capital, both to us and our customers; our ability to continue to meet the changing customer demands; regulatory changes affecting airline operations, aircraft maintenance, accounting standards and taxes; and the market value of engines and other assets in our portfolio. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management’s expectations, are described in greater detail in Item 1A “Risk Factors” of Part I which, along with the other discussion in this report, describes some, but not all, of the factors that could cause actual results to differ significantly from management’s expectations.

General. Our core business is acquiring and leasing commercial aircraft and aircraft engines and related aircraft equipment pursuant to operating leases, all of which we sometimes collectively refer to as “equipment.” As of December 31, 2019, all of our leases were operating leases with the exception of two leases entered into during the first quarter of 2019 which are classified as notes receivable under ASU 2016-02. As of December 31, 2019, we had 85 lessees in 41 countries. Our portfolio is continually changing due to acquisitions and sales. As of December 31, 2019, our lease portfolio consisted of 263 engines, 12 aircraft, 10 other leased parts and equipment, and one marine vessel with an aggregate net book value of $1,650.9 million. As of December 31, 2019, we also managed 450 engines, aircraft and related equipment on behalf of other parties. 

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

In 2011 we entered into an agreement with Mitsui & Co., Ltd. to participate in a joint venture formed as a Dublin-based Irish limited company, WMES, for the purpose of acquiring and leasing jet engines. Each partner holds a fifty percent interest in the joint venture. WMES owns a lease portfolio of 36 engines and five aircraft with a net book value of $306.0 million at December 31, 2019. Our investment in the joint venture was $44.1 million as of December 31, 2019.

In 2014 we entered into an agreement with CASC to participate in CASC Willis, a new joint venture based in Shanghai, China. Each partner holds a fifty percent interest in the joint venture. The company 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. During 2016, CASC was reorganized, with portions of its partnership interest in CASC Willis being transferred to three Chinese airlines and another government-owned entity. The 2016 CASC reorganization resulted in no voting structure change to the joint venture. CASC

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Willis owned a lease portfolio of four engines with a net book value of $49.2 million as of December 31, 2019. Our investment in the joint venture was $13.8 million as of December 31, 2019.

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

Recent Developments. Currently, an independent committee established by our Board of directors is reviewing and negotiating a proposal from our Chief Executive Officer and largest investor (individually and together with an entity controlled by him, the “Willis Parties”) and our Senior Vice President, Corporate Development (together with the Willis Parties, the “Group”) to acquire the Company pursuant to a merger. The Group has not yet submitted a complete proposal for consideration by the independent committee, including indicative financing terms. Consummation of any merger transaction will be subject to approval by the independent committee of the terms of a complete proposal submitted for consideration as well as the execution of definitive merger documentation. There can be no assurance regarding the terms and details of any transaction, that any future proposal by the Group will be made, that any proposal made by the Group will be accepted by the independent committee or that any merger transaction will ultimately be consummated.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to residual values, estimated asset lives, impairments and bad debts. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, grouped by our activities, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Leasing Related Activities. Revenue from leasing of aircraft equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Where collection cannot be reasonably assured, for example, upon a lessee bankruptcy, we do not recognize revenue until cash is received. We also estimate and charge to income a provision for bad debts based on our experience in the business and with each specific customer and the level of past due accounts. The financial condition of our customers may deteriorate and result in actual losses exceeding the estimated allowances. In addition, any deterioration in the financial condition of our customers may adversely affect future lease revenues. As of December 31, 2019, all of our engine leases are accounted for as operating leases with the exception of two leases entered into during the first quarter of 2019 which are classified as notes receivable under ASU 2016-02. Under an operating lease, we retain title to the leased equipment, thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment. 

We generally depreciate engines on a straight-line basis over 15 years to a 55% residual value. Aircraft and airframes are generally depreciated on a straight-line basis over 13 to 20 years to a 15% to 17% residual value. Other leased parts and equipment are generally depreciated on a straight-line basis over 14 to 15 years to a 25% residual value. Major overhauls paid for by us, which improve functionality or extend the original useful life, are capitalized and depreciated over the shorter of the estimated period to the next overhaul (“deferral method”) or the remaining useful life of the equipment. We do not accrue for planned major maintenance. For equipment which is unlikely to be repaired at the end of its current expected life, and is likely to be disassembled upon lease termination, we depreciate the equipment over its estimated life to a residual value based on an estimate of the wholesale value of the parts after disassembly. As of December 31, 2019, 47 engines having a net book value of $51.1 million were depreciated under this policy with estimated useful lives ranging from 1 to 79 months.

Asset Valuation. Long-lived assets and certain identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable, and long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

On a quarterly basis, management monitors the lease portfolio for events which may indicate that a particular asset may need to be evaluated for potential impairment. These events may include a decision to part-out or sell an asset, knowledge of specific damage to an asset, or supply/demand events which may impact the Company’s ability to lease an asset in the future. On an annual basis, even absent any such ‘triggering event’, we evaluate the carrying value of the assets in our lease portfolio to determine if any impairment exists.

Impairment may be identified by several factors, including, comparison of estimated sales proceeds or forecasted undiscounted cash flows over the life of the asset with the asset’s book value. If the forecasted undiscounted cash flows are less than the book value, the asset is written down to its fair value. When evaluating for impairment, we group assets at the lowest level for which identifiable cash

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flows are largely independent of the cash flows of other assets and liabilities. In our portfolio, this is at the individual asset level (e.g., engine or aircraft), as each asset generates its own stream of cash flows, including lease rents, maintenance reserves and repair costs.

We must make assumptions which underlie the most significant and subjective estimates in determining whether any impairment exists.  Those estimates, and the underlying assumptions, are as follows:

• Fair value – we determine fair value by reference to independent appraisals, quoted market prices (e.g., an offer to purchase) and other factors such as current data from airlines, engine manufacturers and MRO providers as well as specific market sales and repair cost data.

• Future cash flows – when evaluating the future cash flows that an asset will generate, we make assumptions regarding the lease market for specific engine models, including estimates of market lease rates and future demand. These assumptions are based upon lease rates that we are obtaining in the current market as well as our expectation of future demand for the specific engine/aircraft model. 

If the forecasted undiscounted cash flows and fair value of our long-lived assets decrease in the future we may incur impairment charges.

Management continuously monitors the aviation industry and evaluates any trends, events or uncertainties involving airlines, individual aircraft and engine models, as well as the engine leasing and sale market which would materially affect the methodology or assumptions employed by WLFC. We do not consider there to be any trends, events or uncertainties that currently exist or that are reasonably likely to occur that would materially affect our methodology or assumptions. However, should any arise, we will adjust our methodology and our disclosure accordingly.

Spare parts inventory is stated at lower of cost or net realizable value. An impairment charge for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value.

Accounting for Maintenance Expenditures and Maintenance Reserves. Use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee. Use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee, the lease terminates, or the obligation to reimburse the lessee for such reserves ceases to exist, at which time they are recognized in revenue as maintenance reserve revenue. Our expenditures for maintenance are expensed as incurred. Expenditures that meet the criteria for capitalization are recorded as an addition to equipment recorded on the balance sheet.

RECENT ACCOUNTING PRONOUNCEMENTS

The most recent adopted and to be adopted accounting pronouncements are described in Note 1(w) to our Consolidated financial statements included in this Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Year Ended December 31, 2019 Compared to the Year Ended December 31, 2018

Revenue is summarized as follows:

	Years Ended December 31,
	2019		2018		% Change
	(dollars in thousands)
Lease rent revenue	$	190,690	$	175,609	8.6	%
Maintenance reserve revenue	108,998		87,009		25.3	%
Spare parts and equipment sales	74,651		71,141		4.9	%
Gain on sale of leased equipment	20,044		6,944		188.7	%
Other revenue	14,777		7,644		93.3	%
Total revenue	$	409,160	$	348,347	17.5	%

Lease Rent Revenue. Our lease rent revenue for the year ended December 31, 2019 increased by 8.6% over the comparable period in 2018. Lease rent revenue consists of rental income from long-term and short-term engine leases, aircraft leases, and other leased parts and equipment. The increase is primarily driven by an increase in lease rental rates. The aggregate net book value of equipment held for lease at December 31, 2019 and 2018 was $1,650.9 million and $1,673.1 million, respectively, a decrease of 1.3%. During the year ended December 31, 2019, 45 engines, 6 aircraft, one marine vessel and other lease equipment were added to our lease portfolio at a total cost

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of $289.4 million (including capitalized costs). During the year ended December 31, 2018, 38 engines and 7 aircraft were added to our lease portfolio at a total cost of $421.9 million (including capitalized costs).

Maintenance Reserve Revenue. Our maintenance reserve revenue for the year ended December 31, 2019 increased 25.3% to $109.0 million from $87.0 million for the year ended December 31, 2018. Assets out on lease with “non-reimbursable” usage fees, generated $71.4 million of short term maintenance revenues compared to $63.7 million generated in the comparable prior period. Long term maintenance revenue increased to $37.6 million for the year ended December 31, 2019 compared to $23.3 million in 2018 as a result of more long-term leases coming to an end during 2019 as compared to the prior year.

Spare Parts and Equipment Sales. Spare parts and equipment sales for the year ended December 31, 2019 increased by $3.5 million to $74.7 million compared to $71.1 million in 2018. Spare parts sales for the year ended December 31, 2019 were $56.3 million compared to $50.0 million in 2018. Equipment sales for the year ended December 31, 2019 were $18.4 million for the sale of three engines, two airframes and one equipment package compared to $21.1 million for the sale of two engines in the comparable period of 2018.

Gain on Sale of Leased Equipment. During the year ended December 31, 2019, we sold 16 engines, seven aircraft, four airframes and other related equipment from the lease portfolio for a net gain of $20.0 million. During the year ended December 31, 2018, we sold 14 engines, six aircraft, one airframe and other related equipment from the lease portfolio for a net gain of $6.9 million.

Other Revenue. Other revenue increased by $7.1 million, to $14.8 million for the year ended December 31, 2019 from $7.6 million in 2018. The increase primarily reflects an increase of $2.5 million in fees earned related to engines managed on behalf of third parties, an increase of $2.8 million in interest revenue from our notes receivable and a $1.0 million increase in service revenue.

Depreciation and Amortization Expense. Depreciation and amortization expense increased $9.4 million, or 12.3%, to $86.2 million for the year ended December 31, 2019 compared to $76.8 million for the year ended December 31, 2018. The increase in depreciation reflects an increase in engine count, and the change in mix of portfolio, as compared to the prior year period.

Cost of Spare Parts and Equipment Sales. Cost of spare parts and equipment sales for the year ended December 31, 2019 was $62.6 million, an increase of 2.7% from 2018. Cost of spare parts sales for the year ended December 31, 2019 were $47.4 million compared to $41.5 million in 2018. Cost of equipment sales was $15.2 million and $19.5 million in the years ended December 31, 2019 and 2018, respectively.

Write-down of Equipment. Write-down of equipment was $18.2 million for the year ended December 31, 2019 and reflects the write-down of eleven engines due to a management decision to monetize the engines either by sale to third party or for party-out and an adjustment of the carrying value of seven impaired engines. Write-down of equipment was $10.7 million for the year ended December 31, 2018 and reflects the write-down of seven engines and seven airframe parts packages.

General and Administrative Expenses. General and administrative expenses increased 20.1% to $86.5 million for the year ended December 31, 2019 compared to $72.0 million in 2018. The increase, when compared to the prior year period, primarily reflects increased bonus accrual due to operating performance and stock based compensation expense which increased due to an increase in total shares granted as well as the share price at which those shares were granted.

Technical Expense. Technical expenses consist of the cost of engine repairs, engine thrust rental fees, outsourced technical support services, sublease engine rental expense, engine storage and freight costs. These expenses decreased 27.1% to $8.1 million for the year ended December 31, 2019, compared to $11.1 million in 2018. The decrease is primarily due to a decrease in engine repairs.

Net Finance Costs.  Net finance costs, which primarily reflects interest expense, increased 4.5% to $67.1 million in the year ended December 31, 2019, from $64.2 million for the year ended December 31, 2018. This increase is primarily a result of a full year of interest under the WEST IV notes. Debt obligations outstanding, net of unamortized debt issuance costs, as of December 31, 2019 and 2018, were $1,251.0 million and $1,337.3 million, respectively. After adjustment for interest rate derivative instruments, $197.0 million and $327.0 million, respectively, was tied to one-month LIBOR. As of December 31, 2019 and 2018, the Company held $200 million and $100 million of interest rate derivative instruments on this debt. As of December 31, 2019 and 2018 one-month LIBOR was 1.76% and 2.50%, respectively.

Income Taxes. Income tax expense for the year ended December 31, 2019 increased to $22.0 million from $13.0 million for the comparable period in 2018. The effective tax rate for the years ended December 31, 2019 and December 31, 2018 was 24.7% and 23.2%, respectively. The increase in the effective tax rate was predominantly due to non-deductible officer compensation and state taxes.

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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2019, the Company had $63.7 million of cash, cash equivalents and restricted cash. At December 31, 2019, $4.7 million in cash and cash equivalents and restricted cash were held in foreign subsidiaries. We do not intend to repatriate the funds held in foreign subsidiaries to the United States. In the event that we decide to repatriate these funds to the United States, we would be required to accrue and pay taxes upon the repatriation.

We finance our growth through borrowings secured by our equipment lease portfolio. Cash of approximately $340.1 million and $759.4 million in the years ended December 31, 2019 and 2018, respectively, was derived from this borrowing activity. In these same time periods $428.1 million and $504.8 million, respectively, was used to pay down related debt.

Preferred Stock Dividends

In October 2016, the Company sold and issued to Development Bank of Japan Inc. (“DBJ”) an aggregate of 1,000,000 shares of the Company’s 6.5% Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting investor fees were $19.8 million.

In September 2017, the Company sold and issued to DBJ an aggregate of 1,500,000 shares of the Company’s 6.5% Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting issuance costs were $29.7 million.

The Company’s Series A-1 Preferred Stock and Series A-2 Preferred Stock accrue quarterly dividends at the rate per annum of 6.5% per share. During the years ended December 31, 2019 and 2018, the Company paid total dividends of $3.3 million on the Series A-1 and Series A-2 Preferred Stock, respectively.

Cash Flows Discussion

Cash flows provided by operating activities were $230.3 million and $188.7 million in the years ended December 31, 2019 and 2018, respectively.

Cash flows from operations are driven significantly by payments made under our lease agreements, which comprise lease revenue, security deposits and maintenance reserves, and are offset by interest expense and general and administrative costs. Cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements. The lease revenue stream, in the short-term, is at fixed rates while a portion of our debt is at variable rates. If interest rates increase, it is unlikely we could increase lease rates in the short term and this would cause a reduction in our earnings and operating cash flows. Revenue and maintenance reserves are also affected by the amount of equipment off lease. Approximately 86% and 88%, by book value, of our assets were on-lease as of December 31, 2019 and December 31, 2018, respectively. The average utilization rate for the year ended December 31, 2019 and 2018 was approximately 88% and 89%, respectively. If there is an increase in off-lease rates or deterioration in lease rates that are not offset by reductions in interest rates, there will be a negative impact on earnings and cash flows from operations.

Distributions received from our investment in WMES were $3.3 million and $5.7 million in the years ended December 31, 2019 and 2018, respectively.

Cash flows used in investing activities were $147.4 million and $380.5 million in the years ended December 31, 2019 and 2018, respectively. Our primary use of funds is for the purchase of equipment for lease and for sale. Purchases of equipment (including capitalized costs and prepaid deposits) totaled $289.4 million and $441.4 million for the years ended December 31, 2019 and 2018, respectively.

Cash flows (used in) provided by financing activities were $(101.2) million and $226.4 million for the years ended December 31, 2019 and 2018, respectively. Cash flows used in financing activities for the year ended December 31, 2019 primarily reflected $340.1 million in proceeds from the issuance of debt obligations, partly offset by $428.1 million in principal payments and $3.6 million in share repurchases. Cash flows provided by financing activities for the year ended December 31, 2018 primarily reflected $759.4 million in proceeds from the issuance of debt obligations, partly offset by $504.8 million in principal payments and $16.1 million in share repurchases.

Debt Obligations and Covenant Compliance

At December 31, 2019, debt obligations consists of loans totaling $1,251.0 million, net of unamortized issuance costs, payable with interest rates varying between approximately 3.2% and 6.4%. Substantially all of our assets are pledged to secure our obligations to creditors. For further information on our debt instruments, see Note 6 “Debt Obligations” in Part II, Item 8 of this Form 10-K.

In June 2019, the Company entered into the Fourth Amendment and Restated Credit Agreement which increased the revolving credit facility from $890.0 million to $1.0 billion and extends the maturity of the credit facility to June 2024. As a result, the Company incurred and deferred an additional $2.8 million of debt issuance costs and recognized a loss on debt extinguishment of $0.2 million. In December

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2019, the Company entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Amendment No. 5 to the Security Agreement. The amendments, which among other things, increase the maximum leverage ratio from 4.00:1.00 to 4.50:1.00 through December 31, 2020, if a permitted change in control is consummated.

In February 2019, the Company entered into an $8.1 million loan with a financial institution with a maturity date of July 2022. Interest is payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% and principal and interest are paid quarterly. The loan is secured by two engines. 

Virtually all of the above debt requires our ongoing compliance with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic concentration restrictions. Under our revolving credit facility, we can typically borrow up to 85% of an engine’s net book value and 65% of spare part’s net book value. Therefore we must have other available funds for the balance of the purchase price of any new equipment to be purchased or we will not be permitted to draw on our revolver. The facilities are also cross-defaulted against other facilities. If we do not comply with the covenants or eligibility requirements, we may not be permitted to borrow additional funds and accelerated payments may become necessary. Additionally, much of the above debt is secured by engines and aircraft to the extent that engines or aircraft are sold, repayment of that portion of the debt could be required.

At December 31, 2019, we were in compliance with the covenants specified in the revolving credit facility, including the Interest Coverage Ratio requirement of at least 2.25 to 1.00, and the Total Leverage Ratio requirement to remain below 4.50 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is the ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) and other one-time charges to consolidated interest expense.  The Total Leverage Ratio, as defined in the credit facility, is the ratio of total indebtedness to tangible net worth. At December 31, 2019, we were in compliance with the covenants specified in the WEST II, WEST III and WEST IV indentures, servicing and other debt related agreements.

Off-Balance Sheet Arrangements

As of December 31, 2019, we had no material off-balance sheet arrangements or obligations that have or are reasonably likely to have a current or future effect on our financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Contractual Obligation and Commitments

Repayments of our gross debt obligations primarily consist of scheduled installments due under term loans and are funded by the use of unrestricted cash reserves and from cash flows from ongoing operations. The table below summarizes our contractual commitments at December 31, 2019:

			Payment due by period (in thousands)
	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Debt obligations	$	1,270,469	$	56,118	$	264,409	$	464,203	$	485,739
Interest payments under debt obligations	274,101		55,479		139,168		54,214		25,240
Operating lease obligations	4,320		922		1,640		862		896
Purchase obligations	459,274		104,401		354,873		—		—
Total	$	2,008,164	$	216,920	$	760,090	$	519,279	$	511,875

From time to time we enter into contractual commitments to purchase engines directly from original equipment manufacturers. As of the date of this report we have purchased three new LEAP-1B engines and are currently committed to purchasing 15 additional new LEAP-1B engines. These engines are solely compatible with the Boeing 737 Max aircraft, the entire fleet of which is currently grounded worldwide. Our expectation is that we will be able to place these engines on lease upon the re-entry of the Boeing 737 Max aircraft into service.

We have estimated the interest payments due under debt obligations by applying the interest rates applicable at December 31, 2019 to the remaining debt, adjusted for the estimated debt repayments identified in the table above. Actual interest payments made will vary due to actual changes in the rates for one-month and three-month LIBOR.

We believe our equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations through 2020. A decline in the level of internally generated funds could result if the amount of equipment off-lease increases, there is a decrease in availability under our existing debt facilities, or there is a significant step-up in borrowing costs. Such decline would impair our ability to sustain our level of operations. We continue to discuss additions to our capital base with our commercial and investment banks. If we are not able to access additional capital, our ability to continue to grow our asset base consistent with historical trends will be impaired and our future growth limited to that which can be funded from internally generated capital.

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MANAGEMENT OF INTEREST RATE EXPOSURE

At December 31, 2019, $404.3 million of our borrowings were on a variable rate basis at various interest rates tied to one-month and three-month LIBOR. Our equipment leases are generally structured at fixed rental rates for specified terms. Increases in interest rates could narrow or result in a negative spread between the rental revenue we realize under our leases and the interest rate that we pay under our borrowings. Historically, we have entered into interest rate derivative instruments to mitigate our exposure to interest rate risk and not to speculate or trade in these derivative products. During 2016, we entered into an interest rate swap agreement which has notional outstanding amount of $100.0 million, with a remaining term of 16 months as of December 31, 2019. In October 2019, the Company entered into an additional fixed-rate interest swap agreement which has a notional outstanding amount of $100.0 million, with a remaining term of 54 months as of December 31, 2019. The net fair value of the swaps was a $1.7 million net liability and a $1.7 million net asset at December 31, 2019 and 2018, respectively.

We record derivative instruments at fair value as either an asset or liability. We have used derivative instruments (primarily interest rate swaps) to manage the risk of interest rate fluctuation. While substantially all our derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria have been met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and the hedge relationship must be highly effective. The hedging instrument’s effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. All of the transactions that we have designated as hedges are accounted for as cash flow hedges. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings. The ineffective portion of these hedges flows through earnings in the current period. The hedge accounting for these derivative instrument arrangements adjusted interest expense by $0.7 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively. This incremental benefit for the swaps effective for hedge accounting was included in interest expense for the respective periods.

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

RELATED PARTY TRANSACTIONS

Stock Buybacks

On September 12, 2018, in a transaction approved by a Special Committee of the Board of Directors, the Company purchased 88,000 shares of common stock directly from the Company’s Chief Executive Officer, Charles F. Willis. The agreed and paid price per share was $34.2972, the volume weighted average price on September 12, 2018.

Joint Ventures

“Other revenue” on the Consolidated Statement of Income includes management fees earned of $2.9 million and $2.6 million during the years ended December 31, 2019 and 2018, respectively, related to the servicing of engines for the WMES lease portfolio. During 2019, the Company sold five aircraft and other equipment to WMES for $76.4 million. Additionally, during 2019, WMES sold one engine to Willis Aeronautical Services, Inc., a wholly-owned subsidiary of the Company, for $2.6 million. During 2018, the Company sold two engines and one aircraft to WMES for $30.7 million.

There were no engine or aircraft sales to CASC Willis during 2019 or 2018.

Other

During the second quarter of 2018, the Company’s Chief Executive Officer purchased artwork from the Company for $5 thousand. This transaction was approved by the Board’s independent Directors.

During the third quarter of 2018, the Company’s Chief Executive Officer utilized the WASI spare parts warehouse to temporarily store personal equipment and reimbursed the Company $450 for such usage.

In January 2019, the Special Committee of the Board of Directors approved a transaction in which the Company's Chief Executive Officer, Charles F. Willis, purchased a car at its market value of $0.1 million from the Company.

During 2019, the Company's Chief Executive Officer, Charles F. Willis, was charged $0.2 million for usage of the Company's marine vessel in the Company's lease portfolio.

During 2019 and 2018, the Company paid approximately $36,000 and $44,000, respectively, of expenses payable to Mikchalk Lake, LLC, an entity in which our Chief Executive Officer retains an ownership interest.  These expenses were for lodging and other business related services.  These transactions were approved by the Board’s independent Directors.

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ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure is that of interest rate risk. A change in LIBOR rates would affect our cost of borrowing. Increases in interest rates, which may cause us to raise the implicit rates charged to our customers, could result in a reduction in demand for our leases. Alternatively, we may price our leases based on market rates so as to keep the fleet on-lease and suffer a decrease in our operating margin due to interest costs that we are unable to pass on to our customers. As of December 31, 2019, $404.3 million of our outstanding debt is variable rate debt. We estimate that for every one percent increase or decrease in interest rate, the annual interest expense for our variable rate debt, would increase or decrease $2.0 million (in 2018, $3.3 million).

We hedge a portion of our borrowings from time to time, effectively fixing the rate of these borrowings. This hedging activity helps protect us against reduced margins on longer term fixed rate leases. Such hedging activities may limit our ability to participate in the benefits of any decrease in interest rates, but may also protect us from increases in interest rates. Furthermore, since lease rates tend to vary with interest rate levels, it is possible that we can adjust lease rates for the effect of change in interest rates at the termination of leases. Other financial assets and liabilities are at fixed rates.

We are also exposed to currency devaluation risk. During the years ended December 31, 2019 and 2018, respectively, 79% and 77% of our total lease rent revenues came from non-United States domiciled lessees. Substantially all of our leases require payment in U.S. dollars. If these lessees’ currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making their lease payments.

No customer accounted for greater than 10% of total lease rent revenue in 2019 and 2018.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is submitted as a separate section of this report beginning on page 37.

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures. Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b)Inherent Limitations on Controls. Management, including the CEO and CFO, does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met.  Further, no evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.  The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

(c)Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  Our internal control over financial reporting includes policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Our internal control over financial reporting is a process designed with the participation of our principal executive officer and principal financial officer or persons performing similar functions to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounted principles.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal

30

Control-Integrated Framework (2013). Based on this assessment our management believes that, as of December 31, 2019, our internal control over financial reporting is effective under those criteria.

KPMG LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this Annual Report, issued an audit report on the Company’s internal control over financial reporting. KPMG’s audit report appears on page 38.

(d)Changes in internal control over financial reporting. There has been no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

None.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

We have adopted a Standards of Ethical Conduct Policy (the “Code of Ethics”) that applies to all directors and employees including our Chief Executive Officer, President, and Chief Financial Officer. The Code of Ethics is filed in Exhibit 14.1 and is also available on our website at www.willislease.com.

The remainder of the information required by this item is incorporated by reference to our Proxy Statement.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to our Proxy Statement. 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information in Item 5 of this report regarding our Equity Compensation Plans is incorporated herein by reference. The remainder of the information required by this item is incorporated by reference to our Proxy Statement.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to our Proxy Statement.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated by reference to our Proxy Statement.

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

The response to this portion of Item 15 is submitted as a separate section of this report beginning on page 40.

(a) (2) Financial Statement Schedules

Schedule I, Condensed Financial Information of Parent, and Schedule II, Valuation Accounts, are submitted as a separate section of this report starting on page 69.

All other financial statement schedules have been omitted as the required information is not pertinent to the Registrant or is not material or because the required information is included in the Financial Statements and Notes thereto.

(a) (3),(b) and (c):Exhibits:  The response to this portion of Item 15 is submitted below.

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EXHIBITS

Exhibit  Number	Description
3.1	Certificate of Incorporation, dated March 12, 1998, as amended by the Certificate of Amendment of Certificate of Incorporation, dated May 6, 1998 (incorporated by reference to Exhibit 3.1 to our report on Form 10-K filed on March 31, 2009).
3.2	Bylaws, dated April 18, 2001 as amended by (1) Amendment to Bylaws, dated November 13, 2001, (2) Amendment to Bylaws, dated December 16, 2008, (3) Amendment to Bylaws, dated September 28, 2010, (4) Amendment to Bylaws, dated August 5, 2013 (incorporated by reference to Exhibit 3.1 to our report on Form 8-K filed on August 9, 2013), and (5) Amendment to Bylaws, dated October 7, 2016 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on October 18, 2016).
4.1	Rights Agreement dated as of September 24, 1999, by and between the Registrant and American Stock Transfer and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.1 to our report on Form 8-K filed on October 4, 1999).
4.2	Second Amendment to Rights Agreement dated as of December 15, 2005, by and between the Registrant and American Stock Transfer and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.5 to our report on Form 10-K filed on March 31, 2009).
4.3	Third Amendment to Rights Agreement dated as of September 30, 2008, by and between the Registrant and American Stock Transfer and Trust Company, as Rights Agent (incorporated by reference to Exhibit 4.6 to our report on Form 10-K filed on March 31, 2009).
4.3.1	Fourth Amendment to Rights Agreement dated August 27, 2018, by and between the Registrant and American Stock Transfer and Trust Company, as Rights Agent.
4.4	Form of Certificate of Designations of the Registrant with respect to the Series I Junior Participating Preferred Stock (formerly known as “Series A Junior Participating Preferred Stock”) (incorporated by reference to Exhibit 4.7 to our report on Form 10-K filed on March 31, 2009).
4.5	Form of Amendment No. 1 to Certificate of Designations of the Registrant with respect to Series I Junior Participating Preferred Stock (incorporated by reference to Exhibit 4.8 to our report on Form 10-K filed on March 31, 2009).
4.6	Second Amended and Restated Certificate of Designations, Preferences, and Relative Rights and Limitations of Series A Cumulative Redeemable Preferred Stock dated as of September 25, 2017 (incorporated by reference to Exhibit 10.2 to our report on Form 8-K filed on September 28, 2017).
4.7	Description of Securities.
4.8	Certificate Eliminating Series I Junior Participating Preferred Stock of Willis Lease Finance Corporation dated as of October 7, 2016 (incorporated by reference to Exhibit 10.3 to our report on Form 8-K filed October 18, 2016).
10.1†	Form of Indemnification Agreement entered into between the Registrant and its directors and officers (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on October 1, 2010).
10.2†	Amended and Restated 2007 Stock Incentive Plan (incorporated by reference to the Registrant’s Proxy Statement for 2015 Annual Meeting of Stockholders filed on April 28, 2015).
10.3†	Amended and Restated Employment Agreement between the Registrant and Charles F. Willis IV dated as of December 1, 2008 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on December 22, 2008).
10.4†	Employment Agreement between the Registrant and Scott B. Flaherty dated May 20, 2016 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on May 25, 2016).
10.5†	Employment Agreement between the Registrant and Dean M. Poulakidas dated March 31, 2013 (incorporated by reference to Exhibit 10.23 to our report on Form 8-K filed on June 19, 2013).
10.6*	Trust Indenture dated as of September 14, 2012 among Willis Engine Securitization Trust II, Deutsche Bank Trust Company Americas, as trustee, the Registrant and Crédit Agricole Corporate and Investment Bank (incorporated by reference to Exhibit 10.14 to our report on Form 10-Q filed on November 9, 2012).
10.7*	Security Trust Agreement dated as of September 14, 2012 by and among Willis Engine Securitization Trust II, Willis Engine Securitization (Ireland) Limited, the Engine Trusts listed on Schedule V thereto, each of the additional grantors referred to therein and from time to time made a party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 10.15 to our report on Form 10-Q filed on November 9, 2012).
10.8*	Note Purchase Agreement dated as of September 6, 2012 by and among Willis Engine Securitization Trust II, the Registrant, Credit Agricole Securities (USA) Inc. and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.16 to our report on Form 10-Q filed on November 9, 2012).
10.9*	Servicing Agreement dated as of September 17, 2012 between Willis Engine Securitization Trust II, the Registrant and the entities listed on Appendix A thereto (incorporated by reference to Exhibit 10.17 to our report on Form 10-Q filed on November 9, 2012).

32

10.10*	Administrative Agency Agreement dated as of September 17, 2012 among Willis Engine Securitization Trust II, the Registrant, Deutsche Bank Trust Company Americas, as trustee, and the entities listed on Appendix A thereto (incorporated by reference to Exhibit 10.18 to our report on Form 10-Q filed on November 9, 2012).
10.11*	Third Amended and Restated Credit Agreement, dated as of April 20, 2016, among the Company, MUFG Union Bank, N.A. as administrative agent and security agent, and certain other lenders and financial institutions named therein (incorporated by reference to Exhibit 10.15 to our report on Form 10-Q filed on August 16, 2016).
10.12†	Employment Agreement between the Company and Brian R. Hole dated January 14, 2016 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on February 16, 2016).
10.13†	Employment Agreement between the Company and Austin C. Willis dated February 9, 2016 (incorporated by reference to Exhibit 10.2 to our report on Form 8-K filed on February 16, 2016).
10.14	Trust Amendment No. 2 dated as of September 9, 2016 to Amended and Restated Trust Agreement of Willis Engine Securitization Trust II dated as of September 14, 2012 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed September 20, 2016).
10.15	General Supplement 2016-1 dated as of September 9, 2016 to Trust Indenture dated as of September 14, 2012 (incorporated by reference to Exhibit 10.2 to our report on Form 8-K filed September 20, 2016).
10.16	Series A Preferred Stock Purchase Agreement dated as of October 11, 2016 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed October 18, 2016).
10.17*	Asset Purchase Agreement dated as of August 4, 2017 between the Registrant and Willis Engine Structured Trust III. (incorporated by reference to Exhibit 10.20 to our report on Form 10-Q filed on November 9, 2017).
10.18*	Security Trust Agreement dated as of August 4, 2017 among Willis Engine Structured Trust III, each Grantor referred to therein and from time to time made a party thereto and Deutsche Bank Trust Company Americas, as trustee (incorporated by reference to Exhibit 10.21 to our report on Form 10-Q filed on November 9, 2017).
10.19*	Servicing Agreement dated as of August 4, 2017 among Willis Engine Structured Trust III, the Registrant and each Service Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.22 to our report on Form 10-Q filed on November 9, 2017).
10.20*	Administrative Agency Agreement dated as of August 4, 2017 among Willis Engine Structured Trust III, the Registrant, Deutsche Bank Trust Company Americas, as trustee, and each Managed Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.23 to our report on Form 10-Q filed on November 9, 2017).
10.21*	Revolving Credit Agreement dated as of August 4, 2017 among Willis Engine Structured Trust III, BNP Paribas and the Registrant (incorporated by reference to Exhibit 10.24 to our report on Form 10-Q filed on November 9, 2017).
10.22*	Series A-2 Preferred Stock Purchase Agreement dated as of September 22, 2017 (incorporated by reference to Exhibit 10.1 to our report on Form 8-K filed on September 28, 2017).
10.23*	General Terms Agreement No. CFM-1-1028985 dated December 22, 2017 between CFM International, Inc. and the Registrant (incorporated by reference to Exhibit 10.26 to our report on Form 10-K filed on March 15, 2018).
10.24*	Letter Agreement No. 1 to GTA No. 1-1028985 dated December 22, 2017 between CFM International, Inc. and the Registrant (incorporated by reference to Exhibit 10.27 to our report on Form 10-K filed March 15, 2018).
10.25*	General Terms Agreement No. GE-1-2299982290-2 dated May 26, 2010 by and amongst General Electric Company, GE Engine Services Distribution, LLC, the Registrant and WEST Engine Funding LLC (incorporated by reference to Exhibit 10.28 to our report on Form 10-K filed March 15, 2018).
10.26*	Letter Agreement No. 3 to GTA No. 1-2299982290 dated December 22, 2017 between General Electric Corporation and the Registrant (incorporated by reference to Exhibit 10.29 to our report on Form 10-K filed March 15, 2018).
10.27*	Amendment No. 2 to General Terms Agreement No. GE-1-2299982290-2 dated December 22, 2017 between General Electric Company and the Registrant (incorporated by reference to Exhibit 10.30 to our report on Form 10-K filed March 15, 2018).
10.28*	Agreement by and between IAE International Aero Engines AG and the Registrant, dated March 16, 2018, to purchase spare engines (incorporated by reference to Exhibit 10.31 to our report on Form 10-Q filed May 10, 2018).
10.29	Redemption Agreement to purchase 294,787 shares of common stock dated as of March 29, 2018 between the Registrant and M3 Partners, LP (incorporated by reference to Exhibit 10.32 to our report on Form 10-Q filed May 10, 2018).
10.30†	2018 Stock Incentive Plan (incorporated by reference to the Registrant’s Proxy Statement for 2018 Annual Meeting of Stockholders filed on April 27, 2018).
10.31*	Administrative Agency Agreement dated as of August 22, 2018 among Willis Engine Structured Trust IV, the Registrant, Deutsche Bank Trust Company Americas, as trustee, and each Managed Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.34 to our report on Form 10-Q filed November 7, 2018).
10.32*	Asset Purchase Agreement dated as of August 22, 2018 between the Registrant and Willis Engine Structured Trust IV (incorporated by reference to Exhibit 10.35 to our report on Form 10-Q filed November 7, 2018).

33

10.33*	Trust Indenture dated as of August 22, 2018 among Willis Engine Structured Trust IV, Deutsche Bank Trust Company Americas, as Trustee, the Registrant and Bank of America, N.A. (incorporated by reference to Exhibit 10.36 to our report on Form 10-Q filed November 7, 2018).
10.34*	Revolving Credit Agreement dated as of August 22, 2018 among Willis Engine Structured Trust IV, Bank of America, N.A. and the Registrant (incorporated by reference to Exhibit 10.37 to our report on Form 10-Q filed November 7, 2018).
10.35*	Servicing Agreement dated as of August 22, 2018 among Willis Engine Structured Trust IV, the Registrant and each Service Group Member referred to therein and from time to time made a party thereto (incorporated by reference to Exhibit 10.38 to our report on Form 10-Q filed November 7, 2018).
10.36*	Security Trust Agreement dated as of August 22, 2018 among Willis Engine Structured Trust IV, each Grantor referred to therein and from time to time made a party thereto and Deutsche Bank Trust Company Americas, as security trustee and operating bank (incorporated by reference to Exhibit 10.39 to our report on Form 10-Q filed November 7, 2018).
10.37*	Amendment No. 1 to Agreement to Purchase Spare Engines, dated July 25, 2018, between IAE International Aero Engines AG and Willis Lease Finance Corporation (incorporated by reference to Exhibit 10.40 to our report on Form 10-Q filed November 7, 2018).
10.38*	Amendment No. 2 to Agreement to Purchase Spare Engines, dated August 9, 2018, between IAE International Aero Engines AG and Willis Lease Finance Corporation (incorporated by reference to Exhibit 10.41 to our report on Form 10-Q filed November 7, 2018).
10.39*	Trust Indenture dated as of August 4, 2017 among Willis Engine Structured Trust III, Deutsche Bank Trust Company Americas, as trustee, the Registrant and BNP Paribas (incorporated by reference to Exhibit 4.6 to our report on Form 10-Q filed on November 9, 2017).
10.40*	Amendment No. 3 to Agreement to Purchase Spare Engines, dated March 22, 2019, between IAE International Aero Engines AG and Willis Lease Finance Corporation (incorporated by reference to Exhibit 10.43 to our report on Form 10-Q filed on May 8, 2019).
10.41*	Amendment No. 4 to Agreement to Purchase Spare Engines, dated June 27, 2019, between IAE International Aero Engines AG and Willis Lease Finance Corporation (incorporated by reference to Exhibit 10.44 to our report on Form 10-Q filed on August 7, 2019).
10.42*	Fourth Amended and Restated Credit Agreement, dated as of June 7, 2019, among the Company, MUFG Union Bank, Ltd. as administrative agent, MUFG Union Bank, N.A. as security agent, and certain other lenders and financial institutions named therein (incorporated by reference to Exhibit 10.44 to our report on Form 10-Q filed on August 7, 2019).
10.43*	Letter Agreement No. 2 to GTA No. 1-1028985 dated December 12, 2019 between CFM International, Inc. and Willis Lease Finance Corporation.
10.44*	Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Amendment No. 5 to Security Agreement, dated as of December 13, 2019, among the Company, MUFG Union Bank, Ltd. as administrative agent, MUFG Union Bank, N.A. as security agent, and certain other lenders and financial institutions named therein.
14.1	Code of Ethics (incorporated by reference to Exhibit 14.1 to our report on Form 10-K filed on March 11, 2016).
21.1	Subsidiaries of the Registrant.
23.1	Consent of KPMG LLP.
31.1	Certification of Charles F. Willis, IV, pursuant to Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Scott B. Flaherty, pursuant to Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101	The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Redeemable Preferred Stock and Shareholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

________________________________________________________

* Certain portions of this exhibit have been redacted pursuant to an SEC order granting confidential treatment or constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10).

† Indicates a management contract or compensatory plan or arrangement.

Financial Statements are submitted as a separate section of this report beginning on page 40.

34

ITEM 16.    FORM 10-K SUMMARY

None.

35

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, duly authorized officers and directors.

Dated:	March 12, 2020
		Willis Lease Finance Corporation
		By:	/s/ CHARLES F. WILLIS, IV
			Charles F. Willis, IV
			Chairman of the Board and
			Chief Executive Officer

Dated:	Title	Signature
Date: March 12, 2020	Chief Executive Officer and Director	/s/ CHARLES F. WILLIS, IV
	(Principal Executive Officer)	Charles F. Willis, IV
Date: March 12, 2020	Chief Financial Officer	/s/ SCOTT B. FLAHERTY
	(Principal Finance and Accounting Officer)	Scott B. Flaherty
Date: March 12, 2020	Director	/s/ ROBERT T. MORRIS
		Robert T. Morris
Date: March 12, 2020	Director	/s/ HANS JOERG HUNZIKER
		Hans Joerg Hunziker
Date: March 12, 2020	Director	/s/ ROBERT J. KEADY
		Robert J. Keady
Date: March 12, 2020	Director	/s/ AUSTIN C. WILLIS
		Austin C. Willis

36

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	38
Consolidated Balance Sheets as of December 31, 2019 and December 31, 2018	40
Consolidated Statements of Income for the years ended December 31, 2019 and December 31, 2018	41
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019 and December 31, 2018	42
Consolidated Statements of Redeemable Preferred Stock and Shareholders’ Equity for the years ended December 31, 2019 and December 31, 2018	43
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and December 31, 2018	44
Notes to Consolidated Financial Statements	45
Schedule I — Condensed Financial Information of Parent	69
Schedule II — Valuation Accounts	74

37

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

Willis Lease Finance Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Willis Lease Finance Corporation and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, comprehensive income, redeemable preferred stock and shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes and financial statement Schedule I, Condensed Financial Information of Parent, and Schedule II, Valuation Accounts (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

38

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

We have not been able to determine the specific year that we began serving as the Company’s auditor; however, we are aware that we have served as the Company’s auditor since at least 1991.

Fort Lauderdale, Florida

March 12, 2020

39

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share data)

	December 31, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	6,720		$	11,688
Restricted cash	56,948			70,261
Equipment held for operating lease, less accumulated depreciation of $414,835 and $385,483 at December 31, 2019 and 2018, respectively	1,650,918			1,673,135
Maintenance rights	3,133			14,763
Equipment held for sale	120			789
Receivables, net of allowances of $1,730 and $2,559 at December 31, 2019 and 2018, respectively	24,059			23,270
Spare parts inventory	41,759			48,874
Investments	57,936			47,941
Property, equipment & furnishings, less accumulated depreciation of $8,666 and $6,945 at December 31, 2019 and 2018, respectively	31,520			27,679
Intangible assets, net	1,312			1,379
Notes receivable	38,145			238
Other assets	28,038			14,926
Total assets (1)	$	1,940,608		$	1,934,943
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	45,648		$	42,939
Deferred income taxes	110,418			90,285
Debt obligations	1,251,006			1,337,349
Maintenance reserves	106,870			94,522
Security deposits	20,569			28,047
Unearned revenue	6,121			5,460
Total liabilities (2)	1,540,632			1,598,602
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)	49,638			49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,356 and 6,176 shares issued at December 31, 2019 and 2018, respectively)	64			62
Paid-in capital in excess of par	4,557			—
Retained earnings	348,965			286,623
Accumulated other comprehensive (loss) income, net of income tax (benefit) expense of $(896) and $81 at December 31, 2019 and 2018, respectively.	(3,248		)	102
Total shareholders’ equity	350,338			286,787
Total liabilities, redeemable preferred stock and shareholders' equity	$	1,940,608		$	1,934,943

________________________________________________________

(1) Total assets at December 31, 2019 and December 31, 2018 include the following assets of variable interest entity’s (“VIE’s”) that can only be used to settle the liabilities of the VIE’s: Cash, $134 and $656; Restricted Cash, $56,523 and $70,261, Equipment, $1,004,851 and $1,032,599; Maintenance Rights, $3,133 and $11,466; Inventory, $2,832 and $4,921; and Other, $668 and $1,075 respectively.

(2) Total liabilities at December 31, 2019 and December 31, 2018 include the following liabilities of VIE’s for which the VIE’s creditors do not have recourse to Willis Lease Finance Corporation: Debt obligations, $842,996 and $903,296, respectively.

See accompanying notes to the consolidated financial statements.

40

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)

	Years Ended December 31,
	2019		2018
REVENUE
Lease rent revenue	$	190,690	$	175,609
Maintenance reserve revenue	108,998		87,009
Spare parts and equipment sales	74,651		71,141
Gain on sale of leased equipment	20,044		6,944
Other revenue	14,777		7,644
Total revenue	409,160		348,347
EXPENSES
Depreciation and amortization expense	86,236		76,814
Cost of spare parts and equipment sales	62,647		61,025
Write-down of equipment	18,220		10,651
General and administrative	86,523		72,021
Technical expense	8,122		11,142
Net finance costs:
Interest expense	66,889		64,220
Loss on debt extinguishment	220		—
Total net finance costs	67,109		64,220
Total expenses	328,857		295,873
Earnings from operations	80,303		52,474
Earnings from joint ventures	8,578		3,800
Income before income taxes	88,881		56,274
Income tax expense	21,959		13,043
Net income	66,922		43,231
Preferred stock dividends	3,250		3,250
Accretion of preferred stock issuance costs	84		83
Net income attributable to common shareholders	$	63,588	$	39,898
Basic weighted average earnings per common share:	$	10.90	$	6.75
Diluted weighted average earnings per common share:	$	10.50	$	6.60
Basic weighted average common shares outstanding	5,836		5,915
Diluted weighted average common shares outstanding	6,058		6,046

See accompanying notes to the consolidated financial statements.

41

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands)

	Years Ended December 31,
	2019			2018
Net income	$	66,922		$	43,231
Other comprehensive loss:
Currency translation adjustment	(222		)	(770		)
Unrealized (loss) gain on derivative instruments	(3,331		)	533
Unrealized loss on derivative instruments at joint venture	(774		)	—
Net loss recognized in other comprehensive income	(4,327		)	(237		)
Tax benefit related to items of other comprehensive income	977			54
Other comprehensive loss	(3,350		)	(183		)
Total comprehensive income	$	63,572		$	43,048

See accompanying notes to the consolidated financial statements.

42

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Redeemable Preferred Stock and Shareholders’ Equity

Years Ended December 31, 2019 and 2018

(In thousands, except per share data)

				Shareholders' Equity
	Redeemable														Accumulated Other
	Preferred Stock			Common Stock					Paid-in Capital in			Retained			Comprehensive			Total Shareholders'
	Shares	Amount		Shares		Amount			Excess of par			Earnings			Income/(Loss)			Equity
Balances at December 31, 2017	2,500	$	49,471	6,419		$	64		$	2,319		$	256,301		$	226		$	258,910
Net income	—	—		—		—			—			43,231			—			43,231
Net unrealized loss from currency translation adjustment, net of tax benefit of $174	—	—		—		—			—			—			(596		)	(596		)
Net unrealized gain from derivative instruments, net of tax expense of $120	—	—		—		—			—			—			413			413
Shares repurchased	—	—		(472	)	(5		)	(6,683		)	(9,517		)	—			(16,205		)
Shares issued under stock compensation plans	—	—		272		3			242			—			—			245
Cancellation of restricted stock units in satisfaction of withholding tax	—	—		(43	)	—			(1,288		)	—			—			(1,288		)
Stock-based compensation, net of forfeitures	—	—		—		—			5,410			—			—			5,410
Accretion of preferred shares issuance costs	—	83		—		—			—			(83		)	—			(83		)
Preferred stock dividends ($1.30 per share)	—	—		—		—			—			(3,250		)	—			(3,250		)
Adoption of ASU 2018-02	—	—		—		—			—			(59		)	59			—
Balances at December 31, 2018	2,500	49,554		6,176		62			—			286,623			102			286,787
Net income	—	—		—		—			—			66,922			—			66,922
Net unrealized loss from currency translation adjustment, net of tax benefit of $50	—	—		—		—			—			—			(172		)	(172		)
Net unrealized loss from derivative instruments, net of tax benefit of $927	—	—		—		—			—			—			(3,178		)	(3,178		)
Shares repurchased	—	—		(72	)	(1		)	(2,087		)	(1,479		)	—			(3,567		)
Shares issued under stock compensation plans	—	—		289		3			332			—			—			335
Cancellation of restricted stock in satisfaction of withholding tax	—	—		(37	)	—			(1,475		)	—			—			(1,475		)
Stock-based compensation, net of forfeitures	—	—		—		—			7,787			—			—			7,787
Accretion of preferred shares issuance costs	—	84		—		—			—			(84		)	—			(84		)
Preferred stock dividends ($1.30 per share)	—	—		—		—			—			(3,250		)	—			(3,250		)
Adoption of ASU 2016-02	—	—		—		—			—			233			—			233
Balances at December 31, 2019	2,500	$	49,638	6,356		$	64		$	4,557		$	348,965		$	(3,248	)	$	350,338

See accompanying notes to the consolidated financial statements.

43

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

	Years Ended December 31,
	2019			2018
Cash flows from operating activities:
Net income	$	66,922		$	43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	86,236			76,814
Write-down of equipment	18,220			10,651
Stock-based compensation expenses	7,787			5,410
Amortization of deferred costs	6,364			6,403
Allowances and provisions	(272		)	1,503
Gain on sale of leased equipment	(20,044		)	(6,944		)
Income from joint ventures	(8,578		)	(3,800		)
Loss (gain) on disposal of property, equipment and furnishings	42			(41		)
Loss on debt extinguishment	220			—
Deferred income taxes	21,074			12,057
Changes in assets and liabilities:
Receivables	(517		)	(5,925		)
Distributions received from joint ventures	3,300			5,730
Inventory	29,114			12,111
Other assets	(2,519		)	(3,453		)
Accounts payable and accrued expenses	2,131			12,543
Maintenance reserves	22,282			21,964
Security deposits	(2,108		)	3,075
Unearned revenue	661			(2,642		)
Net cash provided by operating activities	230,315			188,687
Cash flows from investing activities:
Proceeds from sale of equipment (net of selling expenses)	191,891			64,429
Issuance of notes receivable	(42,857		)	—
Payments received on notes receivable	4,950			—
Capital contributions to joint ventures	(5,713		)	—
Purchase of equipment held for operating lease and for sale	(289,385		)	(441,416		)
Purchase of property, equipment and furnishings	(6,330		)	(3,487		)
Net cash used in investing activities	(147,444		)	(380,474		)
Cash flows from financing activities:
Proceeds from issuance of debt obligations	340,120			759,439
Debt issuance costs	(3,142		)	(7,748		)
Principal payments on debt obligations	(428,081		)	(504,753		)
Interest bearing security deposits	(2,092		)	—
Proceeds from shares issued under stock compensation plans	335			245
Repurchase of common stock	(3,567		)	(16,135		)
Preferred stock dividends	(3,250		)	(3,348		)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475		)	(1,288		)
Net cash (used in) provided by financing activities	(101,152		)	226,412
Increase/(Decrease) in cash, cash equivalents and restricted cash	(18,281		)	34,625
Cash, cash equivalents and restricted cash at beginning of period	81,949			47,324
Cash, cash equivalents and restricted cash at end of period	$	63,668		$	81,949
Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	63,585		$	59,122
Income Taxes	$	222		$	1,073
Supplemental disclosures of non-cash activities:
Purchase of equipment held for operating lease	$	2,515		$	21,656
Transfers from Equipment held for operating lease to Equipment held for sale	$	10,131		$	—
Transfers from Equipment held for operating lease to Spare parts inventory	$	23,931		$	18,220
Transfers from Equipment held for sale to Spare parts inventory	$	422		$	26,387
Accrued preferred stock dividends	$	686		$	686
Accretion of preferred stock issuance costs	$	84		$	83

See accompanying notes to the consolidated financial statements.

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WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Unless the context requires otherwise, references to the “Company”, “WLFC”, “we”, “us” or “our” in this Annual Report on Form 10-K refer to Willis Lease Finance Corporation and its subsidiaries.

(a) Organization

Willis Lease Finance Corporation with its subsidiaries is a provider of aviation services whose primary focus is providing operating leases of commercial aircraft, aircraft engines and other aircraft-related equipment to air carriers, manufacturers and overhaul/repair facilities worldwide. The Company also engages in the selective purchase and resale of commercial aircraft engines.

Willis Aeronautical Services, Inc. (“Willis Aero”) is a wholly-owned subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines.

Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned subsidiary whose primary focus is the engine management and consulting business.

Willis Engine Securitization Trust II (“WEST II” or the “WEST II Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an asset-backed securitization (“ABS”), of which the Company is the sole beneficiary. WEST II is a variable interest entity (“VIE”) which the Company owns 100% of the interest and consolidates in its financial statements.

In August 2017, the Company closed on Willis Engine Securitization Trust III (“WEST III” or the “WEST III Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST III Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $293.7 million and the Series B Notes in an aggregate principal amount of $42.0 million. The Company used these funds, net of transaction expenses, to pay off part of its revolving credit facility. WEST III is a VIE which the Company owns 100% of the interest and consolidates in its financial statements. 

In August 2018, the Company closed on Willis Engine Securitization Trust IV (“WEST IV” or the “WEST IV Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST IV Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $326.8 million and the Series B Notes in an aggregate principal amount of $46.7 million. WEST IV is a VIE which the Company owns 100% of the interest and consolidates in its financial statements.

Principal and interest on the WEST II, III and IV Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the respective indenture agreements.

The WEST II, III and IV Notes are secured by, among other things, the respective ABS’s direct and indirect interests in a portfolio of assets. The WEST II, WEST III and WEST IV Notes have scheduled amortizations and are payable solely from revenue received from the engines and the engine leases, after payment of certain expenses of the respective ABS. The assets of WEST II, WEST III and WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to the respective ABS. WEST II, WEST III and WEST IV are consolidated for financial statement presentation purposes, with the respective assets and liabilities on the Company's balance sheet. The ABS’ ability to make distributions and pay dividends to the Company is subject to the prior payments of its debt and other obligations and maintenance of adequate reserves and capital. Under each ABS, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of the maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

Additionally, in connection with WEST II, WEST III and WEST IV, the Company entered into servicing agreements and administrative agency agreements to provide certain engine, lease management and reporting functions in return for fees based on a percentage of collected lease revenues and asset sales. Because WEST II, WEST III and WEST IV are consolidated for financial statement reporting purposes, all fees eliminate upon consolidation.

(b)Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WLFC and its wholly owned subsidiaries, including VIEs where the Company is the primary beneficiary, in accordance with consolidation guidance. The Company evaluates all entities in

45

which it has an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a variable interest entity the Company consolidates the financial statements of that entity if it is the primary beneficiary of the entities’ activities.  If the entity is a voting interest entity the Company consolidates the entity when it has a majority of voting interests. Intercompany transactions and balances have been eliminated in consolidation. 

The condensed parent company financial statements should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes herein. 

(c)Revenue Recognition

Leasing revenue

Revenue from leasing of engines, aircraft and related parts and equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Revenue is not recognized when cash collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Under the terms of some of the Company’s leases, the lessees pay use fees (also known as maintenance reserves) to the Company based on usage of the leased asset, which are designed to cover expected future maintenance costs. Some of these amounts are reimbursable to the lessee if they make specifically defined maintenance expenditures. Use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee. Use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee,  the lease terminates, or the obligation to reimburse the lessee for such reserves ceases to exist, at which time they are recognized in revenue as maintenance reserve revenue.

Certain lessees may be significantly delinquent in their rental payments and may default on their lease obligations. As of December 31, 2019, the Company had an aggregate of approximately $2.7 million in lease rent and $3.8 million in maintenance reserve receivables more than 30 days past due. Inability to collect receivables or to repossess engines or other leased equipment in the event of a default by a lessee could have a material adverse effect on the Company. The Company estimates an allowance for doubtful accounts for receivables it does not consider fully collectible. The allowance for doubtful accounts includes the following: (1) specific reserves for receivables which are impaired for which management believes full collection is doubtful; and (2) a general reserve for estimated losses based on historical experience. 

No customer accounted for greater than 10% of total lease rent revenue in 2019 and 2018.

Gain on sale of leased equipment  

The Company regularly sells equipment from its lease portfolio. This equipment may or may not be subject to a lease at the time of sale. The net gain or loss on such sales is recognized as revenue and consists of proceeds associated with the sale less the net book value of the asset sold and any direct costs associated with the sale. To the extent that deposits associated with the equipment are not included in the sale, any such amount is included in the calculation of gain or loss.

Spare parts sales

The Spare Parts Sales reportable segment primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or the Company’s leasing operations. The parts are sold at a fixed price with no right of return. In determining the performance obligation, management has identified the promise in the contract to be the shipment of the spare parts to the customer.  Title passes to the buyer when the goods are shipped, and the buyer is responsible for any loss in transit, and the Company has a legal right to payment for the spare parts. Management has determined that physical acceptance of the spare parts to be a formality in accordance with Accounting Standards Codification (“ASC”) 606-10-5-86. 

The spare parts transaction price is a fixed dollar amount and is stated on each purchase order for a fixed amount by total number of parts. Spare parts revenue is based on a set price for a set number of parts as defined in the purchase order. The performance obligation is completed once the parts have shipped and, as a result, all of the transaction price is allocated to that performance obligation. Management has determined that it is appropriate for the Company to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) under ASC 606. Additionally, there is no impact to the timing and amounts of revenue recognized for spare parts sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Equipment Sales

Equipment sales represent the selective purchase and resale of commercial aircraft engines and other aircraft equipment. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, condition of the asset, bill of sale, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in

46

the equipment sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. As such, management has identified the transfer of the asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Equipment sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. Therefore, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Managed Services

Managed services revenue predominantly represents fleet management and engine storage services which may be combined on a single contract with a customer. Fleet management services are performed for a stated fixed fee as agreed upon in the services agreement. Engine storage services are for a fixed monthly fee. For a contract containing more than one performance obligation, the allocation of the transaction price is generally performed on the basis of the relative stand-alone selling price of each distinct good or service in the contract. As each of the services provided within the contract have separate prices, the Company allocates the price to its related performance obligation described above. Management has determined each of the revenue elements contain performance obligations that are satisfied over time and therefore recognizes revenue over time in accordance with ASC 606-10-25-27. The Company utilizes the percentage-of-completion method (input method) for recognizing fleet management services and will calculate revenues based on labor hours incurred. Additionally, as is required by ASC 606-10-25-35, as circumstances change over time, the Company will update its measure of progress to reflect any changes in the outcome of the performance obligation. Engine storage services are recognized on a monthly basis utilizing the input method of days passed. Therefore, there is no impact to the timing and amounts of revenue recognized for managed services related to the implementation of ASC 606 upon adoption on January 1, 2018.

Amounts owed for managed services are typically billed upon contract completion. At December 31, 2019, unbilled revenue was $0.8 million and the Company expects it to be fully recognized by June 30, 2020. Additionally, managed services are presented within the Other revenue line in the Consolidated Statements of Income.

Other Revenue

Other revenue consists primarily of management fee income, lease administration fees, third party consignment commissions earned, service fee revenue, interest revenue, and other discrete revenue items.

(d)Equipment Held for Operating Lease

Aircraft assets held for operating lease are stated at cost, less accumulated depreciation. Certain costs incurred in connection with the acquisition of aircraft assets are capitalized as part of the cost of such assets. Major overhauls paid for by the Company, which improve functionality or extend the original useful life, are capitalized and depreciated over the shorter of the estimated period to the next overhaul (“deferral method”) or the remaining useful life of the equipment. The Company does not accrue for planned major maintenance. The cost of overhauls of aircraft assets under long term leases, for which the lessee is responsible for maintenance during the period of the lease, are paid for by the lessee or from reimbursable maintenance reserves paid to the Company in accordance with the lease, and are not capitalized.

Based on specific aspects of the equipment, the Company generally depreciates engines on a straight-line basis over a 15-year period from the acquisition date to a 55% residual value. This methodology is believed to accurately reflect the Company’s typical holding period for the engine assets and that the residual value assumption reasonably approximates the selling price of the assets 15 years from the date of acquisition. The typical 15 year holding period is the estimated useful life of the Company’s engines based on its business model and plans, and represents how long the Company anticipates holding a newly acquired engine. The technical useful life of a new engine can be in excess of 25 years. The Company reviews the useful life and residual values of all engines periodically as demand changes to accurately depreciate the cost of equipment over the useful life of the engines.

The aircraft and airframes owned by the Company are depreciated on a straight-line basis over an estimated useful life of 13 to 20 years to a 15% to 17% residual value. The other leased parts and related equipment owned by the Company are depreciated on a straight-line basis over an estimated useful life of 14 to 15 years to a 25% residual value.

The useful life of older generation engines and aircraft may be significantly less based upon the technical status of the engine, as well as supply and demand factors. For these older generation engines and aircraft, the remaining useful life and the remaining expected holding period are typically the same. For older generation engines or aircraft that are unlikely to be repaired at the end of the current expected useful lives, the Company depreciates the engines or aircraft over their estimated lives to a residual value based on an estimate of the wholesale value of the parts after disassembly. As of December 31, 2019, 47 engines having a net book value of $51.1 million were depreciated under this policy with estimated useful lives ranging from 1 to 79 months. The Company adjusts its estimates annually

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for these older generation assets, including updating estimates of an engine’s or aircraft’s remaining operating life as well as future residual value expected from part-out based on the current technical status of the engine or aircraft.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets to be disposed are reported at the lower of carrying amount or fair value less cost to sell. Impairment is identified by review of appraisals or by comparison of undiscounted forecasted cash flows, including estimated sales proceeds, over the life of the asset with the assets’ book value. If the undiscounted forecasted cash flows are less than the book value, the asset is written down to its fair value. Fair value is determined per individual asset by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors considered relevant by the Company. The Company conducts a formal annual review of the carrying value of long-lived assets and also evaluates assets during the year if a triggering event is identified indicating impairment is possible. Such annual review resulted in an impairment charge of $6.4 million and $5.3 million in 2019 and 2018, respectively (included in “Write-down of equipment” in the Consolidated Statements of Income). 

(e)Equipment Held for Sale

Equipment held for sale includes engines being marketed for sale as well as third party consigned assets. The assets to be disposed are reported at the lower of carrying amount or fair value less costs to sell.

(f)Debt Issuance Costs and Related Fees

Fees paid in order to secure debt are capitalized, included in Debt obligations on the Consolidated Balance Sheets, and amortized over the life of the related loan using the effective interest method.

(g)Interest Rate Hedging

The Company enters into various derivative instruments periodically to mitigate the exposure on variable rate borrowings. The derivative instruments are fixed-rate interest swaps that are recorded at fair value as either an asset or liability.

While substantially all of the Company’s derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria have been met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective. The hedging instrument’s effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. All of the transactions that the Company has designated as hedges are cash flow hedges. The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings. The ineffective portion of the hedges is recorded in earnings in the current period.

(h)Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs (see Note 8).

The Company files income tax returns in various states and countries which may have different statutes of limitations. The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Such adjustments have historically been minimal and immaterial to our financial results.

(i)Property, Equipment and Furnishings

Property, equipment and furnishings are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to thirty-nine years. Leasehold improvements are recorded at cost and depreciated by the straight-line method over the shorter of the lease term or useful life of the leasehold.

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(j)Cash and Cash Equivalents

The Company considers highly liquid investments readily convertible into known amounts of cash, with original maturities of 90 days or less, as cash equivalents.

(k)Restricted Cash

The Company has certain bank accounts that are subject to restrictions in connection with its WEST II, WEST III and WEST IV borrowings and a note payable. Under these borrowings, cash is collected in restricted accounts, which are used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and some or all of the lease security deposits are accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. Under WEST II, cash from maintenance reserve payments is held in a restricted cash account equal to the maintenance obligations projected for the subsequent six months, and is subject to a minimum balance of $9.0 million. Under WEST III and WEST IV, cash from maintenance reserve payments is held in a restricted cash account equal to a portion of the maintenance obligations projected for the subsequent nine months, and is subject to a minimum balance of $10.0 million. Under WEST II, all security deposits are held in a restricted cash account until the end of the lease. Under WEST III and WEST IV, security deposits are held in a restricted cash account equal to a portion of the security deposits for leases scheduled to terminate over the subsequent four months, subject to a minimum balance of $1.0 million. Provided lease return conditions have been met, these deposits will be returned to the lessee. To the extent return conditions are not met, these deposits may be retained by the Company.

(l)Spare Parts Inventory

Spare parts inventory consists of spare aircraft and engine parts purchased either directly by Willis Aero and also engines removed from the lease portfolio to be parted out. Spare parts inventory is stated at lower of cost or net realizable value. An impairment charge for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value.

(m)Intangible Assets

Intangible assets include customer relationships and goodwill at Willis Asset Management. Intangible assets are accounted for in accordance with ASC 350, “Intangibles — Goodwill and Other.”

Customer relationships are amortized on a straight line basis over their estimated useful life of five years. The Company has no intangible assets with indefinite useful lives. Goodwill is assessed for impairment annually.

(n)Other assets

Other assets typically include prepaid purchase deposits and other prepaid expenses. As of December 31, 2019 and 2018, other assets included prepaid deposits of $10.6 million and $1.9 million, respectively, relating to commitments to purchase equipment.

(o)Management Estimates

These financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates estimates on an ongoing basis, including those related to residual values, estimated asset lives, impairments and bad debts. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes that the accounting policies on revenue recognition, maintenance reserves and expenditures, useful life of equipment, asset residual values, asset impairment and allowance for doubtful accounts are critical to the results of operations.

If the useful lives or residual values are lower than those estimated, upon sale of the asset a loss may be realized. Significant management judgment is required in the forecasting of future operating results, which are used in the preparation of projected undiscounted cash-flows and should different conditions prevail, material impairment write-downs may occur.

(p)Earnings per share information

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of shares

49

outstanding, adjusted for the dilutive effect of unvested restricted stock awards (“RSAs”). See Note 10 for more information on the computation of earnings per share.

(q)Investments

The Company’s investments are joint ventures, where it owns 50% of the equity of the ventures and are accounted for using the equity method of accounting. The investments are recorded at the amount invested plus or minus our 50% share of net income or loss, less any distributions or return of capital received from the entities.

(r)Stock Based Compensation

The Company recognizes stock based compensation expense in the financial statements for share-based awards based on the grant-date fair value of those awards. Stock based compensation expense is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term. Forfeitures are accounted for as they occur.

(s)Initial Direct Costs associated with Leases

The Company accounts for the initial direct costs, including sales commissions and legal fees, incurred in obtaining a new lease by deferring and amortizing those costs over the term of the lease. The amortization of these costs is recorded under general and administrative expenses in the Consolidated Statements of Income. The amounts amortized were $2.0 million and $1.9 million for the years ended December 31, 2019 and 2018, respectively.

(t)Maintenance Rights

The Company identifies, measures and accounts for maintenance right assets and liabilities associated with acquisitions of equipment with in-place leases. A maintenance right asset represents the fair value of the contractual right under a lease to receive equipment in an improved maintenance condition as compared to the maintenance condition on the acquisition date. A maintenance right liability represents the Company's obligation to pay the lessee for the difference between the lease-end contractual maintenance condition of the equipment and the actual maintenance condition of the equipment on the acquisition date. The equipment condition at the end of the lease term may result in either overhaul work being performed by the lessee to meet the required return condition or a financial settlement.

When a capital event is performed on the equipment by the lessee, which satisfies their maintenance right obligation, the maintenance rights are added to the equipment basis and depreciated to the next capital event. When equipment is sold before the end of the pre-existing lease, the maintenance rights are applied against any accumulated maintenance reserves, if paid by the lessee, and the remaining balance is applied to the disposition gain or loss. When a lease terminates, an end of lease true-up is performed and the maintenance right is applied against the accumulated maintenance reserves or, for non-reserve lessees the final settlement payment, and any remaining net maintenance right is recorded in the income statement.

(u)Foreign Currency Translation

The Company’s foreign investments have been converted at rates of exchange in effect at the balance sheet dates. The changes in exchange rates in our foreign investments reported under the equity method are included in stockholders’ equity as accumulated other comprehensive income.

(v)Risk Concentrations

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash deposits, lease receivables and interest rate swaps.

The Company places its cash deposits with financial institutions and other credit-worthy institutions, such as money market funds, and limits the amount of credit exposure to any one party. Management opts for security of principal as opposed to yield. Concentrations of credit risk with respect to lease receivables are limited due to the large number of customers comprising the customer base, and their dispersion across different geographic areas. Some lessees are required to make payments for maintenance reserves at the end of the lease however, this risk is considered limited due to the relatively few lessees which have this provision in the lease. The Company enters into interest rate swap agreements with counterparties that are investment grade financial institutions.

(w)Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted by the Company

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) that amends the accounting guidance on leases for both lessees and lessors. The new standard

50

establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, as well as certain practical expedients related to land easements and lessor accounting.

The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provided an additional and optional transition method that allowed entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopted the new leases standard would continue to be in accordance with ASC Topic 840 if the optional transition method is elected. The Company adopted the standard using the optional transition method with no restatement of comparative periods and a cumulative effect adjustment recognized as of the date of adoption.

Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately $4.5 million and $4.3 million, respectively, as of January 1, 2019. The cumulative effect adjustment to retained earnings as of January 1, 2019 was $0.2 million. The standard did not materially impact our consolidated financial statements. 

As part of the implementation process, the Company assessed its lease arrangements and evaluated practical expedients and accounting policy elections to meet the reporting requirements of this standard. The Company also evaluated the changes in controls and processes that were necessary to implement the new standard, and no material changes were required. The Company elected the ‘package of practical expedients’ which permitted us not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to WLFC. 

Under ASC 842, a lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases. Furthermore, the Company will assess on an ongoing basis, the updated guidance provided for sale leaseback transactions and whether failed sale leaseback accounting treatment is triggered. As lessor, the Company's leases in place upon adoption of ASC 842 remained as operating leases under the new standard. In addition, due to the new standard’s narrowed definition of initial direct costs, the Company expenses as incurred, certain lease origination costs that were previously capitalized as initial direct costs and amortized to expense over the lease term. 

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, the Company did not recognize ROU assets or lease liabilities, including for existing short-term leases. The Company also elected the practical expedient to not separate lease and non-lease components for the majority of its leases as both lessee and lessor.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU is targeted at simplifying the application of hedge accounting and aims at aligning the recognition and presentation of the effects of hedge instruments and hedge items. This guidance became effective for the Company on January 1, 2019 and it did not result in an adjustment to the opening balance of retained earnings for the Company's existing cash flow hedge. Additionally, the presentation and disclosure aspect of ASU 2017-12 was applied on a prospective basis within Note 7.

In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The Company adopted this guidance effective January 1, 2019 and it did not materially impact our consolidated financial statements.

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update).” The ASU clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC's regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance and it did not materially impact our consolidated financial statements.

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Recent Accounting Pronouncements To Be Adopted by the Company

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses of Financial Instruments” (“ASU 2016-13”). ASU 2016-13 revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. ASU 2016-13 affects trade receivables, debt securities, net investments in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief.” This ASU provides targeted transition relief allowing for an irrevocable one-time election upon adoption of the new standard to measure financial assets previously measured at amortized cost using the fair value option. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates” and ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” ASU 2019-10 amends effective dates for public business entities not meeting the definition of an SEC filer. ASU 2019-11 clarifies and addresses stakeholders’ specific issues around certain aspects of the amendments in ASU 2016-13. The amendments in this ASU are effective for the Company on January 1, 2020, with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2020.

While the Company continues to evaluate certain aspects of the new standard, including those still being revised by the FASB, the Company does not expect the new standard will have a material effect on its financial statements, but it does expect significant new disclosures and controls in order to comply with the new standard requirements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves consistent application of and simplifies Generally Accepted Accounting Principles (“GAAP”) for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company plans to adopt this guidance effective January 1, 2021 and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

2. Leases

As lessor, and as of December 31, 2019, all of our leases were operating leases with the exception of two leases entered into during the first quarter of 2019 which are classified as notes receivable under the failed sale leaseback guidance provided by ASC 842.

As lessee, the significant majority of leases the Company enters are for real estate (office and warehouse space for our operations as well as automobiles). These lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of January 1, 2019, the Company did not have any significant leases that had not yet commenced but that created significant rights and obligations. Leases with terms of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Some of the Company's leases include variable non-lease components (e.g., taxes) which are not separated from associated lease components (e.g. fixed rent, common-area maintenance costs, vehicle protection plans and other service fees) as elected under the practical expedient package provided by ASC 842.

The Company's leases have remaining lease terms of one to seven years, some of which include options to renew or extend the lease term from one to five years. Our automobile leases include an option to purchase the vehicle at lease termination. The depreciable life of assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The exercise of lease renewal options or purchase at lease termination is at the Company's sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities.

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Supplemental balance sheet information related to leases was as follows:

Leases	Classification	December 31, 2019
		(in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets	Other assets	$	4,084
Total leased assets		$	4,084
Liabilities
Operating lease right-of-use liabilities	Accounts payable and accrued expenses	$	3,835
Total lease liabilities		$	3,835
Weighted average remaining lease term (years)
Operating leases		5.17
Weighted average discount rate
Operating leases		4.5		%

The weighted average discount rate is based on the discount rate for each lease and the remaining balance of the lease payments for each lease at the reporting date.

Future maturities of the Company's operating lease liabilities at December 31, 2019 are as follows:

Year	(in thousands)
2020	$	947
2021	895
2022	762
2023	504
2024	358
Thereafter	896
Total lease payments	4,362
Less: interest	(527		)
Total lease liabilities	$	3,835

The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2019:

Year	(in thousands)
2020	$	922
2021	878
2022	762
2023	504
2024	358
Thereafter	896
	$	4,320

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The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2018 as presented in the Company's 2018 Form 10-K:

Year	(in thousands)
2019	$	1,172
2020	676
2021	638
2022	645
2023	483
Thereafter	1,183
	$	4,797

The components of lease expense for the years ended December 31, 2019 and 2018 were as follows:

Lease expense	Classification	2019		2018
		(in thousands)
Operating lease cost	General and administrative	$	1,326	$	1,688
Net lease cost		$	1,326	$	1,688

Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows:

	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	920
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	495

3. Revenue from Contracts with Customers

The following table disaggregates revenue by major source for the years ended December 31, 2019 and 2018 (in thousands):

Year ended December 31, 2019	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue	$	299,688	$	—	$	—		$	299,688
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Managed services	10,843		—		—			10,843
Other revenue	3,895		277		(238		)	3,934
Total revenue	$	353,154	$	56,244	$	(238	)	$	409,160

Year ended December 31, 2018	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue (2)	$	262,618	$	—	$	—		$	262,618
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Managed services (2)	7,287		—		—			7,287
Other revenue (2)	292		1,727		(1,662		)	357
Total revenue	$	307,263	$	42,746	$	(1,662	)	$	348,347

________________________________________________________

(1) Represents revenue generated between our reportable segments.

(2) Certain amounts have been reclassified to conform with the classification as of December 31, 2019.

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4. Equipment Held for Operating Lease

As of December 31, 2019, the Company had a total lease portfolio of 263 engines and related equipment, 12 aircraft, 10 other leased parts and equipment and one marine vessel with a net book value of $1,650.9 million. As of December 31, 2018, the Company had a total lease portfolio of 244 aircraft engines and related equipment, 17 aircraft and 10 other leased parts and equipment, with a net book value of $1,673.1 million.

A majority of the equipment is leased and operated internationally. Substantially all leases relating to this equipment are denominated and payable in U.S. dollars.

The Company leases equipment to lessees domiciled in eight geographic regions. The tables below set forth geographic information about the leased equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):

	Years Ended December 31,
Lease rent revenue	2019		2018
	(in thousands)
Region
Europe	$	84,335	$	70,842
Asia	42,127		40,717
United States	39,178		40,100
South America	10,030		11,338
Mexico	5,284		4,721
Middle East	4,117		3,286
Canada	3,279		4,585
Africa	2,340		20
Totals	$	190,690	$	175,609

	As of December 31,
Net book value of equipment held for operating lease	2019		2018
	(in thousands)
Region
Europe	$	554,529	$	624,913
Asia	427,246		368,690
United States	240,454		260,095
South America	110,563		118,508
Mexico	51,573		33,795
Middle East	26,732		43,602
Canada	22,640		18,792
Africa	2,597		2,597
Off-lease and other	214,584		202,143
Totals	$	1,650,918	$	1,673,135

As of December 31, 2019, the lease status of the equipment held for operating lease (in thousands) was as follows:

Lease Term	Net Book Value
Off-lease and other	$	214,584
Month-to-month leases	196,143
Leases expiring 2020	549,244
Leases expiring 2021	131,217
Leases expiring 2022	323,383
Leases expiring 2023	97,613
Leases expiring 2024	70,507
Leases expiring thereafter	68,227
	$	1,650,918

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As of December 31, 2019, minimum future payments under non-cancelable leases were as follows:

Year	(in thousands)
2020	$	155,970
2021	95,015
2022	59,033
2023	33,418
2024	21,287
Thereafter	14,754
	$	379,477

5. Investments

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 fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. As of December 31, 2019, WMES owned a lease portfolio of 36 engines and five aircraft with a net book value of $306.0 million.

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 Engine Lease Company Limited (“CASC Willis”), a joint venture based in Shanghai, China. Each partner holds a fifty percent interest in the joint venture. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on the demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. During 2016, CASC was reorganized, with portions of its partnership interest in CASC Willis being transferred to three Chinese airlines and another government-owned entity. The 2016 CASC reorganization resulted in no voting structure change to the joint venture. CASC Willis owned a lease portfolio of four engines with a net book value of $49.2 million as of December 31, 2019.

Years Ending December 31, 2019 and 2018 (in thousands)	WMES			CASC Willis			Total
Investment in joint ventures as of December 31, 2017	$	36,014		$	14,627		$	50,641
Earnings (loss) from joint ventures	3,899			(99		)	3,800
Distribution	(5,730		)	—			(5,730		)
Foreign currency translation adjustment	—			(770		)	(770		)
Investment in joint ventures as of December 31, 2018	34,183			13,758			47,941
Earnings from joint ventures	8,312			266			8,578
Contribution	5,713			—			5,713
Distribution	(3,300		)	—			(3,300		)
Foreign currency translation adjustment	—			(222		)	(222		)
Other comprehensive loss from joint ventures	(774		)	—			(774		)
Investment in joint ventures as of December 31, 2019	$	44,134		$	13,802		$	57,936

“Other revenue” on the Consolidated Statements of Income includes management fees earned of $2.9 million and $2.6 million during the years ended December 31, 2019 and 2018, respectively, related to the servicing of engines for the WMES lease portfolio.

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Unaudited summarized financial information for 100% of WMES is presented in the following table:

	Years Ended December 31,
	2019		2018
	(in thousands)
Revenue	$	55,770	$	38,465
Expenses	41,253		30,934
WMES net income	$	14,517	$	7,531

	As of December 31,
	2019		2018
	(in thousands)
Total assets	$	322,606	$	274,744
Total liabilities	227,052		198,534
Total WMES net equity	$	95,554	$	76,210

6. Debt Obligations

Debt obligations consisted of the following:

	As of December 31,
	2019			2018
	(in thousands)
Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024	$	397,000		$	427,000
WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines	307,014			323,075
WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines	43,859			46,154
WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines	257,754			274,205
WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines	36,860			39,212
WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037, secured by engines	211,572			237,847
Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines	7,286			—
Note payable at fixed rate of interest of 3.18%, maturing in July 2024, secured by an aircraft	9,124			10,937
	1,270,469			1,358,430
Less: unamortized debt issuance costs	(19,463		)	(21,081		)
Total debt obligations	$	1,251,006		$	1,337,349

One-month LIBOR was 1.76% and 2.50% as of December 31, 2019 and December 31, 2018, respectively. Three-month LIBOR was 1.91% as of December 31, 2019.

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Principal outstanding at December 31, 2019, is expected to be repayable as follows:

Year	(in thousands)
2020	$	56,118
2021	56,415
2022 (includes $158.4 million outstanding on WEST II Series A 2012 term note)	207,994
2023	34,018
2024 (includes $397.0 million outstanding on revolving credit facility)	430,185
Thereafter	485,739
Total	$	1,270,469

At December 31, 2019, the Company had a revolving credit facility to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement. In April 2016, the Company entered into a Third Amended and Restated Credit Agreement with a revolving credit facility of $890.0 million and a term to April 2021. This $890.0 million revolving credit facility had an accordion feature which would expand the entire credit facility up to $1.0 billion.

In June 2019, the Company entered into the Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) which increased the revolving credit facility from $890.0 million to $1.0 billion. The Amended Credit Agreement incorporates an accordion feature that can expand the credit facility up to $1.3 billion, extends the maturity of the credit facility to June 2024 and provides for certain other amendments to covenants, interest rates and commitment fees.

In connection with entering into the Amended Credit Agreement in June 2019, the Company incurred and deferred an additional $2.8 million of debt issuance costs, and recognized a loss on debt extinguishment of $0.2 million. Unamortized debt issuance costs are included as a reduction to “Debt Obligations” in the consolidated balance sheets and are amortized to “Interest expense” on a straight-line basis through the maturity date of the Amended Credit Agreement. Pursuant to the Amended Credit Agreement, all obligations under the revolving credit facility are collateralized by the title and interest of the Company and certain of its subsidiaries, and to substantially all of its assets and properties. In December 2019, the Company entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Amendment No. 5 to the Security Agreement. The Amendments, which among other things, increase the maximum leverage ratio from 4.00:1.00 to 4.50:1.00 through December 31, 2020, if a permitted change in control is consummated.

As of December 31, 2019 and 2018, $603.0 million and $463.0 million were available under this facility, respectively. On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility. Under the revolving credit facility, all subsidiaries except WEST II, WEST III, and WEST IV jointly and severally guarantee payment and performance of the terms of the loan agreement. The guarantee would be triggered by a default under the agreement.

At December 31, 2019 and 2018, $350.9 million and $369.2 million of WEST IV term notes were outstanding, respectively. At December 31, 2019 and 2018,  $294.6 million and $313.4 million of WEST III term notes were outstanding, respectively. At December 31, 2019 and 2018, $211.6 million and $237.8 million of WEST II term notes were outstanding, respectively.

The assets of WEST II, WEST III and WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity. WEST II, WEST III and WEST IV are consolidated for financial statement presentation purposes. WEST II, WEST III and WEST IV’s ability to make distributions and pay dividends to the Company is subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital. Under WEST II, WEST III and WEST IV, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. The WEST II, WEST III, and WEST IV indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

In July 2019, the Company’s note payable secured by a corporate aircraft was repriced at a fixed interest rate of 3.18% and will continue to mature in July 2024. The balance outstanding on these loans was $9.1 million and $10.9 million as of December 31, 2019 and December 31, 2018, respectively.

In February 2019, the Company entered into a new $8.1 million loan with a financial institution and has a maturity date of July 2022. Interest is payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% and principal and interest are paid quarterly.  The loan is secured by two engines.

Virtually all of the above debt requires ongoing compliance with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic

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concentration restrictions. The Company also has certain negative financial covenants such as liens, advances, change in business, sales of assets, dividends and stock repurchases. These covenants are tested either monthly or quarterly and the Company was in full compliance with all financial covenant requirements at December 31, 2019.

7. Derivative Instruments

The Company periodically holds interest rate derivative instruments to mitigate exposure to changes in interest rates, to predominantly one-month LIBOR, with $404.3 million and $427.0 million of variable rate borrowings at December 31, 2019 and 2018, respectively. As a matter of policy, management does not use derivatives for speculative purposes. As of December 31, 2019, the Company has two interest rate swap agreements. One interest rate swap agreement was entered into during 2016 which has notional outstanding amount of $100.0 million, with remaining terms of 16 months as of December 31, 2019. During October 2019, the Company entered into one additional fixed-rate interest swap agreement which has a notional outstanding amount of $100.0 million, with remaining terms of 54 months as of December 31, 2019. The derivative instruments were designated as a cash flow hedge and recorded at fair value.

The Company evaluated the effectiveness of the swaps to hedge the interest rate risk associated with its variable rate debt and concluded at the swap inception date that the swaps were highly effective in hedging that risk. The Company evaluates the effectiveness of the hedging relationship on an ongoing basis.

The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties' risk of non-performance. Valuation of the derivative instruments requires certain assumptions for underlying variables and the use of different assumptions would result in a different valuation. Management believes it has applied assumptions consistently during the period. The Company applies hedge accounting and accounts for the change in fair value of its cash flow hedges through other comprehensive income for all derivative instruments.

The net fair value of the interest rate swaps was a $1.7 million net liability and a $1.7 million net asset at December 31, 2019 and 2018, respectively. The Company recorded an adjustment to interest expense of $0.7 million and $0.4 million during the years ended December 31, 2019 and 2018, respectively, from derivative investments.

Effect of Derivative Instruments on Earnings in the Statements of Income and of Comprehensive Income

The following table provides additional information about the financial statement effects related to the cash flow hedges for the years ended December 31, 2019 and 2018:

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)					Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain Reclassified from Accumulated OCI into  Income (Effective Portion)
	Years Ended December 31,						Years Ended December 31,
	2019			2018			2019		2018
	(in thousands)						(in thousands)
Interest rate contracts	$	(3,331	)	$	533	Interest expense	$	713	$	359
Total	$	(3,331	)	$	533	Total	$	713	$	359

The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings or it is probable that the forecasted transaction will not occur. The ineffective portion of the hedges, if any, is recorded in earnings in the current period. There was no ineffectiveness in the hedges for the year ended December 31, 2019 and 2018.

Counterparty Credit Risk

The Company evaluates the creditworthiness of the counterparties under its hedging agreements. The counterparties for both interest rate swaps are large financial institutions that possessed an investment grade credit rating. Based on this rating, the Company believes that the counterparties were credit-worthy and that their continuing performance under the hedging agreement was probable and did not require the counterparties to provide collateral or other security to the Company.

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8. Income Taxes

The components of income before income taxes are as follows:

	Years ended December 31,
	2019		2018
	(in thousands)
United States	$	88,182	$	55,117
Foreign	699		1,157
Income before income taxes	$	88,881	$	56,274

The components of income tax expense for the years ended December 31, 2019 and 2018 were as follows:

	Federal		State			Foreign		Total
	(in thousands)
2019
Current	$	—	$	722		$	163	$	885
Deferred	20,205		869			—		21,074
Total	$	20,205	$	1,591		$	163	$	21,959
2018
Current	$	—	$	364		$	622	$	986
Deferred	12,871		(814		)	—		12,057
Total	$	12,871	$	(450	)	$	622	$	13,043

The following is a reconciliation of the federal income tax expense at the statutory rate of 21% for the years ended December 31, 2019 and 2018 to the effective income tax expense:

	Years Ended December 31,
	2019			2018
	(in thousands)
Statutory federal income tax expense	$	18,665		$	11,818
State taxes, net of federal benefit	1,440			(526		)
Foreign tax paid	—			622
Foreign jurisdiction rate differential	475			—
Permanent differences-nondeductible executive compensation	2,083			1,144
Permanent differences and other	(704		)	(15		)
Effective income tax expense	$	21,959		$	13,043

The Company records tax expense or benefit for unusual or infrequent items discretely in the period in which they occur.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	(in thousands)
Balance as of December 31, 2017	$	191
Decreases due to tax positions expired	(9		)
Balance as of December 31, 2018	182
Increases related to current year tax positions	250
Decreases due to tax positions expired	(162		)
Balance as of December 31, 2019	$	270

A $0.2 million reserve was established as of December 31, 2019 and no reserve was established as of December 31, 2018 for the exposure in Europe. If the Company is able to eventually recognize these uncertain tax positions, all of the unrecognized benefit would reduce the Company’s effective tax rate.

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	As of December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Unearned lease revenue	$	1,277		$	1,094
State taxes	152			77
Reserves and allowances	1,988			1,187
Other accruals	4,974			3,795
Foreign tax credit	19			26
Lease liability	271			—
Net operating loss carry forward	12,091			39,996
Charitable contributions	57			38
Total deferred tax assets	20,829			46,213
Less: valuation allowance	(153		)	(652		)
Net deferred tax assets	20,676			45,561
Deferred tax liabilities:
Depreciation and impairment on aircraft engines and equipment	(118,595		)	(133,453		)
Inventory	(2,350		)	—
Right of use liability	(6,900		)	—
Other deferred tax assets (liabilities)	(4,198		)	(2,365		)
Net deferred tax liabilities	(132,043		)	(135,818		)
Other comprehensive loss deferred tax liability	949			(28		)
Net deferred tax liabilities	$	(110,418	)	$	(90,285	)

As of December 31, 2019, the Company had net operating loss carry forwards of approximately $55.8 million for federal tax purposes and $0.4 million (tax effected) for state tax purposes. The federal net operating loss carry forwards will expire at various times from 2023 to 2037 and the state net operating loss carry forwards will expire at various times from 2020 to 2038. There is a $0.2 million valuation allowance for net operating losses in California that expire between 2021 and 2038. The Company’s ability to utilize the net operating loss and tax credit carry forwards in the future may be subject to restriction in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax law. Management believes that no valuation allowance is required on deferred tax assets related to federal net operating loss carry forwards, as it is more likely than not that all amounts are recoverable through future taxable income. The open tax years for federal and state tax purposes are from 2003-2019, respectively.

9. Fair Value Measurements

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision.

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

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Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

• Cash and cash equivalents, restricted cash, receivables, and accounts payable: The amounts reported in the accompanying Consolidated Balance Sheets approximate fair value due to their short-term nature.

• Notes receivable: The carrying amount of the Company's outstanding balance on its Notes receivable as of December 31, 2019 and 2018 was estimated to have a fair value of approximately $39.7 million and $0.2 million, respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each period end (Level 2 inputs).

• Debt obligations: The carrying amount of the Company’s outstanding balance on its Debt obligations as of December 31, 2019 and 2018 was estimated to have a fair value of approximately $1,262.6 million and $1,348.1 million, respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each year end (Level 2 inputs).

Assets Measured and Recorded at Fair Value on a Recurring Basis

As of December 31, 2019 and 2018, the Company measured the fair value of its interest rate based on Level 2 inputs, due to the usage of inputs that can be corroborated by observable market data. The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. The interest rate swaps had a net fair value representing a $1.7 million net liability and a net asset of $1.7 million as of December 31, 2019 and 2018, respectively. In 2019 and 2018, $0.7 million and $0.4 million, respectively, was realized through the income statement as an adjustment to interest expense.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company determines fair value of long-lived assets held and used, such as Equipment held for operating lease and Equipment held for sale, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. The Company used Level 2 inputs to measure write-downs of equipment held for lease and equipment held for sale. 

	Total Losses
	Years Ended December 31,
	2019		2018
	(in thousands)
Equipment held for lease	$	18,132	$	8,893
Equipment held for sale	88		1,758
Total	$	18,220	$	10,651

Write-downs of equipment to their estimated fair values totaled $18.2 million for the year ended December 31, 2019 which included write-downs of $11.8 million due to a management decision to monetize eleven engines either by sale to a third party or for part-out and $6.4 million for the adjustment of the carrying value of seven impaired engines. As of December 31, 2019, $37.8 million book value for 16 of these engines remains within equipment held for operating lease, equipment held for sale and spare parts inventory.

Write-downs of equipment to their estimated fair values totaled $10.7 million for the year ended December 31, 2018 which included write-downs of $8.9 million for the adjustment of the carrying value of seven impaired engines and $1.8 million in third party consignment write-downs. As of December 31, 2018, included within equipment held for lease and equipment held for sale, was $18.3 million in remaining book values of six engines and six airframe parts packages.

10. Earnings Per Share

Basic earnings per common share is computed by dividing net income, less preferred stock dividends and accretion of preferred stock issuance costs, by the weighted average number of common shares outstanding for the period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive

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securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the vesting of restricted stock using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is anti-dilutive. Additionally, redeemable preferred stock is not convertible and does not affect dilutive shares.

There were no anti-dilutive shares included in the computations of diluted weighted average earnings per common share for the year ended December 31, 2019. The computations of diluted weighted average earnings per common share do not include approximately 400 restricted shares for the year ended December 31, 2018 as the effect of their inclusion would have been anti-dilutive to earnings per share.

The following table presents the calculation of basic and diluted EPS:

	Year Ended December 31,
	2019		2018
	(in thousands)
Net income attributable to common shareholders	$	63,588	$	39,898
Basic weighted average common shares outstanding	5,836		5,915
Potentially dilutive common shares	222		131
Diluted weighted average common shares outstanding	6,058		6,046
Basic weighted average earnings per common share	$	10.90	$	6.75
Diluted weighted average earnings per common share	$	10.50	$	6.60

11. Commitments, Contingencies, Guarantees and Indemnities

Other obligations 

Other obligations, such as certain purchase obligations are not recognized as liabilities in the consolidated financial statements but are required to be disclosed in the footnotes to the financial statements. These funding commitments could potentially require the Company’s performance in the event of demands by third parties or contingent events. As of December 31, 2019, the Company had $459.3 million in purchase commitments of equipment that will be satisfied within four fiscal years. The purchase obligations are subject to escalation based on the closing date of each transaction.

12. Equity

Common Stock Repurchase

Effective December 31, 2018, the Board of Directors approved the renewal of the existing common stock repurchase plan extending the plan through December 31, 2020 and amending the plan to allow for repurchases of up to $60.0 million of the Company's common stock until such date. Repurchased shares are immediately retired. During 2019, the Company repurchased 72,324 shares of common stock for approximately $3.6 million under the plan, at a weighted average price of $49.29 per share. During 2018, the Company repurchased 471,595 shares of common stock for approximately $16.2 million under the plan, at a weighted average price of $34.36 per share. At December 31, 2019, approximately $56.4 million is available to purchase shares under the plan.

Redeemable Preferred Stock

In October 2016, the Company sold and issued to Development Bank of Japan Inc. (“DBJ”) an aggregate of 1,000,000 shares of the Company’s 6.5% Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting investor fees were $19.8 million.

In September 2017, the Company sold and issued to DBJ an aggregate of 1,500,000 shares of the Company’s 6.5% Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting issuance costs were $29.7 million.

The rights and privileges of the Preferred Stock are described below:

Voting Rights: Holders of the Preferred Stock do not have general voting rights.

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Dividends: The Company’s Series A-1 Preferred Stock and Series A-2 Preferred Stock accrue quarterly dividends at the rate per annum of 6.5% per share. During the years ended December 31, 2019 and 2018, the Company paid total dividends of $3.3 million on the Series A-1 and Series A-2 Preferred Stock, respectively.

Liquidation Preference: The holders of the Preferred Stock have preference in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the corporation, including a merger or consolidation. Upon such liquidation event, the Preferred Stockholders are entitled to be paid out of the assets of the Company available for distribution to its stockholders after payment of all the Company’s indebtedness and other obligations and before any payment shall be made to the holders of common stock or any other class or series of stock ranking on liquidation junior to the Preferred Stock an amount equal to $20.00 per share, plus any declared but unpaid dividends.

Redemption: The Preferred Stock has no stated maturity date, however the holders of the Preferred Stock have the option to require the Company to redeem all or any portion of the Preferred Stock for cash upon occurrence of any significant changes in operating results, ownership structure, or liquidity events as defined in the Preferred Stock purchase agreements.  The redemption price is $20.00 per share plus dividends accrued but not paid.  The Company is accreting the Preferred Stock to redemption value over the period from the date of issuance to the date first callable by the Preferred Stockholders (October 2023 for the Series A Preferred Stock and September 2024 for the Series A-2 Preferred Stock), such that the carrying amounts of the securities will equal the redemption amounts at the earliest redemption dates.

13. Stock-Based Compensation Plans

The components of stock compensation expense were as follows:

	Year Ended December 31,
	2019		2018
	(in thousands)
2007 Stock Incentive Plan	$	4,584	$	5,353
2018 Stock Incentive Plan	3,117		—
Employee Stock Purchase Plan	86		57
Total Stock Compensation Expense	$	7,787	$	5,410

The significant stock compensation plans are described below.

The 2007 Stock Incentive Plan (the “2007 Plan”) was adopted in May 2007. Under this 2007 Plan, a total of 2,800,000 shares were authorized for stock-based compensation available in the form of either restricted stock awards (“RSAs”) or stock options. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date. As of December 31, 2019, there are no stock options outstanding under the 2007 Plan.

The 2018 Stock Incentive Plan (the “2018 Plan”) was adopted in May 2018. Under this 2018 Plan, a total of 800,000 shares were authorized for stock-based compensation, plus the number of shares remaining under the 2007 Plan and any future forfeited awards under the 2007 Plan, in the form of RSAs. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date.

As of December 31, 2019, the Company has granted 279,400 RSAs under the 2018 Plan and has 615,196 shares available for future issuance. The fair value of the restricted stock awards equaled the stock price at the grant date.

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The following table summarizes restricted stock activity under the 2007 and 2018 Plans for the years ended December 31, 2019 and 2018:

	Number Outstanding		Weighted Average Grant Date Fair Value		Aggregate Grant Date Fair Value (in thousands)
Balance as of December 31, 2017	328,122		$	23.49	$	7,707
Shares granted	270,454		33.91		9,172
Shares forfeited	(9,900	)	32.06		(317		)
Shares vested	(170,786	)	22.25		(3,799		)
Balance as of December 31, 2018	417,890		30.54		12,763
Shares granted	279,400		42.28		11,813
Shares forfeited	(3,866	)	30.43		(118		)
Shares vested	(187,957	)	28.74		(5,402		)
Balance as of December 31, 2019	505,467		$	37.70	$	19,056

At December 31, 2019 the stock compensation expense related to the RSAs that will be recognized over the average remaining vesting period of 1.7 years totaled $12.6 million. At December 31, 2019, the intrinsic value of unvested RSAs was $29.8 million.

Under the Employee Stock Purchase Plan (“ESPP”), as amended and restated effective April 1, 2018, 325,000 shares of common stock have been reserved for issuance. Eligible employees may designate no more than 10% of their base cash compensation to be deducted each pay period for the purchase of common stock under the Purchase Plan. Participants may purchase no more than 1000 shares or $25,000 of common stock in any one calendar year. Each January 31 and July 31 shares of common stock are purchased with the employees’ payroll deductions from the immediately preceding six months at a price per share of 85% of the lesser of the market price of the common stock on the purchase date or the market price of the common stock on the date of entry into an offering period. In 2019 and 2018, 13,193 and 11,132 shares of common stock, respectively, were issued under the ESPP. The Company issues new shares through its transfer agent upon employee stock purchase. The weighted average per share fair value of the employee’s purchase rights under the Purchase Plan for the rights granted was $23.20 and  $9.42 for 2019 and 2018, respectively.

14. Employee 401(k) Plan

The Company adopted The Willis 401(k) Plan (the “401(k) Plan”) effective as of January 1997. The 401(k) Plan provides for deferred compensation as described in Section 401(k) of the Internal Revenue Code. The 401(k) Plan is a contributory plan available to all full-time and part-time employees in the United States. In 2019, employees who participated in the 401(k) Plan could elect to defer and contribute to the 401(k) Plan up to 75% of pretax salary or wages up to $19,000 (or $25,000 for employees at least 50 years of age). The Company matches 50% of employee contributions and was capped at $12,500 per employee in 2019. The Company match totaled $0.5 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively.

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15. Quarterly Consolidated Financial Information (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2019 and 2018 (in thousands, except per share data).

2019	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	103,769	$	95,797	$	120,366	$	89,228	$	409,160
Net income attributable to common shareholders	$	20,056	$	16,144	$	23,232	$	4,156	$	63,588
Basic earnings per common share	$	3.47	$	2.75	$	3.97	$	0.71	$	10.90
Diluted earnings per common share	$	3.35	$	2.66	$	3.81	$	0.68	$	10.50
Basic weighted average common shares outstanding	5,779		5,866		5,847		5,850		5,836
Diluted weighted average common shares outstanding	5,978		6,061		6,094		6,099		6,058

2018	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	70,497	$	78,702	$	80,958	$	118,190	$	348,347
Net income attributable to common shareholders	$	6,261	$	7,528	$	8,834	$	17,274	$	39,898
Basic earnings per common share	$	1.03	$	1.28	$	1.50	$	2.99	$	6.75
Diluted earnings per common share	$	1.00	$	1.26	$	1.47	$	2.91	$	6.60
Basic weighted average common shares outstanding	6,104		5,878		5,900		5,782		5,915
Diluted weighted average common shares outstanding	6,256		5,991		6,004		5,939		6,046

16. Related Party Transactions

Stock Buybacks

On September 12, 2018, in a transaction approved by a Special Committee of the Board of Directors, the Company purchased 88,000 shares of common stock directly from the Company’s Chief Executive Officer, Charles F. Willis. The agreed and paid price per share was $34.2972, the volume weighted average price on September 12, 2018.

Joint Ventures

“Other revenue” on the Consolidated Statement of Income includes management fees earned of $2.9 million and $2.6 million during the years ended December 31, 2019 and 2018, respectively, related to the servicing of engines for the WMES lease portfolio. During 2019, the Company sold five aircraft and other equipment to WMES for $76.4 million. Additionally, during 2019, WMES sold one engine to Willis Aeronautical Services, Inc., a wholly-owned subsidiary of the Company, for $2.6 million. During 2018, the Company sold two engines and one aircraft to WMES for $30.7 million.

There were no aircraft or engine sales to CASC Willis during 2019 or 2018.

Other

During the second quarter of 2018, the Company’s Chief Executive Officer purchased artwork from the Company for $5 thousand. This transaction was approved by the Board’s independent Directors.

During the third quarter of 2018, the Company’s Chief Executive Officer utilized the WASI spare parts warehouse to temporarily store personal equipment and reimbursed the Company $450 for such usage.

In January 2019, the Special Committee of the Board of Directors approved a transaction in which the Company's Chief Executive Officer, Charles F. Willis, purchased a car at its market value of $0.1 million from the Company.

During 2019, the Company's Chief Executive Officer, Charles F. Willis, was charged $0.2 million for usage of the Company's marine vessel in the Company's lease portfolio.

During 2019 and 2018, the Company paid approximately $36,000 and $44,000, respectively, of expenses payable to Mikchalk Lake, LLC, an entity in which our Chief Executive Officer retains an ownership interest.  These expenses were for lodging and other business related services.  These transactions were approved by the Board’s independent Directors.

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17. Reportable Segments

The Company has two reportable business segments: (i) Leasing and Related Operations which involves acquiring and leasing, primarily pursuant to operating leases, commercial aircraft, aircraft engines and other aircraft equipment and the selective purchase and resale of commercial aircraft engines and other aircraft equipment and other related businesses and (ii) Spare Parts Sales which involves the purchase and resale of after-market engine parts, whole engines, engine modules and portable aircraft components.

The Company evaluates the performance of each of the segments based on profit or loss after general and administrative expenses. While the Company believes there are synergies between the two business segments, the segments are managed separately because each requires different business strategies.

The following tables present a summary of the reportable segments (in thousands):

For the year ended December 31, 2019	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	190,690	$	—	$	—		$	190,690
Maintenance reserve revenue	108,998		—		—			108,998
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Other revenue	14,738		277		(238		)	14,777
Total revenue	353,154		56,244		(238		)	409,160
Expenses:
Depreciation and amortization expense	86,159		77		—			86,236
Cost of spare parts and equipment sales	15,241		47,406		—			62,647
Write-down of equipment	18,220		—		—			18,220
General and administrative	81,302		5,221		—			86,523
Technical expense	8,122		—		—			8,122
Net finance costs:
Interest expense	66,889		—		—			66,889
Loss on debt extinguishment	220		—		—			220
Total finance costs	67,109		—		—			67,109
Total expenses	276,153		52,704		—			328,857
Earnings from operations	$	77,001	$	3,540	$	(238	)	$	80,303

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For the Year ended December 31, 2018	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	175,609	$	—	$	—		$	175,609
Maintenance reserve revenue	87,009		—		—			87,009
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Other revenue	7,579		1,727		(1,662		)	7,644
Total revenue	307,263		42,746		(1,662		)	348,347
Expenses:
Depreciation and amortization expense	76,502		312		—			76,814
Cost of spare parts and equipment sales	28,290		32,735		—			61,025
Write-down of equipment	10,651		—		—			10,651
General and administrative	67,608		4,413		—			72,021
Technical expense	11,142		—		—			11,142
Interest expense	64,220		—		—			64,220
Total expenses	258,413		37,460		—			295,873
Earnings from operations	$	48,850	$	5,286	$	(1,662	)	$	52,474

________________________

(1) Represents revenue generated between our operating segments.

	Leasing and Related Operations		Spare Parts Sales		Eliminations		Total
Total assets as of December 31, 2019	$	1,898,313	$	42,295	$	—	$	1,940,608
Total assets as of December 31, 2018	$	1,882,860	$	52,083	$	—	$	1,934,943

18. Subsequent Events

WEST V Securitization

On March 3, 2020, the Company renamed its wholly owned subsidiary, WEST II, to Willis Engine Structured Trust V (“WEST V”) and issued $366.2 million in aggregate principal amount of fixed rate notes (the “WEST V Notes”). The WEST V Notes consist of three series; Series A Notes in an aggregate principal amount of $303.0 million bearing a 3.228% fixed rate coupon issued at a price of 99.99859% of par, Series B Notes in an aggregate principal amount of $42.1 million bearing a 4.212% fixed rate coupon issued at a price of 99.99493% of par, and Series C Notes in an aggregate principal amount of $21.1 million bearing a 6.6657% fixed rate coupon issued at a price of 99.99918% of par. The WEST V Notes will be secured by, among other things, WEST V’s direct and indirect interests in a portfolio of 54 aircraft engines and three airframes.

The net proceeds of the WEST V Notes will be primarily applied to (i) repay in full the aggregate principal amount of outstanding Class 2012-A Fixed Rate Term Notes issued by WEST II and pay any accrued and unpaid interest thereon, (ii) pay fees and expenses related to the issuance of the WEST V Notes, (iii) pay WLFC periodically over a 270-day delivery period as consideration for the aircraft engines and the airframes acquired by WEST V from WLFC in connection with the financing and (iv) make a distribution to WLFC with some or all of the excess proceeds, to the extent any excess proceeds remain after giving effect to the foregoing. The Company will apply any net proceeds it receives for general corporate purposes.

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WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Balance Sheets

(In thousands, except per share data)

	December 31, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	1,187		$	5,302
Equipment held for operating lease, less accumulated depreciation	612,808			618,167
Maintenance rights	—			3,296
Equipment held for sale	120			701
Receivables, net of allowances	3,015			3,468
Spare parts inventory	3,466			483
Due from affiliates, net	5,410			14,877
Deferred income taxes	5,607			13,896
Investments	57,936			47,941
Investment in subsidiaries	156,664			141,792
Property, equipment & furnishings, less accumulated depreciation	15,998			15,077
Intangible assets, net	271			271
Notes receivable	38,145			238
Prepaid deposits	9,134			1,383
Other assets, net	13,398			10,528
Total assets	$	923,159		$	877,420
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	33,182		$	27,128
Due to affiliates, net	62,170			40,187
Debt obligations	400,725			434,053
Maintenance reserves	18,464			27,329
Security deposits	6,399			10,692
Unearned revenue	2,243			1,690
Total liabilities	523,183			541,079
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)	49,638			49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized;  6,356 and 6,176 shares issued and outstanding at December 31, 2019 and 2018, respectively)	64			62
Paid-in capital in excess of par	4,557			—
Retained earnings	348,965			286,623
Accumulated other comprehensive (loss) income, net of income tax benefit	(3,248		)	102
Total shareholders’ equity	350,338			286,787
Total liabilities, redeemable preferred stock and shareholders' equity	$	923,159		$	877,420

The accompanying note is an integral part of the Consolidated financial statements.

69

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Income

(In thousands)

	Years Ended December 31,
	2019		2018
REVENUE
Lease rent revenue	$	64,566	$	70,269
Maintenance reserve revenue	48,500		27,407
Spare parts and equipment sales	18,561		35,388
Gain on sale of leased equipment	12,269		6,183
Other revenue	29,644		13,624
Total revenue	173,540		152,871
EXPENSES
Depreciation and amortization expense	30,934		34,795
Cost of spare parts and equipment sales	17,108		32,331
Write-down of equipment	4,425		2,567
General and administrative	71,522		52,896
Technical expense	8,294		9,858
Net finance costs	18,898		25,210
Total expenses	151,181		157,657
Earnings from operations	22,359		(4,786		)
Earnings from joint ventures	8,578		3,800
Income before income taxes	30,937		(986		)
Income tax expense (benefit)	9,456		(280		)
Equity in income of subsidiaries, net of tax of $12,504 and $13,323 at December 31, 2019 and 2018, respectively	45,441		43,937
Net income	66,922		43,231
Preferred stock dividends	3,250		3,250
Accretion of preferred stock issuance costs	84		83
Net income attributable to common shareholders	$	63,588	$	39,898

The accompanying note is an integral part of the Consolidated financial statements.

70

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I —CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Comprehensive Income

(In thousands)

	Years Ended December 31,
	2019			2018
Net income	$	66,922		$	43,231
Other comprehensive loss:
Currency translation adjustment	(222		)	(770		)
Unrealized (loss) gain on derivative instruments	(3,331		)	533
Unrealized loss on derivative instruments at joint venture	(774		)	—
Net loss recognized in other comprehensive income	(4,327		)	(237		)
Tax benefit related to items of other comprehensive income	977			54
Other comprehensive loss	(3,350		)	(183		)
Total comprehensive income	$	63,572		$	43,048

The accompanying note is an integral part of the Consolidated financial statements.

71

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Cash Flows

(In thousands)

	Years Ended December 31,
	2019			2018
Cash flows from operating activities:
Net income	$	66,922		$	43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries	(45,441		)	(43,937		)
Depreciation expense	30,934			34,795
Write-down of equipment	4,425			2,567
Stock-based compensation expenses	7,787			5,410
Amortization of deferred costs	2,748			3,324
Allowances and provisions	(365		)	439
Gain on sale of leased equipment	(12,269		)	(6,183		)
Income from joint ventures	(8,578		)	(3,800		)
Loss on debt extinguishment	220			—
Loss on disposal of property, equipment and furnishings	19			41
Deferred income taxes	9,554			(434		)
Changes in assets and liabilities:
Receivables	818			4,073
Distributions received from joint ventures	3,300			5,730
Inventory	8,195			7,320
Other assets	(3,640		)	(3,983		)
Accounts payable and accrued expenses	2,946			19,459
Due to / from subsidiaries	31,449			41,449
Maintenance reserves	(6,062		)	(9,500		)
Security deposits	(123		)	(6,773		)
Unearned revenue	553			(3,034		)
Net cash provided by operating activities	93,392			90,194
Cash flows from investing activities:
Increase in investment in subsidiaries	—			(9,104		)
Distributions received from subsidiaries	32,066			388,910
Proceeds from sale of equipment (net of selling expenses)	145,117			48,049
Issuance of notes receivable	(42,857		)	—
Payments received on notes receivable	4,950			—
Capital contributions to joint ventures	(5,713		)	—
Purchase of equipment held for operating lease and for sale	(184,505		)	(417,857		)
Purchase of property, equipment and furnishings	(2,607		)	(1,104		)
Net cash (used in) provided by investing activities	(53,549		)	8,894
Cash flows from financing activities:
Proceeds from issuance of debt obligations	332,000			386,000
Debt issuance cost	(3,142		)	—
Principal payments on debt obligations	(363,813		)	(462,119		)
Interest bearing security deposits	(1,046		)	—
Proceeds from shares issued under stock compensation plans	335			245
Repurchase of common stock	(3,567		)	(16,136		)
Preferred stock dividends	(3,250		)	(3,348		)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475		)	(1,288		)
Net cash used in financing activities	(43,958		)	(96,646		)
(Decrease)/Increase in cash and cash equivalents	(4,115		)	2,442
Cash and cash equivalents at beginning of period	5,302			2,860
Cash and cash equivalents at end of period	$	1,187		$	5,302
Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	17,891		$	23,525
Income Taxes	$	(341	)	$	795
Supplemental disclosures of non-cash investing and financing activities:
Engines and equipment transferred to the subsidiaries from the parent	$	—		$	42,456
Transfers from Equipment held for lease to Equipment held for sale	$	6,681		$	—
Transfers from Equipment held for sale to Spare parts inventory	$	13,805		$	26,387
Accrued preferred stock dividends	$	686		$	686
Accretion of preferred stock issuance costs	$	84		$	83

The accompanying note is an integral part of the Consolidated financial statements.

72

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Note to Condensed Financial Information of Parent

1. Organization and Summary of Presentation

The accompanying condensed financial statements include the activity of the Parent Company. These condensed financial statements have been presented for the parent company only and should be read in conjunction with the Consolidated Financial Statements and notes thereto of the Company set forth in Part II, Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

73

WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

SCHEDULE II — VALUATION ACCOUNTS

(In thousands)

	Balance at Beginning of Period		Additions Charged (Credited) to Expense			Net (Deductions) Recoveries		Balance at End of Period
Year Ended December 31, 2018
Accounts receivable, allowance for doubtful accounts	$	949	$	1,610		$	—	$	2,559
Deferred tax valuation allowance	$	806	$	(154	)	$	—	$	652
Year Ended December 31, 2019
Accounts receivable, allowance for doubtful accounts	$	2,559	$	(829	)	$	—	$	1,730
Deferred tax valuation allowance	$	652	$	(499	)	$	—	$	153

Deductions in allowance for doubtful accounts represent uncollectible accounts written off, net of recoveries. 

74

EX-4.7

DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES

EXCHANGE ACT OF 1934

Willis Lease Finance Corporation (“we,” “our,” “us,” or the “Company”) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: our common stock. The following summary is not complete and is subject to, and qualified in its entirety by reference to, the terms of our certificate of incorporation and bylaws, copies of which we have filed as exhibits to our Annual Report on Form 10-K and are incorporated by reference herein, and the provisions of Delaware law applicable to the Company. You should read our certificate of incorporation, our bylaws, and applicable Delaware law, including the General Corporation Law of the State of Delaware (“DGCL”), for more information. Our common stock is listed on the Nasdaq Stock Market LLC under the symbol “WLFC”.

Authorized Capital

Our authorized capital shares consist consists of 20,000,000 shares of Common Stock, par value $0.01 per share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share.

Voting Rights

Each holder of common stock is entitled to one vote for each share held of record on the applicable record date on all matters presented to a vote of stockholders.

See also “Material Anti-Takeover Effects of Certain Provisions of the Certificate of Incorporation, Bylaws and Delaware Law—No Stockholder Action by Written Consent; Supermajority Voting Requirement” below.

Dividends and Liquidation Right

Subject to the rights of the holders of Series A Preferred Stock (defined below) and any other Preferred Stock which may be outstanding, each holder of common stock on the applicable record date is entitled to receive such dividends as may be declared by the Board of Directors (the “Board”) out of funds legally available therefor, and, in the event of liquidation, to share pro rata in any distribution of the Company's assets after payment or providing for the payment of liabilities and the liquidation preference of any outstanding Preferred Stock.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of Preferred Stock in one or more series. Currently, the Company has two series of Preferred Stock outstanding: 1,000,000 shares of 6.5% Series A-1 Preferred Stock, $0.01 par value per share (the “Series A-1 Preferred Stock”) and 1,500,000 shares of 6.5% Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock” and together with the Series A-1 Preferred Stock, the “Series A Preferred Stock”).

The Series A Preferred Stock do not have general voting rights and accrue quarterly dividends at the rate per annum of 6.5% per share. Whenever dividends on any shares of the Series A Preferred Stock are in arrears for an aggregate of six or more dividend periods (whether consecutive or nonconsecutive) and remain unpaid (a “Preferred Dividend Default”), the holders of the Series A Preferred Stock (voting separately as a class with all other holders of the Series A Preferred Stock and holders of all other series of the Company’s preferred stock upon which like voting rights have been conferred) will be entitled to elect by majority vote a total of two additional directors of the Company (the “Preferred

Directors”) to serve on the Board of Directors (which, without the consent of a Required Majority, will not exceed seven directors in total) until all unpaid dividends on the Series A Preferred Stock have been paid. If and when all accumulated dividends and the dividends for the then-current dividend period on the Series A Preferred Stock shall have been paid in full or a sum sufficient has been authorized and set aside and deposited in trust with an eligible trustee for payment in full of all accrued and unpaid dividends, the holders of shares of the Series A Preferred Stock shall be divested of the voting rights set forth in in the previous sentence (subject to revesting in the event of each and every future Preferred Dividend Default) and, if all accumulated dividends and the dividends for the then-current dividend period have been paid in full, the term of office of each Preferred Director so elected shall terminate and the size of the Board of Directors shall be immediately decreased by two directors. Any Preferred Director may be removed at any time, with or without cause, by the vote of, the holders of a majority of the outstanding Series A Preferred Stock when they have the voting rights set forth above.

The holders of the Series A Preferred Stock have preference over holders of common stock in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the corporation, including a merger or consolidation.

The Series A Preferred Stock has no stated maturity date, however the holders of the respective series of Series A Preferred Stock have the option to require the Company to redeem all or any portion of the respective Series A Preferred Stock for cash upon occurrence of any significant changes in operating results, ownership structure, or liquidity events as defined in the purchase agreements for the respective Series A Preferred Stock.

With respect to authorized but unissued Preferred Stock, the Board may designate the rights, preferences, limitations, restrictions of and upon shares of each series, including voting, redemption and conversion rights, dividend rights and preferences in liquidation, which could have the effect, among other things, of restricting any dividends on common stock, diluting the voting power of the common stock or impairing the liquidation rights of such shares, without further action by holders of common stock.

Other Rights and Preferences

Holders of common stock have no preemptive rights to purchase or subscribe for any stock or other securities and there are no conversion rights or redemption or sinking fund provisions with respect to such common stock.

Exclusive Forum

Unless the Company consents to the selection of an alternate forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Company to the Company or the Company’s stockholders, (c) any action asserting a claim arising pursuant to any provision of the DGCL, or (d) any action asserting a claim governed by the internal affairs doctrine.

Material Anti-Takeover Effects of Certain Provisions of the Certificate of Incorporation, Bylaws and Delaware Law

Certain provisions of law, our certificate of incorporation, bylaws and rights agreement could make the following more difficult: (1) an acquisition of us by means of a tender offer, a proxy contest or otherwise, and (2) the removal of incumbent officers and directors.

Authorized but Unissued Shares of Common Stock and Preferred Stock

Our Board has the power, subject to applicable law or the rules of any stock exchange on which our securities may be listed and without further action by stockholders, to issue additional shares of common stock or a series of preferred stock that could impede the completion of a merger, tender offer or other takeover attempt that some, or a majority, of our stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then prevailing market price of the stock.

Rights Agreement

Pursuant to a Rights Agreement (the “Rights Agreement”) entered into by the Company and American Stock Transfer and Trust Company, as rights agent, in September 1999, as subsequently amended, the Board authorized and declared a dividend of one preferred stock purchase right (a “Right”) for each share of common stock, par value $0.01 per share, of the Company. Until the Distribution Date (as defined in the Rights Agreement), the Rights are not exercisable and are attached to and trade only together with shares of common stock. Unless extended or otherwise as provided in the Rights Agreement, the Rights expire on August 30, 2028. The Rights Agreement could make it more difficult to proceed with and discourage a merger, tender offer or proxy contest.

Increase in the Number of Directors

Our bylaws provide for seven directors. In addition, the Board currently has the authority to amend the bylaws to increase the maximum number of directors without seeking stockholder approval.

Classified Board of Directors

The Board is divided into three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year term. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board.

Advance Notice Requirements for stockholder Proposals and Director Nominations

Our bylaws provide detailed requirements for stockholder proposals for our annual meetings, including stockholder nominations for directors.In addition, director nominees must provide certain information, including biographical information, share ownership amounts and other information that would need to be included in a proxy statement relating to the election of a director. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids, and to encourage persons seeking to acquire control of the Company to negotiate first with the Company.

Special Meetings of Stockholders

Our certificate of incorporation provides that special meetings of the stockholders for any purpose or purposes may be called by only (1) the Board; (2) the Chairman of the Board; or (3) the President of the Company, except for any special meeting of the stockholders that may be called by any other person or persons specified in any certificate of designation pursuant to DGCL Section 151(g) in the manner, at the times and for the purposes so specified. This limited ability to call a special meeting of stockholders may have an anti-takeover effect because a potential acquirer may be impeded from calling a special meeting of stockholders to consider removing directors or to consider an acquisition offer.

No Stockholder Action by Written Consent; Supermajority Voting Requirement

Our certificate of incorporation also provides that stockholder action can be taken only at an annual or special meeting of stockholders and may not be taken by written consent. In certain circumstances relating to a merger or consolidation of the Company or any of its subsidiaries, the sale, exchange or lease of all or any substantial part of the assets of the Company to another entity, or any sale or lease to the Company or any of its subsidiaries in exchange for securities of the Company or any assets of any other entity or securities issued by such other entity, the approval by 80% of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors of the Company is required.

Bylaw Amendments

Our bylaws provide that the Board may amend our bylaws without stockholder approval, except to the extent such power is reserved to the stockholders by law. Bylaws may not be made, repealed, altered, amended or rescinded by the stockholders of the corporation except by the vote of the holders of not less than 80% of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors of the Company.

Anti-Takeover Effects of Delaware Law

We are also subject to certain anti-takeover provisions under the DGCL. Under Section 203 of the DGCL, a corporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or (i) our Board approves the transaction prior to the stockholder acquiring the 15% ownership position, (ii) upon consummation of the transaction that resulted in the stockholder acquiring the 15% ownership position, the stockholder owns at least 85% of the outstanding voting stock (excluding shares owned by directors or officers and shares owned by certain employee stock plans) or (iii) the transaction is approved by the Board and by the stockholders at an annual or special meeting by the affirmative vote of 66 2/3%, and not by written consent of the outstanding voting stock (excluding shares held or controlled by the interested stockholder).

A Delaware corporation may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate of incorporation or by-laws approved by its stockholders. We have not opted out of Section 203. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us.

EX-4.3.1

FOURTH AMENDMENT TO RIGHTS AGREEMENT

This FOURTH AMENDMENT TO RIGHTS AGREEMENT, dated as of August 27, 2018 (this "Amendment"), is entered into by and between Willis Lease Finance Corporation, a Delaware corporation (the "Company"), and American Stock Transfer and Trust Company (the "Rights Agent").

RECITALS

WHEREAS, the Company and the Rights Agent entered into a Rights Agreement, dated as of September 24, 1999 (as amended, supplemented or otherwise modified, the “Rights Agreement”);

WHEREAS, Section 27 of the Rights Agreement provides that, in certain circumstances, the Company may supplement or amend the Rights Agreement in any respect, without the approval of any holders of Rights, by action of the Company's Board of Directors, and the Rights Agent shall execute such supplement or amendment;

WHEREAS, the Company intends to extend the effectiveness of the Rights Agreement through 2028;

WHEREAS, the Company’s Board of Directors has determined that this Amendment in the best interests of the Company’s stockholders and has approved the execution and delivery of this Amendment; and

WHEREAS, the Company desires to modify the terms of the Rights Agreement in certain respects as set forth herein, and in connection therewith, is entering into this Amendment and directing the Rights Agent to enter into this Amendment;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

1.Effect of Amendment. On or after the date upon which the Amendment becomes effective (the “Effective Date”), each reference in the Rights Agreement to the term “Agreement,” “hereof,” or “herein” shall be deemed to refer to the Rights Agreement as amended hereby. This Amendment and the amendments to the Rights Agreement effected hereby shall be effective as of the Effective Date and, except as set forth herein, the Rights Agreement shall remain in full force and effect and shall otherwise be unaffected hereby.

2.Capitalized Terms. All capitalized, undefined terms used in this Amendment shall have the meanings assigned thereto in the Rights Agreement.

3.Amendment to Section 1. The definition of “Expiration Date” in Section 1 of the Rights Agreement is hereby amended to read in its entirety as follows:

“Expiration Date” shall mean August 30, 2028.

4^th Amendment to Rights Agreement 1

4.Amendment to Exhibit B to Rights Agreement. The first paragraph of Exhibit B to the Rights Agreement, entitled “Form of Right Certificate” is hereby amended to read in its entirety as follows:

This certifies that _______________________, or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of September 24, 1999, as amended from time to time (the “Rights Agreement”) between Willis Lease Finance Corporation, a Delaware corporation (the “Company”), and American Stock Transfer and Trust Company, a trust company organized under the laws of the State of New York (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date (as such term is defined in the Rights Agreement) and prior to 5:00 P.M., California time, on the later of August 30, 2028 or the tenth anniversary of the Distribution Date at the office or agency of the Rights Agent at 59 Maiden Lane, New York, New York 10038, or at the office of its successors as Rights Agent, one one-hundredth of a fully paid non-assessable share of Series I Junior Participating Preferred Stock, $.01 par value.

5.Effective Date. This Amendment is effective as of August 30, 2018.

6.Governing Law. This Amendment shall be governed by, construed and enforced in accordance with the laws of the State of Delaware, without reference to the conflicts or choice of law principles thereof.

7.Counterparts; Facsimile Signatures. This Amendment may be executed in any number of counterparts (including facsimile signature) each of which shall be an original with the same effect as if the signatures thereto and hereto were upon the same instrument.

8.Headings. The headings in this Amendment are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.

4^th Amendment to Rights Agreement 2

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed, all as of the day and year first above written.

WILLIS LEASE FINANCE CORPORATION

By:______________________________

Name:

Title:

AMERICAN STOCK TRANSFER AND TRUST COMPANY

By:_______________________________

Name:

Title:

4^th Amendment to Rights Agreement 3

EX-10.43

LETTER AGREEMENT NO.

TO GTA No. 1-1028985

Willis Lease Finance Corporation

60 East Sir Francis Drake Boulevard, Suite 209

Larkspur, CA 94939

December 4, 2019

This Letter Agreement No. (hereinafter referred to as the “LetterAgreement”) dated December 12, 2019 (the “Effective Date”), is made and entered into by and between CFM International, Inc. (hereinafter referred to as “CFM”),a company duly organized under the laws of the State of the Delaware, whose registered head office is located at 6440 Aviation Way, West Chester, Ohio, 45069, United States of America, and jointly owned by the General Electric Company, a New York corporation (hereinafter referred to as “GE”) and Safran Aircraft Engines, a French company (hereinafter referred to as “SAE”) and , a company duly organized under the laws of Delaware, whose registered head office is located at 4700 Lyons Technology Parkway, Coconut Creek, Florida 33073, (hereinafter referred to as “Customer”).

CFM and Customer are collectively referred to in this Letter Agreement as the “Parties” or individually as a “Party”.

WHEREAS, CFM and Customerhave entered into General Terms Agreement dated December 22, 2017 (hereinafter referred to as “GTA”);

WHEREAS, the GTA contains the applicable terms and conditions governing the sale by CFM and the purchase by Customer of spare engines.

WHEREAS, Customer desires to purchase and take delivery from CFM of fifteen (15) [*] new spare engines and fifteen (15) [*] new spare engines, with the option to purchase up to an additional fifteen (15) [*] new spare engines and up to an additional fifteen (15) [*] new spare engines (the “Spare Engines”) according to the delivery schedule set forth in Attachment A, and under the conditions set forth in the GTA and this Letter Agreement.

PROPRIETARY INFORMATION NOTICE The information contained in this document is CFM Proprietary Information and is disclosed in confidence. It is the property of CFM and shall not be used, disclosed to others, or reproduced without the express written consent of CFM. If consent is given for reproduction in whole or in part, this notice and the notice set forth on each page of this document shall appear on any such reproduction. Export control laws may also control the information contained in this document. Unauthorized export or re-export is prohibited.

V2015-May-01-Rev02

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

54495-0032/147287860.1

WHEREAS, CFM has offered to provide Customer with a Thrust Lease Program (as more particularly set forth below) to enable Customer to offer higher thrust levels to its lessees; and

WHEREAS, the Parties hereto acknowledge that, as part of the Thrust Lease Program, a mutually agreeable system for tracking the thrust rating leased at above the purchased thrust tor each Spare Engine must be developed and incorporated into an annual financial reconciliation.

NOW THEREFORE, in consideration of the mutual covenants herein contained, the Parties agree as follows:

I. PRICES

A. General

Base price for the Spare Engines delivered shall be as set forth in Attachment C – Base Prices For [*] Spare Engines, and [*] Spare Engines hereto. These base prices are subject to escalation in accordance with the escalation formula set forth in Attachment D1 or D2.

B. Payment Terms

At the time of executing this Letter Agreement, Customer shall place a purchase order, and CFM shall render to Customer an invoice, for [*] percent [*] of the Spare Engine base price (unescalated) which Customer shall pay twelve (12) months prior to each Spare Engine’s scheduled delivery with the Payment of the balance, including amount for price escalation to the month of scheduled delivery, to be made on or before delivery of each Spare Engine.

C. Product Warranties

The standard product warranties for the Spare Engines are as set forth in the GTA, Exhibit A.

D. Engine Stand and Engine Bag

CFM agrees to provide, [*] shipping stands and [*] engine covers in new condition for each of the Spare Engines purchased and delivered under the Letter Agreement n°2.

E. [*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

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54495-0032/147287860.1

F. Pre-purchase Inspection

Customer shall be given the opportunity to inspect the Spare Engines and its associated records prior to the respective Delivery Dates, at Customer’s cost. Such inspection shall be coordinated between CFM and Customer with CFM giving thirty (30) days notice to Customer before the expected delivery date and shall not delay delivery more than forty eight (48) hours from the time the Spare Engine is completed and ready for shipment. Promptly after such inspection, Customer shall notify CFM in writing either if the Spare Engine does or does not meet the requirements set forth in the GTA and this Letter Agreement. Following such inspection and until delivery of the Spare Engines to Customer hereunder, CFM will ensure that the Spare Engines remains properly stored, and CFM will not allow any parts to be removed from the Spare Engines.

If the Spare Engines are lost, confiscated, damaged, destroyed or otherwise rendered unfit or unavailable for use prior to the Delivery Date, or if any of the Spare Engines do not meet the requirements set forth in the GTA and this Letter Agreement following the inspection, the Customer will not be liable to purchase the applicable Spare Engine and CFM shall either (i) propose an equivalent replacement new spare engine for Customer to purchase, (ii) promptly refund any progress payments made with respect to the applicable Spare Engine and the cancellation fees set forth in Attachment H shall not apply, or (iii) upon mutual agreement of the Parties, to repair the applicable Spare Engine to bring it into compliance with the requirements set forth in the GTA and this Letter Agreement. Immediately upon the delivery of each Spare Engine to Customer on the respective Delivery Date, Customer shall execute and deliver to CFM a Certificate of Acceptance in the form attached hereto as Attachment E and CFM shall provide Customer with a Bill of Sale in the form attached hereto as Attachment F.

G. Spare Engine Delay Notice

On an annual basis, with at least [*] notice, Customer shall have the ability to delay delivery of Spare Engines ordered pursuant to this Letter Agreement for up to [*] with no penalty. Any Spare Engine which is so delayed must be delivered during the following [*], unless mutually agreed.

H. Assignment of Customer’s Rights to Purchase Spare Engine

Customer shall be permitted, without the prior written consent of CFM, to assign its rights and obligations to purchase any of the Spare Engines pursuant to this Letter Agreement to Customer’s subsidiaries and affiliates, including, Willis Engine Structured Trust IV, Willis Engine Structured Trust III, Willis Engine Securitization Trust II, Willis Aeronautical Services, Inc., Willis Asset Management Limited, CASC Willis Engine Lease Company Limited and Willis Mitsui & Co Engine Support Limited, any wholly-owned subsidiary formed at a future date for the purpose of financing Customer’s assets under its various financing facilities, or an owner

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

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54495-0032/147287860.1

trustee for the benefit such abovementioned affiliates or subsidiaries of Customer (each a “Permitted Assignee” and collectively, the “Permitted Assignees”).

I. [*]

J. Technical Training

For the avoidance of doubt, Customer shall be entitled to technical training for [*] Student-Days at no charge to Customer for each [*], [*], and [*] purchased by Customer pursuant to the terms of technical training in Section III of the GTA.

K. [*] Thrust Upgrade

1. [*] Thrust Upgrade Purchase

CFM agrees to provide a total of [*] thrust upgrades (thrust rights and plugs) for [*] or [*] engines at a [*] discount from the then-current list price to Customer for Engines over [*] old in any of the following combinations, which shall be determined at Customer’s sole discretion:

o                        [*], and/or

o                        [*], and/or

o                        [*], and/or

o                        [*].

Customer shall at minimum purchase [*] of the [*] by the [*]. Should the minmum number of thrust upgrades not be purchased by the end of [*] then Customer shall reimburse CFM the difference from the [*] discount to a [*] discount.

The expiration date of the [*] thrust upgrades purchase shall be [*].

At Customer’s discretion, Engines may be added to the Thrust Lease Program subject to the terms of Letter Agreement No. 2 dated September 26, 2006 to GTA No. 6-7594, as further amended from time to time.

2. Right of First Offer

If Customer intends to sell or disassemble any engine that has been upgraded with a thrust upgrade purchased pursuant to section K.1, above, the following procedures shall apply: (i) prior to effecting any such sale or disassembly, Customer shall provide full engine details, allowing CFM Materials to provide a written offer (the “Offer Price”) within [*] business days, which shall be subject to physical inspection of the engine; (ii) Customer shall have the right to accept or reject such offer at any time during the [*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

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54495-0032/147287860.1

business day period following delivery (the “Offer Period”); and (iii) if Customer does not accept the Offer Price, Customer shall have the right at any time thereafter to obtain competing bids from any persons or entities, provided that Customer shall not sell such engine or parts for less than the Offer Price without first re-offering the Engine to Seller for such lower price in accordance with the foregoing provisions; and (iv) Customer shall provide CFM Materials with the highest offer it received from any other person or entity, allowing CFM Materials to match such offer, which shall be accepted or rejected by CFM Materials within [*] business days. The parties agree to negotiate in good faith a separate purchase agreement for any CFM Materials offers accepted by Customer.

During the Offer Period (but not less than [*] prior to the end of the Offer Period) Customer agrees to make the engine offered, including all of its records, available for inspection and review by CFM Materials, at Customer’s main MRO facility for the engine, or another agreed upon facility.  The engine inspection shall be at CFM Materials’ sole cost and expense and shall include, but not limited to, a video borescope inspection of the complete gas path, a physical visual inspection of the exterior, a complete inventory of all accessories and photos of the engine.  The engine technical documentations will be reviewed both historical and current data alike and shall consist of at least the items within Schedule 1. 

L.Incremental Spare Engine Options

On an annual basis, Customer shall also have the option to add [*] Spare Engine in the given year beginning in [*], provided Customer places a purchase order for a Spare Engine at least [*] months in advance. If Customer places a purchase order for a Spare Engine with less than a [*] month lead time, CFM will use its reasonable efforts, but will not be obligated, to fulfill such order within such period of time. Customer has the option to convert any [*] to a [*] and vice versa provided Customer provides notice at least [*] months in advance. If Customer provides notice less that [*] months in advance, CFM will use its reasonable efforts to fulfill the Customer request in the delivery timeframe based on availability or CFM will fulfill the Customer request at a later date, subject to Customer’s agreement. No more than [*] [*] Spare Engines or [*] [*] Spare Engines will be available in a single year without CFM agreement.

Confidentiality of Information. This Letter Agreement contains information specifically for Customer and CFM, and is subject to the Data article in the GTA.

The obligations set forth in this Letter Agreement are in addition to the obligations set forth in the GTA. In the event of conflict between the terms of this Letter Agreement and the terms of the GTA, the terms of this Letter Agreement shall take precedence. Terms which are capitalized but not specifically otherwise defined when mentioned herein shall have the meaning ascribed to them in the GTA.

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

IN WITNESS WHEREOF, the Parties hereto, by their duly authorized officers, entered into and executed this Agreement to be effective as of the Effective Date.

For and on behalf of:	For and on behalf of:
Willis Lease Finance Corporation	CFM INTERNATIONAL, INC.
Signature:	Signature:
Printed Name:	Printed Name:
Title:	Title:

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

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54495-0032/147287860.1

Attachment A- Delivery Schedule

QUANTITY	ENGINE MODEL	DELIVERY DATE
1 Firm	[*]	[*]
1 Firm	[*]	[*]
3 Firm	[*]	[*]
3 Firm	[*]	[*]
4 Firm	[*]	[*]
5 Firm	[*]	[*]
4 Firm	[*]	[*]
5 Firm	[*]	[*]
4 Firm	[*]	[*]
4 Option	[*]	[*]
4 Option	[*]	[*]
4 Option	[*]	[*]
3 Option	[*]	[*]
3 Option	[*]	[*]
4 Option	[*]	[*]
4 Option	[*]	[*]
4 Option	[*]	[*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

This Letter Agreement is deemed equivalent to having placed a purchase order for the Firm Spare Engine(s). Customer will place a purchase order for any Option Spare Engine it elects to convert to a firm order no later than [*] months prior to its required delivery date.

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment B – Spare Engine serial numbers

covered by the Thrust Lease Program

[*]: [*]

[*]

[*]

[*]

[*]

[*]: [*]

[*]

[*]

[*] more [*] Spare Engines to deliver in 4Q [*] in accordance with Letter Agreement 1 dated December 22, 2017, as amended pursuant to Amendment 2 to Letter Agreement 1, with improved payment terms of [*] of the Spare Engine Base Price (unescalated) as set forth in Attachment C of Letter Agreement 1.

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment C - Base Prices For [*] Spare Engines

ITEM Base Price

BASIC ENGINEJanuary 2018 US$

[*] $[*]

[*]$[*]

A. Base prices are effective for basic Spare Engines delivered to Customer on or before [*], subject to adjustment for escalation as defined in Attachment D1 and Attachment D2, respectively.

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment D1 - [*] Price Escalation Formula

[*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment D2 - [*] Price Escalation Formula

[*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment E - Certicate of Acceptance

Form of

Certificate of Acceptance

________________________ (“Customer”) hereby certifies that pursuant to the Letter Agreement No.1 dated as of [Date], by and between CFM International, Inc.(“Seller”) and Customer (the “Engine SalesAgreement”), in connection with the sale by Seller to Customer of the new CFM International model [*] [or [*]] aircraft engine bearing the manufacturer’s serial number (the “Engine”) Engines:

(a) Customer has inspected the Engine, including all technical records, and is satisfied the Engine conforms with the delivery condition requirements as set forth in the Engine Sales Agreement;

(b) Customer has inspected, found to be complete and satisfactory to it and received all of the Engine’s technical documents.

Date: _____________

Company Name

By:________________________________

Name:_____________________________

Title:_______________________________

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment F - Bill of Sale

Form of

BILL OF SALE

Pursuant to the Letter Agreement No. 2, dated [DATE], by and between Willis Lease Finance Corporation and CFM International, Inc. (“Seller”) (the “Engine Sales Agreement”), and for and in consideration of the purchase price, and other good and valuable consideration, the payment of which is described in the Engine Sales Agreement, Seller, the owner of full legal and beneficial title to:

Identification of the Engine

Engine ModelEngine Serial Number

[*]xxx-xxx

has as of the ___ day of [Date], sold, granted, transferred and delivered all right, title, and interest in and to the above listed engine (the “Engine”) to [enter Buyer entity designated by Willis Lease Finance Corporation] (“Buyer”), and to its successors and assigns, to have and to hold said Engine forever.

Seller hereby warrants to Buyer that at the time of delivery of the Engine to Buyer, Seller was the lawful owner of the Engine with good title thereto; that said the Engine is free from all claims, liens, encumbrances and rights of others; that Seller has good and lawful right to sell the Engine; that there is hereby conveyed to Buyer on the date hereof good and marketable title to the Engine free and clear of all liens, claims, charges and encumbrances and that Seller will warrant and defend such title against all claims and demands of all persons, whomsoever arising from any event or condition occurring prior to the delivery of the Engine by Seller to Buyer.

This Bill of Sale will be governed in accordance with the laws of the State of New York, U.S.A.; except, that New York conflict of law rules will not apply if the result would be the application of the laws of another jurisdiction.

The undersigned has caused this Bill of Sale to be signed by a duly authorized officer as of this ____ day of [Month, Year].

CFM INTERNATIONAL, INC.

By:_____________________________

Printed Name:____________________

Title:____________________________

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment G - Thrust Lease Calculation*

[*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

Attachment H - Conditions For Delay/Cancellation

1. Cancellation of Spare Engines

Customer recognizes that harm or damage will be sustained by CFM if Customer fails to accept delivery of the Spare Engines when duly tendered. Within thirty (30) calendar days of any such cancellation or failure to accept delivery occurs, Customer shall remit to CFM cancellation charge equal to [*] of the Spare Engine base price in accordance with Attachment C - Base Prices For [*] Spare Engines and [*] Spare Engines hereto less any progress payments previously remitted.

The Parties acknowledge such cancellation charge to be a reasonable estimate of the minimum harm or damage to CFM in such circumstances.

CFM shall retain any progress payments or other deposits made to CFM for any such cancelled Spare Engine or failure to accept delivery for reasons other than detailed in Section E, Pre-purchase Inspection of this Letter Agreement No. 2. Such progress payments will be applied to the cancellation charge for such Spare Engine. Progress payments held by CFM in respect of any such Spare Engine which are in excess of such amounts will be immediately refunded to Customer, provided Customer is not then in arrears on other amounts owed to CFM.

2. [*]

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

SCHEDULE 1

ENGINE Records and Inspection Description

1.         Engine Records

• Certified statement on status of each Engine (time and cycle records

• All shop visit, restoration and repair documents

• Current AD compliance report (terminated and repetitive) signed and dated on Airline headed paper

• Current SB status report (to the extent tracked by Seller) signed and dated on Airline headed paper

• Approved release to service certification for hard time components with remaining hours and cycles

• Listing of installed on-condition components (to the extent tracked by Seller) signed and dated on Airline headed paper

• Current engine disc sheets signed and dated on Airline headed paper

• Complete Back to Birth supporting documentation for each LLP on each engine

• Manufacturer Delivery Document (EDS)

• Condition Monitoring Report

• Engine Master Record of installation/removals

• Last Borescope report, including video if available

• Last Test cell run report (if available)

• Last on-wing ground run, if applicable

• Statement that Engines were not involved in an accident or incident in the form attached hereto as Schedule 2

• Approved release to service certification for hard time components

• Type of engine oil used on signed and dated Airline headed paper

• JAR Form 1/8130‑3 release to service for each engine shop visit

• Power rating operation statement on signed and dated Airline headed paper

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

SCHEDULE 2

FOR EACH ENGINE

EXAMPLE FORM OF

CERTIFICATION STATEMENT

[INSERT: Seller’s Company Name] certifies that, to the best of its knowledge, the used (manufacturer’s name) aircraft (engine/module) model (model type) bearing the manufacturer’s serial number  (the “Engine”):

* Was not removed from an aircraft that has been subjected to any extreme heat or other form of extreme stress, e.g. major engine failure, fire, or involved in an incident or accident as defined by the relevant regulating authority.

* Does not have and has not had any Parts Manufacturer Approval parts, non-OEN approved DERs or non-Type Certificate Holder repaired parts installed other than those authorized by the engine manufacturer;

* Has not been immersed in salt water or otherwise exposed to corrosive agents outside normal operation;

* Was not obtained from, nor operated by, any Government, or any military sources; and

* Was maintained and stored in accordance with OEM standard procedures.

Last Operator:

EXECUTED THIS  /  /

                                Month             Day                                   Year     

[INSERT: Seller’s Company Name]

By: __________________________________________

Name:_________________________________________

Title:__________________________________________

CFM PROPRIETARY INFORMATION

NOTE: Certain Confidential Information in this document (indicated by [*]) has been omitted because it is both (i) not material and (ii) would likely cause competitive harm if publicly disclosed.

(subject to restrictions on first page)

54495-0032/147287860.1

EX-10.44

AMENDMENT NO. 1

to

FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

and

AMENDMENT NO. 5

to

SECURITY AGREEMENT

Dated as of December 13, 2019

This AMENDMENT NO. 1 TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT and AMENDMENT NO. 5 TO SECURITY AGREEMENT (this “Amendment”), is entered into as of December 13, 2019, by and among WILLIS LEASE FINANCE CORPORATION, a Delaware corporation (“Borrower”), MUFG BANK, LTD., in its capacity as administrative agent (in such capacity, “Administrative Agent”) and MUFG UNION BANK, N.A. (formerly known as Union Bank, N.A.), in its capacity as security agent (in such capacity, “Security Agent”; together with the Administrative Agent, the “Agents”) and the Lenders (as hereinafter defined) party hereto.

RECITALS

A.Borrower, the Agents and certain financial institutions and other persons from time to time party thereto (collectively, the “Lenders”), have entered into that certain Fourth Amended and Restated Credit Agreement dated as of June 7, 2019, as amended by that certain Letter Agreement dated as of November 8, 2019 (as the same may be further amended, restated, supplemented or otherwise modified, the “Credit Agreement”; capitalized terms used herein but not defined shall be used herein as defined in the Credit Agreement), pursuant to which the Lenders have made available to Borrower the Revolving Commitment in the aggregate maximum principal amount of One Billion Dollars ($1,000,000,000).

B.    Borrower is party to that certain Security Agreement dated as of November 18, 2009 by and between Borrower and the Security Agent, as amended by (i) Amendment No. 1 Limited Waiver and Consent to Amended and Restated Credit Agreement and Amendment No. 1 to Security Agreement dated as of September 13, 2012, (ii) Amendment No. 2 to Security Agreement dated as of June 4, 2014, (iii) Amendment No. 3 to Security Agreement dated as of April 20, 2016 and (iv) Amendment No. 4 to Security Agreement dated as of June 7, 2019 (as the same may be further amended, restated, supplemented or otherwise modified, the “Security Agreement”).

C.    As of the date hereof, the outstanding principal balance, exclusive of accrued interest and other expenses, under the Revolving Commitment is $394,000,000.

D.    As of the date hereof, the Administrative Agent has informed the Borrower that the Lenders consist of the following financial institutions: MUFG Bank, Ltd.; Bank of America, N.A.; Wells Fargo Bank, National Association; U.S. Bank National Association; City National Bank; The Huntington National Bank; KeyBank National Association; Umpqua Bank; BMO Harris Bank N.A.; Fifth Third Bank; Credit Agricole Corporate and Investment Bank; HSBC Bank USA, N.A.; Apple Bank for Savings; CIT Bank, N.A.; BNP Paribas; Crédit Industriel et Commercial, New York Branch; and Columbia State Bank.

E.    Borrower has requested certain modifications to the Credit Agreement and the Security Agreement on the terms and conditions set forth herein.

F.    Agents and the Requisite Lenders have agreed, subject to the terms and conditions set forth below, to amend the Credit Agreement and the Security Agreement in certain respects as set forth below and to the grant the releases, waivers and consents as set forth below.

SMRH:4818-7924-7534.6	1
		0A22-196038

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree and covenant as follows:

AGREEMENT

1.Recitals. The recitals set forth above are true, accurate and correct.

2.Reaffirmation of the Obligations and Guaranties. Subject to any limitation set forth in any Loan Document, each of Borrower, each Subsidiary and Owner Trustee party hereto, and Willis Lease France (“WLF”), hereby (i) ratifies and reaffirms all of its payment and performance obligations, contingent or otherwise, under each of the Loan Documents to which it is a party, (ii) ratifies and reaffirms each grant of a lien on, or security interest in, its property made pursuant to the Loan Documents to which it is a party (including, without limitation, the grant of security made by such party pursuant to the Collateral Documents to which it is a party) and confirms that such liens and security interests continue to secure the Obligations under such Loan Documents, in each case subject to the terms thereof and (iii) in the case of each guarantor that has executed a Subsidiary Guaranty or Owner Trustee Guaranty, ratifies and reaffirms its guaranty of the Obligations.

3.Amendment of Credit Agreement.

3.1    As of the Effective Date (as defined below), Section 1.1 of the Credit Agreement is hereby amended as follows:

3.1.1    The definition of “Future WEST ABS Non-Recourse Indebtedness” is hereby amended by deleting it in its entirety and inserting in lieu thereof the following:

“Future WEST ABS Non-Recourse Indebtedness” means the Indebtedness that is Non-Recourse Debt of any future Special Purpose Financing Vehicle that is incurred in connection with future asset-based securitization transactions similar to those transactions contemplated by clauses (i) through (iii) of the definition of WEST Funding Facility.

3.1.2    The definition of “Permitted Indebtedness” in Section 1.1 of the Credit Agreement is hereby amended by deleting the words “May ___, 2024” and inserting in lieu thereof the words “June 7, 2024.”

3.2    As of the Change in Control Date (as defined below), the Credit Agreement is hereby amended as follows:

3.2.1Definitions. Section 1.1 of the Credit Agreement shall be amended by:

(a)    Inserting the words “; and (v) any Permitted Margin Stock” immediately before the period at the end of the definition of “Collateral” and deleting the word “and” immediately prior to clause (iv) of such definition.

(b)    Adding the following definition in proper alphabetical order:

“Permitted Margin Stock” means, to the extent constituting margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System of the United States), capital stock of the Borrower acquired in connection with any Permitted Change in Control, which capital stock will be cancelled and will cease to exist immediately following the consummation of such Permitted Change in Control.

3.2.2Maximum Leverage Ratio. Section 6.14.2 shall be amended by adding the following proviso immediately prior to the period at the end thereof: “; provided that for the Fiscal Quarter in which a Permitted Change in Control is consummated and continuing thereafter through and including the Fiscal Quarter ending December 31, 2020, such ratio shall be not more than 4.50:1.00”.

SMRH:4818-7924-7534.6 2

3.2.3Permitted Margin Stock. The following language shall be inserted immediately following Section 7.20 as a separate stand-alone paragraph:

“In no event shall this Article VII impose, or be deemed to impose, a restriction on Permitted Margin Stock.”

3.3    As of the Change in Control Financing Date (as defined below), the Credit Agreement is hereby amended as follows:

3.3.1Definitions. Section 1.1 of the Credit Agreement shall be amended by deleting the definition of “Collateral” in its entirety and inserting in lieu thereof the following:

“Collateral” means all right, title and interest of the Borrower and its Subsidiaries (other than Excluded Subsidiaries) in and to all of its assets and properties, whether now existing or owned or hereafter acquired, in each case, as more specifically defined as “Collateral” in each of the Collateral Documents, but shall exclude (i) Borrower’s beneficial interest in any Special Purpose Financing Vehicle and the proceeds thereof (including any and all residual cash distributions made by such Special Purpose Financing Vehicle) unless and until such proceeds are received by the Borrower or any of its Subsidiaries; (ii) the WEST Servicing Agreement; (iii) one Corporate Aircraft being Bombardier Model BD-700-1A10 (Global Express) and any other Corporate Aircraft purchased from time to time, in each case if not included in the Borrowing Base and only for the period during which it is not included in the Borrowing Base; (iv) except to the extent pledged pursuant to a Stock Pledge Agreement, the Stock of any Subsidiary of Borrower that is incorporated or otherwise organized under the Applicable Laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia; and (v) any Permitted Margin Stock.

3.3.2Negative Pledge/WEST. Section 7.18 of the Credit Agreement shall be amended by deleting it in its entirety and inserting in lieu thereof the following:

“7.18    Negative Pledge/WEST. Not (i) cause or create any Liens or Negative Pledges on Borrower’s direct or indirect interest in the WEST Subsidiaries or the WEST Administrative Agency Agreement and/or management fee arrangement with WEST under the WEST Servicing Agreement (including without limitation, any rights to payment thereunder) or (ii) permit any Lien on Borrower’s direct or indirect interest in the WEST Subsidiaries or the WEST Administrative Agency Agreement and/or management fee arrangement with WEST under the WEST Servicing Agreement, other than, in each case (x) Liens or Negative Pledges then existing under the WEST Funding Facility provided such Liens or Negative Pledges shall not adversely affect such management agreement or Borrower’s interest therein and (y) the Liens and Negative Pledges permitted under Section 5 of that certain Amendment No. 1 to Fourth Amended and Restated Credit Agreement and Amendment No. 5 to Security Agreement dated as of December 13, 2019 among Borrower, Agents and the Lenders party thereto.”

4.Amendment of Security Agreement.

4.1    As of the Change in Control Date, the proviso at the end of Section 1 of the Security Agreement is hereby amended by inserting the words “; and (v) any Permitted Margin Stock” immediately before the period at the end thereof and deleting the word “and” immediately prior to clause (iv) of such proviso.

4.2    As of the Change in Control Financing Date, Section 1 of the Security Agreement is hereby amended as follows:

4.2.1    The words “, 100% of the residual cash distributions from WEST” where they appear in paragraph (A) of Section 1 are hereby amended by deleting them in their entirety and replacing them with the following:

SMRH:4818-7924-7534.6 3

“, to the extent such distributions are actually received by Debtor, 100% of the residual cash distributions from any Special Purpose Financing Vehicle in which Debtor has a direct beneficial interest”

4.2.2    The proviso at the end of Section 1 is hereby amended by deleting it in its entirety and replacing it with the following:

“provided, the Collateral shall not include: (i) Debtor’s beneficial interest in any Special Purpose Financing Vehicle and the proceeds thereof (including any and all residual cash distributions made by such Special Purpose Financing Vehicle) unless and until such proceeds are received by the Debtor or any of its Subsidiaries; (ii) the WEST Servicing Agreement; (iii) one Corporate Aircraft being Bombardier Model BD-700-1A10 (Global Express) and any other Corporate Aircraft purchased from time to time, in each case if not included in the Borrowing Base and only for the period during which it is not included in the Borrowing Base; (iv) except to the extent pledged pursuant to a Stock Pledge Agreement, the Stock of any Subsidiary of Debtor that is incorporated or otherwise organized under the Applicable Laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia; and (v) any Permitted Margin Stock.”

5.Limited Waiver and Consent. Agents and the Requisite Lenders hereby agree that, in connection with any Non-Recourse Debt (i)(x) to be entered into by one or more newly formed Special Purpose Financing Vehicles established after the Effective Date to facilitate a Permitted Change in Control (each a “WEST Holdco”) and (y) pursuant to which the beneficial interests in (including the residual cash distributions from) any of WEST II, WEST III or WEST IV are conveyed to a WEST Holdco and thereafter pledged by such WEST Holdco to secure such Non-Recourse Debt incurred by such WEST Holdco (such a financing, “Change in Control Financing”) or (ii) that is a refinancing (a “Change in Control Refinancing”) by a WEST Holdco of any such Change in Control Financing in connection with the incurrence by WEST (or any successor thereof (including as a result of a name change) or any Special Purpose Financing Vehicle that is a transferee of all or substantially all of the assets of such WEST entity) of any Future WEST ABS Non-Recourse Indebtedness that refinances, re-securitizes or replaces the WEST Funding Facility of WEST II, WEST III or WEST IV (or any such successor thereof), and pursuant to which a WEST Holdco directly owns the beneficial interests of the issuer of such Future WEST ABS Non-Recourse Indebtedness and continues to pledge such beneficial interests of (including the residual cash distributions from) such issuer to secure the Non-Recourse Debt incurred by such WEST Holdco: (a) notwithstanding the restrictions set forth in Section 7.15 of the Credit Agreement, after the Effective Date, the Borrower may make Investments in any such WEST Holdco solely in the form of a capital contribution by the Borrower of the beneficial interests of any of WEST II, WEST III or WEST IV to any such WEST Holdco and the provisions of Section 7.15 of the Credit Agreement are hereby waived to the extent necessary to permit such capital contributions to such WEST Holdco and for such WEST Holdco hold and continue to own such beneficial interests (and the beneficial interests of any such successor); and (b) notwithstanding the restrictions set forth in Section 7.18 of the Credit Agreement, any such WEST Holdco may thereafter create Liens or Negative Pledges on the beneficial interests of WEST (or any such successor) held by it and its rights to receive any proceeds thereof (including any and all residual cash distributions therefrom), and the provisions of Section 7.18 of the Credit Agreement are hereby waived to the extent necessary to permit the creation of such Liens or Negative Pledges, as applicable, and the consummation and performance by any WEST Holdco of its obligations in connection with such Non-Recourse Debt.

6.UCC Financing Statement Amendment.

6.1    Upon the Agents’ receipt of notice from the Borrower pursuant to Section 8.1.12 of the Credit Agreement stating that a Change in Control has occurred, the Requisite Lenders hereby authorize and direct the Security Agent to promptly file the Uniform Commercial Code financing statement amendment in the form attached hereto as Exhibit A; provided that if the Security Agent does not file such Uniform Commercial Code financing statement amendment on the Change in Control Date, then the Borrower (or its designee) is hereby authorized to file such Uniform Commercial Code financing statement amendment.

6.2    Upon the Agents’ receipt of notice from the Borrower stating that a Change in Control Financing has occurred, the Requisite Lenders hereby authorize and direct the Security Agent to promptly file the Uniform Commercial

SMRH:4818-7924-7534.6 4

Code financing statement amendment in the form attached hereto as Exhibit B; provided that if the Security Agent does not file such Uniform Commercial Code financing statement amendment on the Change in Control Financing Date, then the Borrower (or its designee) is hereby authorized to file such Uniform Commercial Code financing statement amendment.

7.Conditions.

7.1    This Amendment (other than Sections 3.2, 3.3, 4, 6, and 8 hereof) shall become effective as of the date by which the Agents shall have received the following (such date, the “Effective Date”):

7.1.1    a counterpart of this Amendment duly executed by the Borrower, the Agents and the Requisite Lenders, and agreed to and accepted by each Guarantor;

7.1.2    evidence of Borrower's authority to enter into this Amendment; and

7.1.3    a certificate of good standing or status from the jurisdiction under whose laws each of the Borrower, Willis Aeronautical Services, Inc., and West Engine Funding LLC was formed or incorporated, as applicable, dated within thirty (30) days prior to the date of this Amendment.

7.2    Sections 3.2, 4.1, 6.1 and 8 of this Amendment shall become effective immediately (and without need for further action, consent or confirmation of any Person) and simultaneously with the consummation of a Permitted Change in Control (the “Change in Control Date”).

7.3    Sections  3.3, 4.2, and 6.2 of this Amendment shall become effective immediately (and without need for further action, consent or confirmation of any Person) and simultaneously with the consummation of a Change in Control Financing (the “Change in Control Financing Date”).

8.Post-Amendment Covenants. Borrower agrees that:

8.1    Within ten (10) days after the Change in Control Date, Borrower shall deliver to Agents an officer’s certificate (a) attaching copies of Borrower’s then-current bylaws and certificate of incorporation and all amendments thereto, (b) attaching a certified copy of the agreement giving effect to the Permitted Change in Control, with all schedules, supplements, and attachments thereto that were previously publicly filed with the SEC, and (iii) confirming that the Permitted Change in Control has been consummated in accordance with the terms of such agreement.

8.2    Promptly following repayment in full of (a) any Change in Control Financing that does not result in a Change in Control Refinancing or (b) a Change in Control Refinancing, Borrower shall make a determination whether the applicable WEST Holdco entity whose Indebtedness was repaid in accordance with the foregoing can be merged, dissolved, liquidated or otherwise become the subject of an internal reorganization in order for Borrower to become the direct owner of the beneficial interests of the applicable WEST entity then directly owned by such WEST Holdco entity without (i) breaching, violating or resulting in a conflict with any term or provision of any Indebtedness or other contractual restriction then in effect that is not prohibited by the Credit Agreement, (ii) resulting in an adverse tax consequence to Borrower or any of its Subsidiaries or Excluded Subsidiaries or (iii) incurring unreasonably excessive costs or burdens, in each case, as determined reasonably and in good faith by Borrower. If Borrower determines that it can become the direct owner of beneficial interests of the applicable WEST entity pursuant to the previous sentence, Borrower will notify Administrative Agent and upon re-acquiring the direct beneficial interests in such WEST entity will execute and deliver to the applicable Agent, such amendments to the Credit Agreement or Security Agreement as are necessary to include in the Collateral 100% of the residual cash distributions from such WEST entity, and will authorize the Security Agent to file an amended Uniform Commercial Code financing statement in the applicable jurisdiction to reflect such modification to the Collateral. Any such amendment to the Loan Documents contemplated by this Section 8.2 shall become effective without further consent of any other party to such Loan Documents (including, any Subsidiary or Owner Trustee), other than Borrower, Administrative Agent and, if applicable, Security Agent.

SMRH:4818-7924-7534.6 5

9.Willis Lease France. Notwithstanding the current designation of WLF as an Excluded Subsidiary under the Credit Agreement, (i) all documents executed and delivered to Security Agent by WLF in connection with the Credit Facilities shall constitute Collateral Documents, including, without limitation, the Subsidiary Guaranty and each Leasing Subsidiary Security Assignment executed by WLF to date and such other documents as may be executed by WLF hereafter in its capacity as a Leasing Subsidiary, (ii) WLF hereby reaffirms its obligations and grant of security interests thereunder, (iii) the property in which WLF grants Security Agent a security interest thereunder constitutes Collateral and (iv) the representation in Section 5.5.6 of the Credit Agreement is hereby amended and restated as follows: “Willis Lease France is an Excluded Subsidiary whose operations are limited to the employment of persons resident in France and which has no material assets or material operating income, other than in connection with its business operations related to being a Leasing Subsidiary as contemplated by the Eligible Leases and other Loan Documents to which it is a party.”

10.Borrower’s Representations and Warranties. Borrower represents and warrants, for the benefit of the Lenders and the Agents, as follows:

10.1    Borrower has all requisite power and authority under applicable law and under its certificate of incorporation and bylaws to execute, deliver and perform this Amendment, and to perform the Loan Documents as amended hereby. There have been no changes in the certificate of incorporation and bylaws of Borrower since the Closing Date.

10.2    all actions, waivers and consents (corporate, regulatory and otherwise) necessary or appropriate for the Borrower to execute, deliver and perform this Amendment, and to perform the Loan Documents as amended hereby, have been taken and/or received;

10.3    this Amendment, and the Loan Documents, as amended by this Amendment, constitute the legal, valid and binding obligation of the Borrower enforceable against it in accordance with the terms hereof (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles, whether enforcement is sought by proceedings in equity or at law);

10.4    the execution, delivery and performance of this Amendment, and the performance of the Loan Documents, as amended hereby, will not (a) violate or contravene any material requirement of Applicable Law, (b) result in any material breach or violation of, or constitute a material default under, any agreement or instrument by which the Borrower or any of its property may be bound, or (c) result in or require the creation of any Lien (other than pursuant to the Loan Documents) upon or with respect to any properties of the Borrower, whether such properties are now owned or hereafter acquired (other than Permitted Liens);

10.5    the representations and warranties contained in the Credit Agreement and the other Loan Documents are correct in all material respects on and as of the date of this Amendment, before and after giving effect to the same, as though made on and as of such date (other than any such representations or warranties that, by their terms, are specifically made as of a date other than the date hereof); and

10.6    no Default has occurred and is continuing.

11.Reference to and Effect on the Credit Agreement, Security Agreement and the Other Loan Documents.

11.1    Upon the effectiveness of this Amendment, each reference in the Credit Agreement or the Security Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each reference in the other Loan Documents to “the Credit Agreement”, “the Security Agreement”, “thereunder”, “thereof”, “therein” or words of like import, shall mean and be a reference to the Credit Agreement or the Security Agreement, as applicable, as amended hereby.

11.2    Except as specifically amended herein, the Credit Agreement, the Security Agreement and the other Loan Documents are and shall continue to be in full force and effect and are hereby reaffirmed, ratified and confirmed

SMRH:4818-7924-7534.6 6

in all respects. Borrower acknowledges that it has no claims, offsets or defenses with respect to the payment of sums due under the Notes or any other Loan Document.

11.3    The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agents or the Lenders under the Credit Agreement, the Security Agreement or any other Loan Document or constitute a waiver of any provision of the Credit Agreement or any other Loan Document, except as specifically set forth herein.

12.Payment of Expenses. Borrower shall pay the fees and expenses of the Agents in connection with this Amendment in accordance with Section 12.2 of the Credit Agreement.

13.Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of the signature page to this Amendment by facsimile or electronic means (including as a .pdf or .tif document) shall be as effective as delivery of a manually executed counterpart of this Amendment.

14.Governing Law. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York, without reference to its choice-of-law rules (other than Section 5-1401 of the New York General Obligations Law). If any court of competent jurisdiction in the state of New York determines any provision of this Amendment or any of the other Loan Documents to be invalid, illegal or unenforceable, that portion shall be deemed severed from the rest, which shall remain in full force and effect as though the invalid, illegal or unenforceable portion had never been a part of the Loan Documents.

15.No Impairment; No Novation. Except as specifically hereby amended, the Loan Documents shall each remain unaffected by this Amendment and all Loan Documents shall remain in full force and effect. The execution and delivery of this Amendment is not intended to, and shall not, constitute a novation of any Loan Document.

16.Integration. The Loan Documents, including this Amendment: (a) integrate all the terms and conditions mentioned in or incidental to the Loan Documents; (b) supersede all oral negotiations and prior and other writings with respect to their subject matter; and (c) are intended by the parties as the final expression of the agreement with respect to the terms and conditions set forth in those documents and as the complete and exclusive statement of the terms agreed to by the parties. If there is any conflict between the terms, conditions and provisions of this Amendment and those of any other agreement or instrument, including any of the other Loan Documents, the terms, conditions and provisions of this Amendment shall prevail.

[Signature Pages Follow]

SMRH:4818-7924-7534.6 7

IN WITNESS WHEREOF, the parties have agreed to the foregoing as of the date first set forth above.

BORROWER

WILLIS LEASE FINANCE CORPORATION,

a Delaware corporation

By:    _________________________

Name:    _________________________

Title:    _________________________

SMRH:4818-7924-7534.6	8#
		0A22-196038

4841-0310-0077.v13

ADMINISTRATIVE AGENT:

MUFG BANK, LTD.

By:    _________________________

Name:    _________________________

Title:    _________________________

SECURITY AGENT:

MUFG UNION BANK, N.A.

By:    _________________________

Name:    _________________________

Title:    _________________________

SMRH:4818-7924-7534.6	9
		0A22-196038

4841-0310-0077.v13

REQUISITE LENDERS:

[See Signature Pages Attached]

SMRH:4818-7924-7534.6	10
		0A22-196038

4841-0310-0077.v13

Each of the following hereby consents to the terms and provisions of this Amendment and ratifies and reaffirms the full force and effectiveness of the guaranty it has executed and delivered to the Agents, as of the date first set forth above.

WILLIS LEASE (IRELAND) LIMITED

By: ____________________________________________

Name:

Title:

WEST ENGINE FUNDING LLC

By: ____________________________________________

Name:

Title:

WEST ENGINE FUNDING (IRELAND) LIMITED

By: ____________________________________________

Name:

Title:

WILLIS AERONAUTICAL SERVICES, INC.

By: ____________________________________________

Name:

Title:

WLFC (IRELAND) LIMITED

By: ____________________________________________

Name:

Title:

WILLIS LEASE FRANCE

By: ____________________________________________

Name:

Title:

SMRH:4818-7924-7534.6	11
		0A22-196038

4841-0310-0077.v13

The undersigned hereby consents to the terms and provisions of this Amendment and ratifies and reaffirms the full force and effectiveness of the guaranty it has executed and delivered to the Agents, as of the date first set forth above.

WELLS FARGO TRUST COMPANY, NATIONAL ASSOCIATION, not individually but solely as Owner Trustee under the Trust Agreements

By: ____________________________________________

Name:

Title:

SMRH:4818-7924-7534.6	12
		0A22-196038

4841-0310-0077.v13

The undersigned hereby consents to the terms and provisions of this Amendment and ratifies and reaffirms the full force and effectiveness of the guaranty it has executed and delivered to the Agents, as of the date first set forth above.

U.S. BANK NATIONAL ASSOCIATION, not individually but solely as Owner Trustee under the Trust Agreements

By: ____________________________________________

Name:

Title:

SMRH:4818-7924-7534.6	13
		0A22-196038

4841-0310-0077.v13

The undersigned hereby consents to the terms and provisions of this Amendment and ratifies and reaffirms the full force and effectiveness of the guaranty it has executed and delivered to the Agents, as of the date first set forth above.

BANK OF UTAH, not individually but solely as Owner Trustee under the Trust Agreements

By: ____________________________________________

Name:

Title:

SMRH:4818-7924-7534.6	14
		0A22-196038

4841-0310-0077.v13

Exhibit A

Change in Control Date Uniform Commercial Code Financing Statement Amendment

(See attached.)

SMRH:4818-7924-7534.6	1
		0A22-196038

4841-0310-0077.v13

Exhibit B

Change in Control Financing Date Uniform Commercial Code Financing Statement Amendment

(See attached.)

SMRH:4818-7924-7534.6	1
		0A22-196038

4841-0310-0077.v13

EX-21.1

Exhibit 21.1

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

List of Subsidiaries

Subsidiary	State or Jurisdiction of Incorporation
WEST Engine Funding LLC	Delaware
Willis Lease (Ireland) Limited	Rep. of Ireland
WLFC (Ireland) Limited	Rep. of Ireland
WLFC Funding (Ireland) Limited	Rep. of Ireland
Willis Lease Finance (Ireland) Limited	Rep. of Ireland
Willis Lease France	France
Willis Lease (China) Limited	People’s Republic of China
Willis Engine Securitization Trust II	Delaware
WEST Engine Acquisition LLC	Delaware
Facility Engine Acquisition LLC	Delaware
Willis Engine Securitization (Ireland) Limited	Rep. of Ireland
Willis Aeronautical Services, Inc.	Delaware
Willis Lease Singapore Pte. Ltd.	Singapore
Willis Asset Management Limited	United Kingdom
Willis Engine Structured Trust III	Delaware
Coconut Creek Aviation Assets LLC	Delaware
Willis Engine Structured Trust IV	Delaware
WEST III Engines (Ireland) Limited	Rep. of Ireland
WEST IV Engines (Ireland) Limited	Rep. of Ireland
WEST II France	France
WEST III France	France
WEST IV France	France
Willis Lease Marine LLC	Cayman Islands

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Willis Lease Finance Corporation:

We consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-226695, 333-221463, 333-219572, 333-170049, 333-142914 and 333-118127) of Willis Lease Finance Corporation and subsidiaries (the “Company”) of our report dated March 12, 2020, with respect to the consolidated balance sheets of the Company as of December 31, 2019 and 2018, and the related consolidated statements of income, comprehensive income, redeemable preferred stock and shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes and financial statement Schedule I, Condensed Financial Information of Parent, and Schedule II, Valuation Accounts (collectively, the “consolidated financial statements”), and the effectiveness of internal control over financial reporting as of December 31, 2019, which report appears in the December 31, 2019 annual report on Form 10-K of the Company.

/s/ KPMG LLP

Fort Lauderdale, Florida

March 12, 2020

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Charles F. Willis IV, certify that:

1.I have reviewed this report on Form 10-K of Willis Lease Finance Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 12, 2020	/s/ Charles F. Willis, IV
		Charles F. Willis, IV
		Chief Executive Officer
		Chairman of the Board

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Scott B. Flaherty, certify that:

1.I have reviewed this report on Form 10-K of Willis Lease Finance Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	March 12, 2020	/s/ Scott B. Flaherty
		Scott B. Flaherty
		Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, in his or her capacity as an officer of Willis Lease Finance Corporation (the “Company”), for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his or her knowledge:

• the Annual Report of the Company on Form 10-K for the year ended December 31, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• the information contained in such report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: March 12, 2020

/s/ Charles F. Willis, IV

Charles F. Willis, IV

Chairman of the Board and Chief Executive Officer

/s/ Scott B. Flaherty

Scott B. Flaherty

Chief Financial Officer

XML

Related Party Transactions (Details)	1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2019 USD ($) engine aircraft.	Dec. 31, 2018 engine	Dec. 31, 2018 aircraft.	Dec. 31, 2018 USD ($)	Sep. 12, 2018 USD ($) $ / shares
Related Party and Similar Transactions
Maintenance reserve revenue				$ 108,998,000			$ 87,009,000
WMES
Related Party and Similar Transactions
Number of assets sold				5	2	1
Proceeds from sale of assets				$ 76,400,000			30,700,000
Willis Aeronautical Services, Inc.
Related Party and Similar Transactions
Number of assets sold | engine				1
Proceeds from sale of assets				$ 2,600,000
CASC Willis
Related Party and Similar Transactions
Number of assets sold | aircraft.				0
Chief Executive Officer
Related Party and Similar Transactions
Number of shares repurchased (in shares)								$ 88,000
Repurchased price (in dollars per share) | $ / shares								$ 34.2972
Purchase of artwork by CEO			$ 5,000
Amounts related party transaction		$ 450
Mikchalk Lake LLC
Related Party and Similar Transactions
Expenses paid				$ 36,000			44,000
Sale of Vehicle | Chief Executive Officer
Related Party and Similar Transactions
Amounts related party transaction	$ 100,000
Use of Marine Vessel | Chief Executive Officer
Related Party and Similar Transactions
Amounts related party transaction				200,000
Asset Management | WMES | Other Revenue
Related Party and Similar Transactions
Maintenance reserve revenue				$ 2,900,000			$ 2,600,000

XML

SCHEDULE I - Parent Company Information - Condensed Statements of Income - Additional Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Parent Company
Equity in income of subsidiaries
Equity in income of subsidiaries, tax	$ 12,504	$ 13,323

XML

Stock-Based Compensation Plans - 2007 Stock Incentive Plan (Details) - shares		1 Months Ended	12 Months Ended
	May 24, 2007	May 31, 2018	Dec. 31, 2019
Stock-based compensation plans
Number of shares available (in shares)			615,196
2007 Stock Incentive Plan
Stock-based compensation plans
Number of shares authorized (in shares)	2,800,000
2018 Stock Incentive Plan
Stock-based compensation plans
Number of shares authorized (in shares)		800,000
Restricted Stock | 2007 Stock Incentive Plan
Stock-based compensation plans
Number of shares awarded (in shares)			279,400
Equity Options | 2007 Stock Incentive Plan
Stock-based compensation plans
Stock options outstanding (in shares)			0
Minimum | Restricted Stock | 2007 Stock Incentive Plan
Stock-based compensation plans
Vesting period	1 year
Minimum | Restricted Stock | 2018 Stock Incentive Plan
Stock-based compensation plans
Vesting period		1 year
Maximum | Restricted Stock | 2007 Stock Incentive Plan
Stock-based compensation plans
Vesting period	3 years
Maximum | Restricted Stock | 2018 Stock Incentive Plan
Stock-based compensation plans
Vesting period		3 years

XML

Investments (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) engine aircraft.	Dec. 31, 2018 USD ($)	Dec. 31, 2014	Dec. 31, 2011
Investments
Ownership interest	50.00%
Net book value of equipment held for operating lease	$ 1,650,918	$ 1,673,135
Investment in WMES joint ventures at beginning of the period	47,941	50,641
Earnings (loss) from joint ventures	8,578	3,800
Contribution	5,713	0
Distribution	(3,300)	(5,730)
Foreign currency translation adjustment	222	770
Other comprehensive loss from joint ventures	(774)	0
Investment in WMES joint ventures at end of the period	57,936	47,941
Other revenue	$ 14,777	7,644
WMES
Investments
Ownership interest	100.00%			50.00%
Number of engines in lease portfolio | engine	36
Number of aircraft in lease portfolio | aircraft.	5
Net book value of equipment held for operating lease	$ 306,000
Investment in WMES joint ventures at beginning of the period	34,183	36,014
Earnings (loss) from joint ventures	8,312	3,899
Contribution	5,713
Distribution	(3,300)	(5,730)
Foreign currency translation adjustment	0	0
Other comprehensive loss from joint ventures	(774)
Investment in WMES joint ventures at end of the period	44,134	34,183
Consolidated Statements of Income
Revenue	55,770	38,465
Expenses	41,253	30,934
WMES net income	14,517	7,531
Consolidated Balance Sheets
Total assets	322,606	274,744
Total liabilities	227,052	198,534
Total WMES net equity	$ 95,554	76,210
CASC Willis
Investments
Ownership interest			50.00%
Number of engines in lease portfolio | engine	4
Net book value of equipment held for operating lease	$ 49,200
Investment in WMES joint ventures at beginning of the period	13,758	14,627
Earnings (loss) from joint ventures	266	(99)
Contribution	0
Distribution	0	0
Foreign currency translation adjustment	222	770
Other comprehensive loss from joint ventures	0
Investment in WMES joint ventures at end of the period	$ 13,802	$ 13,758

XML

Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 947
2021	895
2022	762
2023	504
2024	358
Thereafter	896
Total lease payments	4,362
Less: interest	(527)
Total lease liabilities	$ 3,835

XML

Equipment Held for Operating Lease - Narrative (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 engine region	Dec. 31, 2019 airframe_part_package	Dec. 31, 2019 aircraft.	Dec. 31, 2019 USD ($)	Dec. 31, 2019 vessel	Dec. 31, 2018 engine	Dec. 31, 2018 airframe_part_package	Dec. 31, 2018 aircraft.	Dec. 31, 2018 USD ($)
Leases [Abstract]
Number of equipment pieces held for lease	263	10	12		1	244	10	17
Net book value of equipment held for operating lease | $				$ 1,650,918					$ 1,673,135
Number of geographic regions in which aircraft lessees are domiciled in | region	8

XML

Derivative Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of information about financial statement effects related to cash flow hedges

The following table provides additional information about the financial statement effects related to the cash flow hedges for the years ended December 31, 2019 and 2018:

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)					Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain Reclassified from Accumulated OCI into  Income (Effective Portion)
	Years Ended December 31,						Years Ended December 31,
	2019			2018			2019		2018
	(in thousands)						(in thousands)
Interest rate contracts	$	(3,331	)	$	533	Interest expense	$	713	$	359
Total	$	(3,331	)	$	533	Total	$	713	$	359

XML

Revenue from Contracts with Customers (Tables)

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Schedule of disaggregation of revenue by major source

The following table disaggregates revenue by major source for the years ended December 31, 2019 and 2018 (in thousands):

Year ended December 31, 2019	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue	$	299,688	$	—	$	—		$	299,688
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Managed services	10,843		—		—			10,843
Other revenue	3,895		277		(238		)	3,934
Total revenue	$	353,154	$	56,244	$	(238	)	$	409,160

Year ended December 31, 2018	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue (2)	$	262,618	$	—	$	—		$	262,618
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Managed services (2)	7,287		—		—			7,287
Other revenue (2)	292		1,727		(1,662		)	357
Total revenue	$	307,263	$	42,746	$	(1,662	)	$	348,347

________________________________________________________

(1) Represents revenue generated between our reportable segments.

(2)

Certain amounts have been reclassified to conform with the classification as of December 31, 2019.

XML

Stock-Based Compensation Plans (Tables)

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Schedule of components of stock compensation expense

The components of stock compensation expense were as follows:

	Year Ended December 31,
	2019		2018
	(in thousands)
2007 Stock Incentive Plan	$	4,584	$	5,353
2018 Stock Incentive Plan	3,117		—
Employee Stock Purchase Plan	86		57
Total Stock Compensation Expense	$	7,787	$	5,410

Summary of restricted stock activity

The following table summarizes restricted stock activity under the 2007 and 2018 Plans for the years ended December 31, 2019 and 2018:

	Number Outstanding		Weighted Average Grant Date Fair Value		Aggregate Grant Date Fair Value (in thousands)
Balance as of December 31, 2017	328,122		$	23.49	$	7,707
Shares granted	270,454		33.91		9,172
Shares forfeited	(9,900	)	32.06		(317		)
Shares vested	(170,786	)	22.25		(3,799		)
Balance as of December 31, 2018	417,890		30.54		12,763
Shares granted	279,400		42.28		11,813
Shares forfeited	(3,866	)	30.43		(118		)
Shares vested	(187,957	)	28.74		(5,402		)
Balance as of December 31, 2019	505,467		$	37.70	$	19,056

XML

Equipment Held for Operating Lease

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Equipment Held for Operating Lease

Equipment Held for Operating Lease

As of December 31, 2019, the Company had a total lease portfolio of 263 engines and related equipment, 12 aircraft, 10 other leased parts and equipment and one marine vessel with a net book value of $1,650.9 million. As of December 31, 2018, the Company had a total lease portfolio of 244 aircraft engines and related equipment, 17 aircraft and 10 other leased parts and equipment, with a net book value of $1,673.1 million.

A majority of the equipment is leased and operated internationally. Substantially all leases relating to this equipment are denominated and payable in U.S. dollars.

The Company leases equipment to lessees domiciled in eight geographic regions. The tables below set forth geographic information about the leased equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):

	Years Ended December 31,
Lease rent revenue	2019		2018
	(in thousands)
Region
Europe	$	84,335	$	70,842
Asia	42,127		40,717
United States	39,178		40,100
South America	10,030		11,338
Mexico	5,284		4,721
Middle East	4,117		3,286
Canada	3,279		4,585
Africa	2,340		20
Totals	$	190,690	$	175,609

	As of December 31,
Net book value of equipment held for operating lease	2019		2018
	(in thousands)
Region
Europe	$	554,529	$	624,913
Asia	427,246		368,690
United States	240,454		260,095
South America	110,563		118,508
Mexico	51,573		33,795
Middle East	26,732		43,602
Canada	22,640		18,792
Africa	2,597		2,597
Off-lease and other	214,584		202,143
Totals	$	1,650,918	$	1,673,135

As of December 31, 2019, the lease status of the equipment held for operating lease (in thousands) was as follows:

Lease Term	Net Book Value
Off-lease and other	$	214,584
Month-to-month leases	196,143
Leases expiring 2020	549,244
Leases expiring 2021	131,217
Leases expiring 2022	323,383
Leases expiring 2023	97,613
Leases expiring 2024	70,507
Leases expiring thereafter	68,227
	$	1,650,918

As of December 31, 2019, minimum future payments under non-cancelable leases were as follows:

Year	(in thousands)
2020	$	155,970
2021	95,015
2022	59,033
2023	33,418
2024	21,287
Thereafter	14,754
	$	379,477

XML

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income before income taxes are as follows:

	Years ended December 31,
	2019		2018
	(in thousands)
United States	$	88,182	$	55,117
Foreign	699		1,157
Income before income taxes	$	88,881	$	56,274

The components of income tax expense for the years ended December 31, 2019 and 2018 were as follows:

	Federal		State			Foreign		Total
	(in thousands)
2019
Current	$	—	$	722		$	163	$	885
Deferred	20,205		869			—		21,074
Total	$	20,205	$	1,591		$	163	$	21,959
2018
Current	$	—	$	364		$	622	$	986
Deferred	12,871		(814		)	—		12,057
Total	$	12,871	$	(450	)	$	622	$	13,043

The following is a reconciliation of the federal income tax expense at the statutory rate of 21% for the years ended December 31, 2019 and 2018 to the effective income tax expense:

	Years Ended December 31,
	2019			2018
	(in thousands)
Statutory federal income tax expense	$	18,665		$	11,818
State taxes, net of federal benefit	1,440			(526		)
Foreign tax paid	—			622
Foreign jurisdiction rate differential	475			—
Permanent differences-nondeductible executive compensation	2,083			1,144
Permanent differences and other	(704		)	(15		)
Effective income tax expense	$	21,959		$	13,043

The Company records tax expense or benefit for unusual or infrequent items discretely in the period in which they occur.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	(in thousands)
Balance as of December 31, 2017	$	191
Decreases due to tax positions expired	(9		)
Balance as of December 31, 2018	182
Increases related to current year tax positions	250
Decreases due to tax positions expired	(162		)
Balance as of December 31, 2019	$	270

A $0.2 million reserve was established as of December 31, 2019 and no reserve was established as of December 31, 2018 for the exposure in Europe. If the Company is able to eventually recognize these uncertain tax positions, all of the unrecognized benefit would reduce the Company’s effective tax rate.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	As of December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Unearned lease revenue	$	1,277		$	1,094
State taxes	152			77
Reserves and allowances	1,988			1,187
Other accruals	4,974			3,795
Foreign tax credit	19			26
Lease liability	271			—
Net operating loss carry forward	12,091			39,996
Charitable contributions	57			38
Total deferred tax assets	20,829			46,213
Less: valuation allowance	(153		)	(652		)
Net deferred tax assets	20,676			45,561
Deferred tax liabilities:
Depreciation and impairment on aircraft engines and equipment	(118,595		)	(133,453		)
Inventory	(2,350		)	—
Right of use liability	(6,900		)	—
Other deferred tax assets (liabilities)	(4,198		)	(2,365		)
Net deferred tax liabilities	(132,043		)	(135,818		)
Other comprehensive loss deferred tax liability	949			(28		)
Net deferred tax liabilities	$	(110,418	)	$	(90,285	)

As of December 31, 2019, the Company had net operating loss carry forwards of approximately $55.8 million for federal tax purposes and $0.4 million (tax effected) for state tax purposes. The federal net operating loss carry forwards will expire at various times from 2023 to 2037 and the state net operating loss carry forwards will expire at various times from 2020 to 2038. There is a $0.2 million valuation allowance for net operating losses in California that expire between 2021 and 2038. The Company’s ability to utilize the net operating loss and tax credit carry forwards in the future may be subject to restriction in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code and similar state tax law. Management believes that no valuation allowance is required on deferred tax assets related to federal net operating loss carry forwards, as it is more likely than not that all amounts are recoverable through future taxable income. The open tax years for federal and state tax purposes are from 2003-2019, respectively.

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SCHEDULE II - VALUATION ACCOUNTS

12 Months Ended

Dec. 31, 2019

SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]

SCHEDULE II - VALUATION ACCOUNTS

WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

SCHEDULE II — VALUATION ACCOUNTS

(In thousands)

	Balance at Beginning of Period		Additions Charged (Credited) to Expense			Net (Deductions) Recoveries		Balance at End of Period
Year Ended December 31, 2018
Accounts receivable, allowance for doubtful accounts	$	949	$	1,610		$	—	$	2,559
Deferred tax valuation allowance	$	806	$	(154	)	$	—	$	652
Year Ended December 31, 2019
Accounts receivable, allowance for doubtful accounts	$	2,559	$	(829	)	$	—	$	1,730
Deferred tax valuation allowance	$	652	$	(499	)	$	—	$	153

Deductions in allowance for doubtful accounts represent uncollectible accounts written off, net of recoveries.

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Equity

12 Months Ended

Dec. 31, 2019

Stockholders' Equity Note [Abstract]

Equity

Equity

Common Stock Repurchase

Effective December 31, 2018, the Board of Directors approved the renewal of the existing common stock repurchase plan extending the plan through December 31, 2020 and amending the plan to allow for repurchases of up to $60.0 million of the Company's common stock until such date. Repurchased shares are immediately retired. During 2019, the Company repurchased 72,324 shares of common stock for approximately $3.6 million under the plan, at a weighted average price of $49.29 per share. During 2018, the Company repurchased 471,595 shares of common stock for approximately $16.2 million under the plan, at a weighted average price of $34.36 per share. At December 31, 2019, approximately $56.4 million is available to purchase shares under the plan.

Redeemable Preferred Stock

In October 2016, the Company sold and issued to Development Bank of Japan Inc. (“DBJ”) an aggregate of 1,000,000 shares of the Company’s 6.5% Series A Preferred Stock, $0.01 par value per share (the “Series A Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting investor fees were $19.8 million.

In September 2017, the Company sold and issued to DBJ an aggregate of 1,500,000 shares of the Company’s 6.5% Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock”) at a purchase price of $20.00 per share. The net proceeds to the Company after deducting issuance costs were $29.7 million.

The rights and privileges of the Preferred Stock are described below:

Voting Rights: Holders of the Preferred Stock do not have general voting rights.

Dividends: The Company’s Series A-1 Preferred Stock and Series A-2 Preferred Stock accrue quarterly dividends at the rate per annum of 6.5% per share. During the years ended December 31, 2019 and 2018, the Company paid total dividends of $3.3 million on the Series A-1 and Series A-2 Preferred Stock, respectively.

Liquidation Preference: The holders of the Preferred Stock have preference in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the corporation, including a merger or consolidation. Upon such liquidation event, the Preferred Stockholders are entitled to be paid out of the assets of the Company available for distribution to its stockholders after payment of all the Company’s indebtedness and other obligations and before any payment shall be made to the holders of common stock or any other class or series of stock ranking on liquidation junior to the Preferred Stock an amount equal to $20.00 per share, plus any declared but unpaid dividends.

Redemption: The Preferred Stock has no stated maturity date, however the holders of the Preferred Stock have the option to require the Company to redeem all or any portion of the Preferred Stock for cash upon occurrence of any significant changes in operating results, ownership structure, or liquidity events as defined in the Preferred Stock purchase agreements.  The redemption price is $20.00 per share plus dividends accrued but not paid.  The Company is accreting the Preferred Stock to redemption value over the period from the date of issuance to the date first callable by the Preferred Stockholders (October 2023 for the Series A Preferred Stock and September 2024 for the Series A-2 Preferred Stock), such that the carrying amounts of the securities will equal the redemption amounts at the earliest redemption dates.

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Related Party Transactions

12 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Stock Buybacks

On September 12, 2018, in a transaction approved by a Special Committee of the Board of Directors, the Company purchased 88,000 shares of common stock directly from the Company’s Chief Executive Officer, Charles F. Willis. The agreed and paid price per share was $34.2972, the volume weighted average price on September 12, 2018.

Joint Ventures

“Other revenue” on the Consolidated Statement of Income includes management fees earned of $2.9 million and $2.6 million during the years ended December 31, 2019 and 2018, respectively, related to the servicing of engines for the WMES lease portfolio. During 2019, the Company sold five aircraft and other equipment to WMES for $76.4 million. Additionally, during 2019, WMES sold one engine to Willis Aeronautical Services, Inc., a wholly-owned subsidiary of the Company, for $2.6 million. During 2018, the Company sold two engines and one aircraft to WMES for $30.7 million.

There were no aircraft or engine sales to CASC Willis during 2019 or 2018.

Other

During the second quarter of 2018, the Company’s Chief Executive Officer purchased artwork from the Company for $5 thousand. This transaction was approved by the Board’s independent Directors.

During the third quarter of 2018, the Company’s Chief Executive Officer utilized the WASI spare parts warehouse to temporarily store personal equipment and reimbursed the Company $450 for such usage.

In January 2019, the Special Committee of the Board of Directors approved a transaction in which the Company's Chief Executive Officer, Charles F. Willis, purchased a car at its market value of $0.1 million from the Company.

During 2019, the Company's Chief Executive Officer, Charles F. Willis, was charged $0.2 million for usage of the Company's marine vessel in the Company's lease portfolio.

During 2019 and 2018, the Company paid approximately $36,000 and $44,000, respectively, of expenses payable to Mikchalk Lake, LLC, an entity in which our Chief Executive Officer retains an ownership interest.  These expenses were for lodging and other business related services.  These transactions were approved by the Board’s independent Directors

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Derivative Instruments - Cash flow hedges (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Effects of derivative instruments
Unrealized (loss) gain on derivative instruments	$ (3,331,000)	$ 533,000
Cash flow hedging
Effects of derivative instruments
Unrealized (loss) gain on derivative instruments	(3,331,000)	533,000
Amount of Gain Reclassified from Accumulated OCI into Income (Effective Portion)	713,000	359,000
Significant ineffectiveness on held hedges	0	0
Cash flow hedging | Interest rate contracts | Interest expense
Effects of derivative instruments
Unrealized (loss) gain on derivative instruments	(3,331,000)	533,000
Amount of Gain Reclassified from Accumulated OCI into Income (Effective Portion)	$ 713,000	$ 359,000

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Fair Value Measurements (Details) - USD ($) $ in Millions	Dec. 31, 2019	Dec. 31, 2018
Fair Value Disclosures [Abstract]
Fair value of notes receivable	$ 39.7	$ 0.2
Fair value of notes payable	$ 1,262.6	$ 1,348.1

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Organization and Summary of Significant Accounting Policies - Intangibles and Other Assets (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Other Assets [Abstract]
Prepaid Deposits	$ 10,600,000	$ 1,900,000
Customer Relationships
Intangible Assets
Useful life	5 years
Indefinite-lived Intangible Assets
Intangible Assets
Intangible assets with indefinite useful lives	$ 0

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Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
REVENUE
Lease rent revenue									$ 190,690	$ 175,609
Maintenance reserve revenue									108,998	87,009
Spare parts and equipment sales									74,651	71,141
Gain on sale of leased equipment									20,044	6,944
Other revenue									14,777	7,644
Total revenue	$ 89,228	$ 120,366	$ 95,797	$ 103,769	$ 118,190	$ 80,958	$ 78,702	$ 70,497	409,160	348,347
EXPENSES
Depreciation and amortization expense									86,236	76,814
Cost of spare parts and equipment sales									62,647	61,025
Write-down of equipment									18,220	10,651
General and administrative									86,523	72,021
Technical expense									8,122	11,142
Net finance costs:
Interest expense									66,889	64,220
Loss on debt extinguishment									220	0
Total expenses									67,109	64,220
Total expenses									328,857	295,873
Earnings from operations									80,303	52,474
Earnings from joint ventures									8,578	3,800
Income before income taxes									88,881	56,274
Income tax expense									21,959	13,043
Net income									66,922	43,231
Preferred stock dividends									3,250	3,250
Accretion of preferred stock issuance costs									84	83
Net income attributable to common shareholders	$ 4,156	$ 23,232	$ 16,144	$ 20,056	$ 17,274	$ 8,834	$ 7,528	$ 6,261	$ 63,588	$ 39,898
Basic weighted average earnings per common share (in dollars per share)	$ 0.71	$ 3.97	$ 2.75	$ 3.47	$ 2.99	$ 1.50	$ 1.28	$ 1.03	$ 10.90	$ 6.75
Diluted weighted average earnings per common share (in dollars per share)	$ 0.68	$ 3.81	$ 2.66	$ 3.35	$ 2.91	$ 1.47	$ 1.26	$ 1.00	$ 10.50	$ 6.60
Basic weighted average common shares outstanding (in shares)	5,850	5,847	5,866	5,779	5,782	5,900	5,878	6,104	5,836	5,915
Diluted weighted average common shares outstanding (in shares)	6,099	6,094	6,061	5,978	5,939	6,004	5,991	6,256	6,058	6,046

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Reportable Segments (Tables)

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Summary of the reportable segments

The following tables present a summary of the reportable segments (in thousands):

For the year ended December 31, 2019	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	190,690	$	—	$	—		$	190,690
Maintenance reserve revenue	108,998		—		—			108,998
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Other revenue	14,738		277		(238		)	14,777
Total revenue	353,154		56,244		(238		)	409,160
Expenses:
Depreciation and amortization expense	86,159		77		—			86,236
Cost of spare parts and equipment sales	15,241		47,406		—			62,647
Write-down of equipment	18,220		—		—			18,220
General and administrative	81,302		5,221		—			86,523
Technical expense	8,122		—		—			8,122
Net finance costs:
Interest expense	66,889		—		—			66,889
Loss on debt extinguishment	220		—		—			220
Total finance costs	67,109		—		—			67,109
Total expenses	276,153		52,704		—			328,857
Earnings from operations	$	77,001	$	3,540	$	(238	)	$	80,303

For the Year ended December 31, 2018	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	175,609	$	—	$	—		$	175,609
Maintenance reserve revenue	87,009		—		—			87,009
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Other revenue	7,579		1,727		(1,662		)	7,644
Total revenue	307,263		42,746		(1,662		)	348,347
Expenses:
Depreciation and amortization expense	76,502		312		—			76,814
Cost of spare parts and equipment sales	28,290		32,735		—			61,025
Write-down of equipment	10,651		—		—			10,651
General and administrative	67,608		4,413		—			72,021
Technical expense	11,142		—		—			11,142
Interest expense	64,220		—		—			64,220
Total expenses	258,413		37,460		—			295,873
Earnings from operations	$	48,850	$	5,286	$	(1,662	)	$	52,474

________________________

(1) Represents revenue generated between our operating segments.

	Leasing and Related Operations		Spare Parts Sales		Eliminations		Total
Total assets as of December 31, 2019	$	1,898,313	$	42,295	$	—	$	1,940,608
Total assets as of December 31, 2018	$	1,882,860	$	52,083	$	—	$	1,934,943

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Leases - Supplemental Balance Sheet Information (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
Operating lease right-of-use assets	$ 4,084
Operating lease right-of-use liabilities	$ 3,835
Weighted average remaining lease term (years)	5 years 2 months 1 day
Weighted average discount rate	4.50%

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net income	$ 66,922	$ 43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	86,236	76,814
Write-down of equipment	18,220	10,651
Stock-based compensation expenses	7,787	5,410
Amortization of deferred costs	6,364	6,403
Allowances and provisions	(272)	1,503
Gain on sale of leased equipment	(20,044)	(6,944)
Income from joint ventures	(8,578)	(3,800)
Loss (gain) on disposal of property, equipment and furnishings	42	(41)
Loss on debt extinguishment	220	0
Deferred income taxes	21,074	12,057
Changes in assets and liabilities:
Receivables	(517)	(5,925)
Distributions received from joint ventures	3,300	5,730
Inventory	29,114	12,111
Other assets	(2,519)	(3,453)
Accounts payable and accrued expenses	2,131	12,543
Maintenance reserves	22,282	21,964
Security deposits	(2,108)	3,075
Unearned revenue	661	(2,642)
Net cash provided by operating activities	230,315	188,687
Cash flows from investing activities:
Proceeds from sale of equipment (net of selling expenses)	191,891	64,429
Issuance of notes receivable	(42,857)	0
Payments received on notes receivable	4,950	0
Capital contributions to joint ventures	(5,713)	0
Purchase of equipment held for operating lease and for sale	(289,385)	(441,416)
Purchase of property, equipment and furnishings	(6,330)	(3,487)
Net cash used in investing activities	(147,444)	(380,474)
Cash flows from financing activities:
Proceeds from issuance of debt obligations	340,120	759,439
Debt issuance costs	(3,142)	(7,748)
Principal payments on debt obligations	(428,081)	(504,753)
Interest bearing security deposits	(2,092)	0
Proceeds from shares issued under stock compensation plans	335	245
Repurchase of common stock	(3,567)	(16,135)
Preferred stock dividends	(3,250)	(3,348)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475)	(1,288)
Net cash (used in) provided by financing activities	(101,152)	226,412
Increase/(Decrease) in cash, cash equivalents and restricted cash	(18,281)	34,625
Cash, cash equivalents and restricted cash at beginning of period	81,949	47,324
Cash, cash equivalents and restricted cash at end of period	63,668	81,949
Net cash paid for:
Interest	63,585	59,122
Income Taxes	222	1,073
Supplemental disclosures of non-cash activities:
Purchase of equipment held for operating lease	2,515	21,656
Transfers from Equipment held for operating lease to Equipment held for sale	10,131	0
Transfers from Equipment held for operating lease to Spare parts inventory	23,931	18,220
Transfers from Equipment held for sale to Spare parts inventory	422	26,387
Accrued preferred stock dividends	686	686
Accretion of preferred stock issuance costs	$ 84	$ 83

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Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Stock-Based Compensation Plans

Stock-Based Compensation Plans

The components of stock compensation expense were as follows:

	Year Ended December 31,
	2019		2018
	(in thousands)
2007 Stock Incentive Plan	$	4,584	$	5,353
2018 Stock Incentive Plan	3,117		—
Employee Stock Purchase Plan	86		57
Total Stock Compensation Expense	$	7,787	$	5,410

The significant stock compensation plans are described below.

The 2007 Stock Incentive Plan (the “2007 Plan”) was adopted in May 2007. Under this 2007 Plan, a total of 2,800,000 shares were authorized for stock-based compensation available in the form of either restricted stock awards (“RSAs”) or stock options. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date. As of December 31, 2019, there are no stock options outstanding under the 2007 Plan.

The 2018 Stock Incentive Plan (the “2018 Plan”) was adopted in May 2018. Under this 2018 Plan, a total of 800,000 shares were authorized for stock-based compensation, plus the number of shares remaining under the 2007 Plan and any future forfeited awards under the 2007 Plan, in the form of RSAs. The RSAs are subject to service-based vesting, typically between one and three years, where a specific period of continued employment must pass before an award vests. The expense associated with these awards is recognized on a straight-line basis over the respective vesting period, with forfeitures accounted for as they occur. For any vesting tranche of an award, the cumulative amount of compensation cost recognized is equal to the portion of the grant‑date fair value of the award tranche that is actually vested at that date.

As of December 31, 2019, the Company has granted 279,400 RSAs under the 2018 Plan and has 615,196 shares available for future issuance. The fair value of the restricted stock awards equaled the stock price at the grant date.

The following table summarizes restricted stock activity under the 2007 and 2018 Plans for the years ended December 31, 2019 and 2018:

	Number Outstanding		Weighted Average Grant Date Fair Value		Aggregate Grant Date Fair Value (in thousands)
Balance as of December 31, 2017	328,122		$	23.49	$	7,707
Shares granted	270,454		33.91		9,172
Shares forfeited	(9,900	)	32.06		(317		)
Shares vested	(170,786	)	22.25		(3,799		)
Balance as of December 31, 2018	417,890		30.54		12,763
Shares granted	279,400		42.28		11,813
Shares forfeited	(3,866	)	30.43		(118		)
Shares vested	(187,957	)	28.74		(5,402		)
Balance as of December 31, 2019	505,467		$	37.70	$	19,056

At December 31, 2019 the stock compensation expense related to the RSAs that will be recognized over the average remaining vesting period of 1.7 years totaled $12.6 million. At December 31, 2019, the intrinsic value of unvested RSAs was $29.8 million.

Under the Employee Stock Purchase Plan (“ESPP”), as amended and restated effective April 1, 2018, 325,000 shares of common stock have been reserved for issuance. Eligible employees may designate no more than 10% of their base cash compensation to be deducted each pay period for the purchase of common stock under the Purchase Plan. Participants may purchase no more than 1000 shares or $25,000 of common stock in any one calendar year. Each January 31 and July 31 shares of common stock are purchased with the employees’ payroll deductions from the immediately preceding six months at a price per share of 85% of the lesser of the market price of the common stock on the purchase date or the market price of the common stock on the date of entry into an offering period. In 2019 and 2018, 13,193 and 11,132 shares of common stock, respectively, were issued under the ESPP. The Company issues new shares through its transfer agent upon employee stock purchase. The weighted average per share fair value of the employee’s purchase rights under the Purchase Plan for the rights granted was $23.20 and  $9.42 for 2019 and 2018, respectively.

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Reportable Segments

12 Months Ended

Dec. 31, 2019

Segment Reporting [Abstract]

Reportable Segments

Reportable Segments

The Company has two reportable business segments: (i) Leasing and Related Operations which involves acquiring and leasing, primarily pursuant to operating leases, commercial aircraft, aircraft engines and other aircraft equipment and the selective purchase and resale of commercial aircraft engines and other aircraft equipment and other related businesses and (ii) Spare Parts Sales which involves the purchase and resale of after-market engine parts, whole engines, engine modules and portable aircraft components.

The Company evaluates the performance of each of the segments based on profit or loss after general and administrative expenses. While the Company believes there are synergies between the two business segments, the segments are managed separately because each requires different business strategies.

The following tables present a summary of the reportable segments (in thousands):

For the year ended December 31, 2019	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	190,690	$	—	$	—		$	190,690
Maintenance reserve revenue	108,998		—		—			108,998
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Other revenue	14,738		277		(238		)	14,777
Total revenue	353,154		56,244		(238		)	409,160
Expenses:
Depreciation and amortization expense	86,159		77		—			86,236
Cost of spare parts and equipment sales	15,241		47,406		—			62,647
Write-down of equipment	18,220		—		—			18,220
General and administrative	81,302		5,221		—			86,523
Technical expense	8,122		—		—			8,122
Net finance costs:
Interest expense	66,889		—		—			66,889
Loss on debt extinguishment	220		—		—			220
Total finance costs	67,109		—		—			67,109
Total expenses	276,153		52,704		—			328,857
Earnings from operations	$	77,001	$	3,540	$	(238	)	$	80,303

For the Year ended December 31, 2018	Leasing and Related Operations		Spare Parts Sales		Eliminations (1)			Total
Revenue:
Lease rent revenue	$	175,609	$	—	$	—		$	175,609
Maintenance reserve revenue	87,009		—		—			87,009
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Other revenue	7,579		1,727		(1,662		)	7,644
Total revenue	307,263		42,746		(1,662		)	348,347
Expenses:
Depreciation and amortization expense	76,502		312		—			76,814
Cost of spare parts and equipment sales	28,290		32,735		—			61,025
Write-down of equipment	10,651		—		—			10,651
General and administrative	67,608		4,413		—			72,021
Technical expense	11,142		—		—			11,142
Interest expense	64,220		—		—			64,220
Total expenses	258,413		37,460		—			295,873
Earnings from operations	$	48,850	$	5,286	$	(1,662	)	$	52,474

________________________

(1) Represents revenue generated between our operating segments.

	Leasing and Related Operations		Spare Parts Sales		Eliminations		Total
Total assets as of December 31, 2019	$	1,898,313	$	42,295	$	—	$	1,940,608
Total assets as of December 31, 2018	$	1,882,860	$	52,083	$	—	$	1,934,943

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Organization and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

Organization

Willis Lease Finance Corporation with its subsidiaries is a provider of aviation services whose primary focus is providing operating leases of commercial aircraft, aircraft engines and other aircraft-related equipment to air carriers, manufacturers and overhaul/repair facilities worldwide. The Company also engages in the selective purchase and resale of commercial aircraft engines.

Willis Aeronautical Services, Inc. (“Willis Aero”) is a wholly-owned subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines.

Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned subsidiary whose primary focus is the engine management and consulting business.

Willis Engine Securitization Trust II (“WEST II” or the “WEST II Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an asset-backed securitization (“ABS”), of which the Company is the sole beneficiary. WEST II is a variable interest entity (“VIE”) which the Company owns 100% of the interest and consolidates in its financial statements.

In August 2017, the Company closed on Willis Engine Securitization Trust III (“WEST III” or the “WEST III Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST III Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $293.7 million and the Series B Notes in an aggregate principal amount of $42.0 million. The Company used these funds, net of transaction expenses, to pay off part of its revolving credit facility. WEST III is a VIE which the Company owns 100% of the interest and consolidates in its financial statements. 

In August 2018, the Company closed on Willis Engine Securitization Trust IV (“WEST IV” or the “WEST IV Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST IV Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $326.8 million and the Series B Notes in an aggregate principal amount of $46.7 million. WEST IV is a VIE which the Company owns 100% of the interest and consolidates in its financial statements.

Principal and interest on the WEST II, III and IV Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the respective indenture agreements.

The WEST II, III and IV Notes are secured by, among other things, the respective ABS’s direct and indirect interests in a portfolio of assets. The WEST II, WEST III and WEST IV Notes have scheduled amortizations and are payable solely from revenue received from the engines and the engine leases, after payment of certain expenses of the respective ABS. The assets of WEST II, WEST III and WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to the respective ABS. WEST II, WEST III and WEST IV are consolidated for financial statement presentation purposes, with the respective assets and liabilities on the Company's balance sheet. The ABS’ ability to make distributions and pay dividends to the Company is subject to the prior payments of its debt and other obligations and maintenance of adequate reserves and capital. Under each ABS, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of the maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

Additionally, in connection with WEST II, WEST III and WEST IV, the Company entered into servicing agreements and administrative agency agreements to provide certain engine, lease management and reporting functions in return for fees based on a percentage of collected lease revenues and asset sales. Because WEST II, WEST III and WEST IV are consolidated for financial statement reporting purposes, all fees eliminate upon consolidation.

Basis of Presentation and Principles of Consolidation

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WLFC and its wholly owned subsidiaries, including VIEs where the Company is the primary beneficiary, in accordance with consolidation guidance. The Company evaluates all entities in

which it has an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a variable interest entity the Company consolidates the financial statements of that entity if it is the primary beneficiary of the entities’ activities.  If the entity is a voting interest entity the Company consolidates the entity when it has a majority of voting interests. Intercompany transactions and balances have been eliminated in consolidation. 

The condensed parent company financial statements should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes herein. 

Revenue Recognition

Revenue Recognition

Leasing revenue

Revenue from leasing of engines, aircraft and related parts and equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Revenue is not recognized when cash collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Under the terms of some of the Company’s leases, the lessees pay use fees (also known as maintenance reserves) to the Company based on usage of the leased asset, which are designed to cover expected future maintenance costs. Some of these amounts are reimbursable to the lessee if they make specifically defined maintenance expenditures. Use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee. Use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee,  the lease terminates, or the obligation to reimburse the lessee for such reserves ceases to exist, at which time they are recognized in revenue as maintenance reserve revenue.

Certain lessees may be significantly delinquent in their rental payments and may default on their lease obligations. As of December 31, 2019, the Company had an aggregate of approximately $2.7 million in lease rent and $3.8 million in maintenance reserve receivables more than 30 days past due. Inability to collect receivables or to repossess engines or other leased equipment in the event of a default by a lessee could have a material adverse effect on the Company. The Company estimates an allowance for doubtful accounts for receivables it does not consider fully collectible. The allowance for doubtful accounts includes the following: (1) specific reserves for receivables which are impaired for which management believes full collection is doubtful; and (2) a general reserve for estimated losses based on historical experience. 

No customer accounted for greater than 10% of total lease rent revenue in 2019 and 2018.

Gain on sale of leased equipment  

The Company regularly sells equipment from its lease portfolio. This equipment may or may not be subject to a lease at the time of sale. The net gain or loss on such sales is recognized as revenue and consists of proceeds associated with the sale less the net book value of the asset sold and any direct costs associated with the sale. To the extent that deposits associated with the equipment are not included in the sale, any such amount is included in the calculation of gain or loss.

Spare parts sales

The Spare Parts Sales reportable segment primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or the Company’s leasing operations. The parts are sold at a fixed price with no right of return. In determining the performance obligation, management has identified the promise in the contract to be the shipment of the spare parts to the customer.  Title passes to the buyer when the goods are shipped, and the buyer is responsible for any loss in transit, and the Company has a legal right to payment for the spare parts. Management has determined that physical acceptance of the spare parts to be a formality in accordance with Accounting Standards Codification (“ASC”) 606-10-5-86. 

The spare parts transaction price is a fixed dollar amount and is stated on each purchase order for a fixed amount by total number of parts. Spare parts revenue is based on a set price for a set number of parts as defined in the purchase order. The performance obligation is completed once the parts have shipped and, as a result, all of the transaction price is allocated to that performance obligation. Management has determined that it is appropriate for the Company to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) under ASC 606. Additionally, there is no impact to the timing and amounts of revenue recognized for spare parts sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Equipment Sales

Equipment sales represent the selective purchase and resale of commercial aircraft engines and other aircraft equipment. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, condition of the asset, bill of sale, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in

the equipment sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. As such, management has identified the transfer of the asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Equipment sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. Therefore, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Managed Services

Managed services revenue predominantly represents fleet management and engine storage services which may be combined on a single contract with a customer. Fleet management services are performed for a stated fixed fee as agreed upon in the services agreement. Engine storage services are for a fixed monthly fee. For a contract containing more than one performance obligation, the allocation of the transaction price is generally performed on the basis of the relative stand-alone selling price of each distinct good or service in the contract. As each of the services provided within the contract have separate prices, the Company allocates the price to its related performance obligation described above. Management has determined each of the revenue elements contain performance obligations that are satisfied over time and therefore recognizes revenue over time in accordance with ASC 606-10-25-27. The Company utilizes the percentage-of-completion method (input method) for recognizing fleet management services and will calculate revenues based on labor hours incurred. Additionally, as is required by ASC 606-10-25-35, as circumstances change over time, the Company will update its measure of progress to reflect any changes in the outcome of the performance obligation. Engine storage services are recognized on a monthly basis utilizing the input method of days passed. Therefore, there is no impact to the timing and amounts of revenue recognized for managed services related to the implementation of ASC 606 upon adoption on January 1, 2018.

Amounts owed for managed services are typically billed upon contract completion. At December 31, 2019, unbilled revenue was $0.8 million and the Company expects it to be fully recognized by June 30, 2020. Additionally, managed services are presented within the Other revenue line in the Consolidated Statements of Income.

Other Revenue

Other revenue consists primarily of management fee income, lease administration fees, third party consignment commissions earned, service fee revenue, interest revenue, and other discrete revenue items.

Equipment Held for Operating Lease

Equipment Held for Operating Lease

Aircraft assets held for operating lease are stated at cost, less accumulated depreciation. Certain costs incurred in connection with the acquisition of aircraft assets are capitalized as part of the cost of such assets. Major overhauls paid for by the Company, which improve functionality or extend the original useful life, are capitalized and depreciated over the shorter of the estimated period to the next overhaul (“deferral method”) or the remaining useful life of the equipment. The Company does not accrue for planned major maintenance. The cost of overhauls of aircraft assets under long term leases, for which the lessee is responsible for maintenance during the period of the lease, are paid for by the lessee or from reimbursable maintenance reserves paid to the Company in accordance with the lease, and are not capitalized.

Based on specific aspects of the equipment, the Company generally depreciates engines on a straight-line basis over a 15-year period from the acquisition date to a 55% residual value. This methodology is believed to accurately reflect the Company’s typical holding period for the engine assets and that the residual value assumption reasonably approximates the selling price of the assets 15 years from the date of acquisition. The typical 15 year holding period is the estimated useful life of the Company’s engines based on its business model and plans, and represents how long the Company anticipates holding a newly acquired engine. The technical useful life of a new engine can be in excess of 25 years. The Company reviews the useful life and residual values of all engines periodically as demand changes to accurately depreciate the cost of equipment over the useful life of the engines.

The aircraft and airframes owned by the Company are depreciated on a straight-line basis over an estimated useful life of 13 to 20 years to a 15% to 17% residual value. The other leased parts and related equipment owned by the Company are depreciated on a straight-line basis over an estimated useful life of 14 to 15 years to a 25% residual value.

The useful life of older generation engines and aircraft may be significantly less based upon the technical status of the engine, as well as supply and demand factors. For these older generation engines and aircraft, the remaining useful life and the remaining expected holding period are typically the same. For older generation engines or aircraft that are unlikely to be repaired at the end of the current expected useful lives, the Company depreciates the engines or aircraft over their estimated lives to a residual value based on an estimate of the wholesale value of the parts after disassembly. As of December 31, 2019, 47 engines having a net book value of $51.1 million were depreciated under this policy with estimated useful lives ranging from 1 to 79 months. The Company adjusts its estimates annually

for these older generation assets, including updating estimates of an engine’s or aircraft’s remaining operating life as well as future residual value expected from part-out based on the current technical status of the engine or aircraft.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets to be disposed are reported at the lower of carrying amount or fair value less cost to sell. Impairment is identified by review of appraisals or by comparison of undiscounted forecasted cash flows, including estimated sales proceeds, over the life of the asset with the assets’ book value. If the undiscounted forecasted cash flows are less than the book value, the asset is written down to its fair value. Fair value is determined per individual asset by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors considered relevant by the Company. The Company conducts a formal annual review of the carrying value of long-lived assets and also evaluates assets during the year if a triggering event is identified indicating impairment is possible.

Equipment Held for Sale

Equipment Held for Sale

Equipment held for sale includes engines being marketed for sale as well as third party consigned assets. The assets to be disposed are reported at the lower of carrying amount or fair value less costs to sell.

Debt Issuance Costs and Related Fees

Debt Issuance Costs and Related Fees

Fees paid in order to secure debt are capitalized, included in Debt obligations on the Consolidated Balance Sheets, and amortized over the life of the related loan using the effective interest method.

Interest Rate Hedging

Interest Rate Hedging

The Company enters into various derivative instruments periodically to mitigate the exposure on variable rate borrowings. The derivative instruments are fixed-rate interest swaps that are recorded at fair value as either an asset or liability.

While substantially all of the Company’s derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria have been met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective. The hedging instrument’s effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. All of the transactions that the Company has designated as hedges are cash flow hedges. The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings. The ineffective portion of the hedges is recorded in earnings in the current period.

Income Taxes

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs (see Note 8).

The Company files income tax returns in various states and countries which may have different statutes of limitations. The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Such adjustments have historically been minimal and immaterial to our financial results.

Property, Equipment and Furnishings

Property, Equipment and Furnishings

Property, equipment and furnishings are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to thirty-nine years. Leasehold improvements are recorded at cost and depreciated by the straight-line method over the shorter of the lease term or useful life of the leasehold.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers highly liquid investments readily convertible into known amounts of cash, with original maturities of 90 days or less, as cash equivalents.

Restricted Cash

Restricted Cash

The Company has certain bank accounts that are subject to restrictions in connection with its WEST II, WEST III and WEST IV borrowings and a note payable. Under these borrowings, cash is collected in restricted accounts, which are used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and some or all of the lease security deposits are accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. Under WEST II, cash from maintenance reserve payments is held in a restricted cash account equal to the maintenance obligations projected for the subsequent six months, and is subject to a minimum balance of $9.0 million. Under WEST III and WEST IV, cash from maintenance reserve payments is held in a restricted cash account equal to a portion of the maintenance obligations projected for the subsequent nine months, and is subject to a minimum balance of $10.0 million. Under WEST II, all security deposits are held in a restricted cash account until the end of the lease. Under WEST III and WEST IV, security deposits are held in a restricted cash account equal to a portion of the security deposits for leases scheduled to terminate over the subsequent four months, subject to a minimum balance of $1.0 million. Provided lease return conditions have been met, these deposits will be returned to the lessee. To the extent return conditions are not met, these deposits may be retained by the Company.

Spare Parts Inventory

Spare Parts Inventory

Spare parts inventory consists of spare aircraft and engine parts purchased either directly by Willis Aero and also engines removed from the lease portfolio to be parted out. Spare parts inventory is stated at lower of cost or net realizable value. An impairment charge for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value.

Intangible Assets

Intangible Assets

Intangible assets include customer relationships and goodwill at Willis Asset Management. Intangible assets are accounted for in accordance with ASC 350, “Intangibles — Goodwill and Other.”

Customer relationships are amortized on a straight line basis over their estimated useful life of five years. The Company has no intangible assets with indefinite useful lives. Goodwill is assessed for impairment annually.

Other assets

Other assets

Other assets typically include prepaid purchase deposits and other prepaid expenses. As of December 31, 2019 and 2018, other assets included prepaid deposits of $10.6 million and $1.9 million, respectively, relating to commitments to purchase equipment.

Management Estimates

Management Estimates

These financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates estimates on an ongoing basis, including those related to residual values, estimated asset lives, impairments and bad debts. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes that the accounting policies on revenue recognition, maintenance reserves and expenditures, useful life of equipment, asset residual values, asset impairment and allowance for doubtful accounts are critical to the results of operations.

If the useful lives or residual values are lower than those estimated, upon sale of the asset a loss may be realized. Significant management judgment is required in the forecasting of future operating results, which are used in the preparation of projected undiscounted cash-flows and should different conditions prevail, material impairment write-downs may occur.

Earnings per share information

Earnings per share information

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of shares

outstanding, adjusted for the dilutive effect of unvested restricted stock awards (“RSAs”). See Note 10 for more information on the computation of earnings per share.

Investments

Investments

The Company’s investments are joint ventures, where it owns 50% of the equity of the ventures and are accounted for using the equity method of accounting. The investments are recorded at the amount invested plus or minus our 50% share of net income or loss, less any distributions or return of capital received from the entities.

Stock Based Compensation

Stock Based Compensation

The Company recognizes stock based compensation expense in the financial statements for share-based awards based on the grant-date fair value of those awards. Stock based compensation expense is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term. Forfeitures are accounted for as they occur.

Initial Direct Costs associated with Leases

Initial Direct Costs associated with LeasesThe Company accounts for the initial direct costs, including sales commissions and legal fees, incurred in obtaining a new lease by deferring and amortizing those costs over the term of the lease. The amortization of these costs is recorded under general and administrative expenses in the Consolidated Statements of Income.

Maintenance Rights

Maintenance Rights

The Company identifies, measures and accounts for maintenance right assets and liabilities associated with acquisitions of equipment with in-place leases. A maintenance right asset represents the fair value of the contractual right under a lease to receive equipment in an improved maintenance condition as compared to the maintenance condition on the acquisition date. A maintenance right liability represents the Company's obligation to pay the lessee for the difference between the lease-end contractual maintenance condition of the equipment and the actual maintenance condition of the equipment on the acquisition date. The equipment condition at the end of the lease term may result in either overhaul work being performed by the lessee to meet the required return condition or a financial settlement.

When a capital event is performed on the equipment by the lessee, which satisfies their maintenance right obligation, the maintenance rights are added to the equipment basis and depreciated to the next capital event. When equipment is sold before the end of the pre-existing lease, the maintenance rights are applied against any accumulated maintenance reserves, if paid by the lessee, and the remaining balance is applied to the disposition gain or loss. When a lease terminates, an end of lease true-up is performed and the maintenance right is applied against the accumulated maintenance reserves or, for non-reserve lessees the final settlement payment, and any remaining net maintenance right is recorded in the income statement.

Foreign Currency Translation

Foreign Currency Translation

The Company’s foreign investments have been converted at rates of exchange in effect at the balance sheet dates. The changes in exchange rates in our foreign investments reported under the equity method are included in stockholders’ equity as accumulated other comprehensive income.

Risk Concentrations

Risk Concentrations

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash deposits, lease receivables and interest rate swaps.

The Company places its cash deposits with financial institutions and other credit-worthy institutions, such as money market funds, and limits the amount of credit exposure to any one party. Management opts for security of principal as opposed to yield. Concentrations of credit risk with respect to lease receivables are limited due to the large number of customers comprising the customer base, and their dispersion across different geographic areas. Some lessees are required to make payments for maintenance reserves at the end of the lease however, this risk is considered limited due to the relatively few lessees which have this provision in the lease. The Company enters into interest rate swap agreements with counterparties that are investment grade financial institutions.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted by the Company

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) that amends the accounting guidance on leases for both lessees and lessors. The new standard

establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, as well as certain practical expedients related to land easements and lessor accounting.

The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provided an additional and optional transition method that allowed entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopted the new leases standard would continue to be in accordance with ASC Topic 840 if the optional transition method is elected. The Company adopted the standard using the optional transition method with no restatement of comparative periods and a cumulative effect adjustment recognized as of the date of adoption.

Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately $4.5 million and $4.3 million, respectively, as of January 1, 2019. The cumulative effect adjustment to retained earnings as of January 1, 2019 was $0.2 million. The standard did not materially impact our consolidated financial statements. 

As part of the implementation process, the Company assessed its lease arrangements and evaluated practical expedients and accounting policy elections to meet the reporting requirements of this standard. The Company also evaluated the changes in controls and processes that were necessary to implement the new standard, and no material changes were required. The Company elected the ‘package of practical expedients’ which permitted us not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to WLFC. 

Under ASC 842, a lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases. Furthermore, the Company will assess on an ongoing basis, the updated guidance provided for sale leaseback transactions and whether failed sale leaseback accounting treatment is triggered. As lessor, the Company's leases in place upon adoption of ASC 842 remained as operating leases under the new standard. In addition, due to the new standard’s narrowed definition of initial direct costs, the Company expenses as incurred, certain lease origination costs that were previously capitalized as initial direct costs and amortized to expense over the lease term. 

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, the Company did not recognize ROU assets or lease liabilities, including for existing short-term leases. The Company also elected the practical expedient to not separate lease and non-lease components for the majority of its leases as both lessee and lessor.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU is targeted at simplifying the application of hedge accounting and aims at aligning the recognition and presentation of the effects of hedge instruments and hedge items. This guidance became effective for the Company on January 1, 2019 and it did not result in an adjustment to the opening balance of retained earnings for the Company's existing cash flow hedge. Additionally, the presentation and disclosure aspect of ASU 2017-12 was applied on a prospective basis within Note 7.

In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The Company adopted this guidance effective January 1, 2019 and it did not materially impact our consolidated financial statements.

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update).” The ASU clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC's regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance and it did not materially impact our consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted by the Company

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses of Financial Instruments” (“ASU 2016-13”). ASU 2016-13 revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. ASU 2016-13 affects trade receivables, debt securities, net investments in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief.” This ASU provides targeted transition relief allowing for an irrevocable one-time election upon adoption of the new standard to measure financial assets previously measured at amortized cost using the fair value option. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates” and ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” ASU 2019-10 amends effective dates for public business entities not meeting the definition of an SEC filer. ASU 2019-11 clarifies and addresses stakeholders’ specific issues around certain aspects of the amendments in ASU 2016-13. The amendments in this ASU are effective for the Company on January 1, 2020, with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2020.

While the Company continues to evaluate certain aspects of the new standard, including those still being revised by the FASB, the Company does not expect the new standard will have a material effect on its financial statements, but it does expect significant new disclosures and controls in order to comply with the new standard requirements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves consistent application of and simplifies Generally Accepted Accounting Principles (“GAAP”) for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company plans to adopt this guidance effective January 1, 2021 and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

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Debt Obligations - Schedule of Principal Outstanding (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Long Term Debt [Line Items]
2020	$ 56,118
2021	56,415
2022 (includes $158.4 million outstanding on WEST II Series A 2012 term note)	207,994
2023	34,018
2024 (includes $397.0 million outstanding on revolving credit facility)	430,185
Thereafter	485,739
Total	1,270,469	$ 1,358,430
WEST II
Long Term Debt [Line Items]
2022 (includes $158.4 million outstanding on WEST II Series A 2012 term note)	158,400
Total	211,572	$ 237,847
Revolving credit facility
Long Term Debt [Line Items]
2024 (includes $397.0 million outstanding on revolving credit facility)	$ 397,000

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Fair Value Measurements - Recurring Basis (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Oct. 31, 2019	Dec. 31, 2016
Fair Value, Recurring | Level 2
Assets and (Liabilities) at Fair Value
Liabilities at fair value	$ 1.7
Assets at fair value		$ 1.7
Interest rate contracts
Assets and (Liabilities) at Fair Value
Derivative, notional amount			$ 100.0	$ 100.0
Interest rate contracts | Fair Value, Recurring | Level 2
Assets and (Liabilities) at Fair Value
Gain (loss) recorded to net finance costs	$ 0.7	$ (0.4)

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Leases - Additional Information (Details)	Dec. 31, 2019
Minimum
Lessee, Lease, Description [Line Items]
Remaining lease terms	1 year
Options to renew lease term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Remaining lease terms	7 years
Options to renew lease term	5 years

XML

Organization and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Summary of Significant Accounting Policies

Organization and Summary of Significant Accounting Policies

Unless the context requires otherwise, references to the “Company”, “WLFC”, “we”, “us” or “our” in this Annual Report on Form 10-K refer to Willis Lease Finance Corporation and its subsidiaries.

(a) Organization

Willis Lease Finance Corporation with its subsidiaries is a provider of aviation services whose primary focus is providing operating leases of commercial aircraft, aircraft engines and other aircraft-related equipment to air carriers, manufacturers and overhaul/repair facilities worldwide. The Company also engages in the selective purchase and resale of commercial aircraft engines.

Willis Aeronautical Services, Inc. (“Willis Aero”) is a wholly-owned subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft and engines.

Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned subsidiary whose primary focus is the engine management and consulting business.

Willis Engine Securitization Trust II (“WEST II” or the “WEST II Notes”) is a bankruptcy remote special purpose vehicle which was established for the purpose of financing aircraft engines through an asset-backed securitization (“ABS”), of which the Company is the sole beneficiary. WEST II is a variable interest entity (“VIE”) which the Company owns 100% of the interest and consolidates in its financial statements.

In August 2017, the Company closed on Willis Engine Securitization Trust III (“WEST III” or the “WEST III Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST III Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $293.7 million and the Series B Notes in an aggregate principal amount of $42.0 million. The Company used these funds, net of transaction expenses, to pay off part of its revolving credit facility. WEST III is a VIE which the Company owns 100% of the interest and consolidates in its financial statements. 

In August 2018, the Company closed on Willis Engine Securitization Trust IV (“WEST IV” or the “WEST IV Notes”), a bankruptcy remote special purpose vehicle, which was established for the purpose of financing aircraft engines through an ABS, of which the Company is the sole beneficiary. The WEST IV Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $326.8 million and the Series B Notes in an aggregate principal amount of $46.7 million. WEST IV is a VIE which the Company owns 100% of the interest and consolidates in its financial statements.

Principal and interest on the WEST II, III and IV Notes are payable monthly to the extent of available cash in accordance with a priority of payments included in the respective indenture agreements.

The WEST II, III and IV Notes are secured by, among other things, the respective ABS’s direct and indirect interests in a portfolio of assets. The WEST II, WEST III and WEST IV Notes have scheduled amortizations and are payable solely from revenue received from the engines and the engine leases, after payment of certain expenses of the respective ABS. The assets of WEST II, WEST III and WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to the respective ABS. WEST II, WEST III and WEST IV are consolidated for financial statement presentation purposes, with the respective assets and liabilities on the Company's balance sheet. The ABS’ ability to make distributions and pay dividends to the Company is subject to the prior payments of its debt and other obligations and maintenance of adequate reserves and capital. Under each ABS, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of the maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively.

Additionally, in connection with WEST II, WEST III and WEST IV, the Company entered into servicing agreements and administrative agency agreements to provide certain engine, lease management and reporting functions in return for fees based on a percentage of collected lease revenues and asset sales. Because WEST II, WEST III and WEST IV are consolidated for financial statement reporting purposes, all fees eliminate upon consolidation.

(b)Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of WLFC and its wholly owned subsidiaries, including VIEs where the Company is the primary beneficiary, in accordance with consolidation guidance. The Company evaluates all entities in

which it has an economic interest firstly to determine whether for accounting purposes the entity is a variable interest entity or voting interest entity. If the entity is a variable interest entity the Company consolidates the financial statements of that entity if it is the primary beneficiary of the entities’ activities.  If the entity is a voting interest entity the Company consolidates the entity when it has a majority of voting interests. Intercompany transactions and balances have been eliminated in consolidation. 

The condensed parent company financial statements should be read in conjunction with the Company’s consolidated financial statements and the accompanying notes herein. 

(c)Revenue Recognition

Leasing revenue

Revenue from leasing of engines, aircraft and related parts and equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Revenue is not recognized when cash collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Under the terms of some of the Company’s leases, the lessees pay use fees (also known as maintenance reserves) to the Company based on usage of the leased asset, which are designed to cover expected future maintenance costs. Some of these amounts are reimbursable to the lessee if they make specifically defined maintenance expenditures. Use fees received are recognized in revenue as maintenance reserve revenue if they are not reimbursable to the lessee. Use fees that are reimbursable are recorded as a maintenance reserve liability until they are reimbursed to the lessee,  the lease terminates, or the obligation to reimburse the lessee for such reserves ceases to exist, at which time they are recognized in revenue as maintenance reserve revenue.

Certain lessees may be significantly delinquent in their rental payments and may default on their lease obligations. As of December 31, 2019, the Company had an aggregate of approximately $2.7 million in lease rent and $3.8 million in maintenance reserve receivables more than 30 days past due. Inability to collect receivables or to repossess engines or other leased equipment in the event of a default by a lessee could have a material adverse effect on the Company. The Company estimates an allowance for doubtful accounts for receivables it does not consider fully collectible. The allowance for doubtful accounts includes the following: (1) specific reserves for receivables which are impaired for which management believes full collection is doubtful; and (2) a general reserve for estimated losses based on historical experience. 

No customer accounted for greater than 10% of total lease rent revenue in 2019 and 2018.

Gain on sale of leased equipment  

The Company regularly sells equipment from its lease portfolio. This equipment may or may not be subject to a lease at the time of sale. The net gain or loss on such sales is recognized as revenue and consists of proceeds associated with the sale less the net book value of the asset sold and any direct costs associated with the sale. To the extent that deposits associated with the equipment are not included in the sale, any such amount is included in the calculation of gain or loss.

Spare parts sales

The Spare Parts Sales reportable segment primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or the Company’s leasing operations. The parts are sold at a fixed price with no right of return. In determining the performance obligation, management has identified the promise in the contract to be the shipment of the spare parts to the customer.  Title passes to the buyer when the goods are shipped, and the buyer is responsible for any loss in transit, and the Company has a legal right to payment for the spare parts. Management has determined that physical acceptance of the spare parts to be a formality in accordance with Accounting Standards Codification (“ASC”) 606-10-5-86. 

The spare parts transaction price is a fixed dollar amount and is stated on each purchase order for a fixed amount by total number of parts. Spare parts revenue is based on a set price for a set number of parts as defined in the purchase order. The performance obligation is completed once the parts have shipped and, as a result, all of the transaction price is allocated to that performance obligation. Management has determined that it is appropriate for the Company to recognize spare parts sales at a point in time (i.e., the date the parts are shipped) under ASC 606. Additionally, there is no impact to the timing and amounts of revenue recognized for spare parts sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Equipment Sales

Equipment sales represent the selective purchase and resale of commercial aircraft engines and other aircraft equipment. The Company and customer enter into an agreement which outlines the place and date of sale, purchase price, payment terms, condition of the asset, bill of sale, and the assignment of rights and warranties from the Company to the customer. Management has identified the promise in

the equipment sale contract to be the transfer of ownership of the asset. Management believes the asset holds standalone value to the customer as it is not dependent on any other services for functionality purposes and therefore is distinct within the context of the contract and as described in ASC 606-10. As such, management has identified the transfer of the asset as the performance obligation. The transaction price is set at a fixed dollar amount per fixed quantity (number of assets) and is explicitly stated in each contract. Equipment sales revenue is based on a set price for a set number of assets, which is allocated to the performance obligation discussed above, in its entirety. The Company has determined the date of transfer to the customer to be the date the customer obtains control and title over the asset and the date which revenue is to be recognized and payment is due. Therefore, there is no impact to the timing and amounts of revenue recognized for equipment sales related to the implementation of ASC 606 upon adoption on January 1, 2018.

Managed Services

Managed services revenue predominantly represents fleet management and engine storage services which may be combined on a single contract with a customer. Fleet management services are performed for a stated fixed fee as agreed upon in the services agreement. Engine storage services are for a fixed monthly fee. For a contract containing more than one performance obligation, the allocation of the transaction price is generally performed on the basis of the relative stand-alone selling price of each distinct good or service in the contract. As each of the services provided within the contract have separate prices, the Company allocates the price to its related performance obligation described above. Management has determined each of the revenue elements contain performance obligations that are satisfied over time and therefore recognizes revenue over time in accordance with ASC 606-10-25-27. The Company utilizes the percentage-of-completion method (input method) for recognizing fleet management services and will calculate revenues based on labor hours incurred. Additionally, as is required by ASC 606-10-25-35, as circumstances change over time, the Company will update its measure of progress to reflect any changes in the outcome of the performance obligation. Engine storage services are recognized on a monthly basis utilizing the input method of days passed. Therefore, there is no impact to the timing and amounts of revenue recognized for managed services related to the implementation of ASC 606 upon adoption on January 1, 2018.

Amounts owed for managed services are typically billed upon contract completion. At December 31, 2019, unbilled revenue was $0.8 million and the Company expects it to be fully recognized by June 30, 2020. Additionally, managed services are presented within the Other revenue line in the Consolidated Statements of Income.

Other Revenue

Other revenue consists primarily of management fee income, lease administration fees, third party consignment commissions earned, service fee revenue, interest revenue, and other discrete revenue items.

(d)Equipment Held for Operating Lease

Aircraft assets held for operating lease are stated at cost, less accumulated depreciation. Certain costs incurred in connection with the acquisition of aircraft assets are capitalized as part of the cost of such assets. Major overhauls paid for by the Company, which improve functionality or extend the original useful life, are capitalized and depreciated over the shorter of the estimated period to the next overhaul (“deferral method”) or the remaining useful life of the equipment. The Company does not accrue for planned major maintenance. The cost of overhauls of aircraft assets under long term leases, for which the lessee is responsible for maintenance during the period of the lease, are paid for by the lessee or from reimbursable maintenance reserves paid to the Company in accordance with the lease, and are not capitalized.

Based on specific aspects of the equipment, the Company generally depreciates engines on a straight-line basis over a 15-year period from the acquisition date to a 55% residual value. This methodology is believed to accurately reflect the Company’s typical holding period for the engine assets and that the residual value assumption reasonably approximates the selling price of the assets 15 years from the date of acquisition. The typical 15 year holding period is the estimated useful life of the Company’s engines based on its business model and plans, and represents how long the Company anticipates holding a newly acquired engine. The technical useful life of a new engine can be in excess of 25 years. The Company reviews the useful life and residual values of all engines periodically as demand changes to accurately depreciate the cost of equipment over the useful life of the engines.

The aircraft and airframes owned by the Company are depreciated on a straight-line basis over an estimated useful life of 13 to 20 years to a 15% to 17% residual value. The other leased parts and related equipment owned by the Company are depreciated on a straight-line basis over an estimated useful life of 14 to 15 years to a 25% residual value.

The useful life of older generation engines and aircraft may be significantly less based upon the technical status of the engine, as well as supply and demand factors. For these older generation engines and aircraft, the remaining useful life and the remaining expected holding period are typically the same. For older generation engines or aircraft that are unlikely to be repaired at the end of the current expected useful lives, the Company depreciates the engines or aircraft over their estimated lives to a residual value based on an estimate of the wholesale value of the parts after disassembly. As of December 31, 2019, 47 engines having a net book value of $51.1 million were depreciated under this policy with estimated useful lives ranging from 1 to 79 months. The Company adjusts its estimates annually

for these older generation assets, including updating estimates of an engine’s or aircraft’s remaining operating life as well as future residual value expected from part-out based on the current technical status of the engine or aircraft.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets to be disposed are reported at the lower of carrying amount or fair value less cost to sell. Impairment is identified by review of appraisals or by comparison of undiscounted forecasted cash flows, including estimated sales proceeds, over the life of the asset with the assets’ book value. If the undiscounted forecasted cash flows are less than the book value, the asset is written down to its fair value. Fair value is determined per individual asset by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors considered relevant by the Company. The Company conducts a formal annual review of the carrying value of long-lived assets and also evaluates assets during the year if a triggering event is identified indicating impairment is possible. Such annual review resulted in an impairment charge of $6.4 million and $5.3 million in 2019 and 2018, respectively (included in “Write-down of equipment” in the Consolidated Statements of Income). 

(e)Equipment Held for Sale

Equipment held for sale includes engines being marketed for sale as well as third party consigned assets. The assets to be disposed are reported at the lower of carrying amount or fair value less costs to sell.

(f)Debt Issuance Costs and Related Fees

Fees paid in order to secure debt are capitalized, included in Debt obligations on the Consolidated Balance Sheets, and amortized over the life of the related loan using the effective interest method.

(g)Interest Rate Hedging

The Company enters into various derivative instruments periodically to mitigate the exposure on variable rate borrowings. The derivative instruments are fixed-rate interest swaps that are recorded at fair value as either an asset or liability.

While substantially all of the Company’s derivative transactions are entered into for the purposes described above, hedge accounting is only applied where specific criteria have been met and it is practicable to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and it must be highly effective. The hedging instrument’s effectiveness is assessed utilizing regression analysis at the inception of the hedge and on at least a quarterly basis throughout its life. All of the transactions that the Company has designated as hedges are cash flow hedges. The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings. The ineffective portion of the hedges is recorded in earnings in the current period.

(h)Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. The effect on deferred taxes of a change in the tax rates is recognized in income in the period that includes the enactment date.

The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs (see Note 8).

The Company files income tax returns in various states and countries which may have different statutes of limitations. The Company records penalties and accrued interest related to uncertain tax positions in income tax expense. Such adjustments have historically been minimal and immaterial to our financial results.

(i)Property, Equipment and Furnishings

Property, equipment and furnishings are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to thirty-nine years. Leasehold improvements are recorded at cost and depreciated by the straight-line method over the shorter of the lease term or useful life of the leasehold.

(j)Cash and Cash Equivalents

The Company considers highly liquid investments readily convertible into known amounts of cash, with original maturities of 90 days or less, as cash equivalents.

(k)Restricted Cash

The Company has certain bank accounts that are subject to restrictions in connection with its WEST II, WEST III and WEST IV borrowings and a note payable. Under these borrowings, cash is collected in restricted accounts, which are used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and some or all of the lease security deposits are accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. Under WEST II, cash from maintenance reserve payments is held in a restricted cash account equal to the maintenance obligations projected for the subsequent six months, and is subject to a minimum balance of $9.0 million. Under WEST III and WEST IV, cash from maintenance reserve payments is held in a restricted cash account equal to a portion of the maintenance obligations projected for the subsequent nine months, and is subject to a minimum balance of $10.0 million. Under WEST II, all security deposits are held in a restricted cash account until the end of the lease. Under WEST III and WEST IV, security deposits are held in a restricted cash account equal to a portion of the security deposits for leases scheduled to terminate over the subsequent four months, subject to a minimum balance of $1.0 million. Provided lease return conditions have been met, these deposits will be returned to the lessee. To the extent return conditions are not met, these deposits may be retained by the Company.

(l)Spare Parts Inventory

Spare parts inventory consists of spare aircraft and engine parts purchased either directly by Willis Aero and also engines removed from the lease portfolio to be parted out. Spare parts inventory is stated at lower of cost or net realizable value. An impairment charge for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations and salvage value.

(m)Intangible Assets

Intangible assets include customer relationships and goodwill at Willis Asset Management. Intangible assets are accounted for in accordance with ASC 350, “Intangibles — Goodwill and Other.”

Customer relationships are amortized on a straight line basis over their estimated useful life of five years. The Company has no intangible assets with indefinite useful lives. Goodwill is assessed for impairment annually.

(n)Other assets

Other assets typically include prepaid purchase deposits and other prepaid expenses. As of December 31, 2019 and 2018, other assets included prepaid deposits of $10.6 million and $1.9 million, respectively, relating to commitments to purchase equipment.

(o)Management Estimates

These financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States.

The preparation of consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management evaluates estimates on an ongoing basis, including those related to residual values, estimated asset lives, impairments and bad debts. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes that the accounting policies on revenue recognition, maintenance reserves and expenditures, useful life of equipment, asset residual values, asset impairment and allowance for doubtful accounts are critical to the results of operations.

If the useful lives or residual values are lower than those estimated, upon sale of the asset a loss may be realized. Significant management judgment is required in the forecasting of future operating results, which are used in the preparation of projected undiscounted cash-flows and should different conditions prevail, material impairment write-downs may occur.

(p)Earnings per share information

Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of shares

outstanding, adjusted for the dilutive effect of unvested restricted stock awards (“RSAs”). See Note 10 for more information on the computation of earnings per share.

(q)Investments

The Company’s investments are joint ventures, where it owns 50% of the equity of the ventures and are accounted for using the equity method of accounting. The investments are recorded at the amount invested plus or minus our 50% share of net income or loss, less any distributions or return of capital received from the entities.

(r)Stock Based Compensation

The Company recognizes stock based compensation expense in the financial statements for share-based awards based on the grant-date fair value of those awards. Stock based compensation expense is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term. Forfeitures are accounted for as they occur.

(s)Initial Direct Costs associated with Leases

The Company accounts for the initial direct costs, including sales commissions and legal fees, incurred in obtaining a new lease by deferring and amortizing those costs over the term of the lease. The amortization of these costs is recorded under general and administrative expenses in the Consolidated Statements of Income. The amounts amortized were $2.0 million and $1.9 million for the years ended December 31, 2019 and 2018, respectively.

(t)Maintenance Rights

The Company identifies, measures and accounts for maintenance right assets and liabilities associated with acquisitions of equipment with in-place leases. A maintenance right asset represents the fair value of the contractual right under a lease to receive equipment in an improved maintenance condition as compared to the maintenance condition on the acquisition date. A maintenance right liability represents the Company's obligation to pay the lessee for the difference between the lease-end contractual maintenance condition of the equipment and the actual maintenance condition of the equipment on the acquisition date. The equipment condition at the end of the lease term may result in either overhaul work being performed by the lessee to meet the required return condition or a financial settlement.

When a capital event is performed on the equipment by the lessee, which satisfies their maintenance right obligation, the maintenance rights are added to the equipment basis and depreciated to the next capital event. When equipment is sold before the end of the pre-existing lease, the maintenance rights are applied against any accumulated maintenance reserves, if paid by the lessee, and the remaining balance is applied to the disposition gain or loss. When a lease terminates, an end of lease true-up is performed and the maintenance right is applied against the accumulated maintenance reserves or, for non-reserve lessees the final settlement payment, and any remaining net maintenance right is recorded in the income statement.

(u)Foreign Currency Translation

The Company’s foreign investments have been converted at rates of exchange in effect at the balance sheet dates. The changes in exchange rates in our foreign investments reported under the equity method are included in stockholders’ equity as accumulated other comprehensive income.

(v)Risk Concentrations

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash deposits, lease receivables and interest rate swaps.

The Company places its cash deposits with financial institutions and other credit-worthy institutions, such as money market funds, and limits the amount of credit exposure to any one party. Management opts for security of principal as opposed to yield. Concentrations of credit risk with respect to lease receivables are limited due to the large number of customers comprising the customer base, and their dispersion across different geographic areas. Some lessees are required to make payments for maintenance reserves at the end of the lease however, this risk is considered limited due to the relatively few lessees which have this provision in the lease. The Company enters into interest rate swap agreements with counterparties that are investment grade financial institutions.

(w)Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted by the Company

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) that amends the accounting guidance on leases for both lessees and lessors. The new standard

establishes a right-of-use (“ROU”) model that requires a lessee to record an ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The FASB also subsequently issued amendments to the standard, including providing an additional and optional transition method to adopt the new standard, as well as certain practical expedients related to land easements and lessor accounting.

The accounting standard update originally required the use of a modified retrospective approach reflecting the application of the standard to leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements with the option to elect certain practical expedients. A subsequent amendment to the standard provided an additional and optional transition method that allowed entities to initially apply the new leases standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting for the comparative periods presented in the financial statements in which it adopted the new leases standard would continue to be in accordance with ASC Topic 840 if the optional transition method is elected. The Company adopted the standard using the optional transition method with no restatement of comparative periods and a cumulative effect adjustment recognized as of the date of adoption.

Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately $4.5 million and $4.3 million, respectively, as of January 1, 2019. The cumulative effect adjustment to retained earnings as of January 1, 2019 was $0.2 million. The standard did not materially impact our consolidated financial statements. 

As part of the implementation process, the Company assessed its lease arrangements and evaluated practical expedients and accounting policy elections to meet the reporting requirements of this standard. The Company also evaluated the changes in controls and processes that were necessary to implement the new standard, and no material changes were required. The Company elected the ‘package of practical expedients’ which permitted us not to reassess under the new standard the prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to WLFC. 

Under ASC 842, a lease is a sales-type lease if any one of five criteria are met, each of which indicate that the lease, in effect, transfers control of the underlying asset to the lessee. If none of those five criteria are met, but two additional criteria are both met, indicating that the lessor has transferred substantially all the risks and benefits of the underlying asset to the lessee, the lease is a direct financing lease. All leases that are not sales-type or direct financing leases are operating leases. Furthermore, the Company will assess on an ongoing basis, the updated guidance provided for sale leaseback transactions and whether failed sale leaseback accounting treatment is triggered. As lessor, the Company's leases in place upon adoption of ASC 842 remained as operating leases under the new standard. In addition, due to the new standard’s narrowed definition of initial direct costs, the Company expenses as incurred, certain lease origination costs that were previously capitalized as initial direct costs and amortized to expense over the lease term. 

The new standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption for all leases that qualify. As a result, for those leases that qualify, the Company did not recognize ROU assets or lease liabilities, including for existing short-term leases. The Company also elected the practical expedient to not separate lease and non-lease components for the majority of its leases as both lessee and lessor.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU is targeted at simplifying the application of hedge accounting and aims at aligning the recognition and presentation of the effects of hedge instruments and hedge items. This guidance became effective for the Company on January 1, 2019 and it did not result in an adjustment to the opening balance of retained earnings for the Company's existing cash flow hedge. Additionally, the presentation and disclosure aspect of ASU 2017-12 was applied on a prospective basis within Note 7.

In June 2018, the FASB issued ASU 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The Company adopted this guidance effective January 1, 2019 and it did not materially impact our consolidated financial statements.

In July 2019, the FASB issued ASU 2019-07, “Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates (SEC Update).” The ASU clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC's regulations, thereby eliminating redundancies and making the codification easier to apply. This ASU was effective upon issuance and it did not materially impact our consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted by the Company

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses of Financial Instruments” (“ASU 2016-13”). ASU 2016-13 revises the measurement of credit losses for financial assets measured at amortized cost from an incurred loss methodology to an expected loss methodology. ASU 2016-13 affects trade receivables, debt securities, net investments in leases, and most other financial assets that represent a right to receive cash. Additional disclosures about significant estimates and credit quality are also required. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, “Financial Instruments - Credit Losses (Topic 326): Targeted Transition Relief.” This ASU provides targeted transition relief allowing for an irrevocable one-time election upon adoption of the new standard to measure financial assets previously measured at amortized cost using the fair value option. In November 2019, the FASB issued ASU 2019-10 “Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates” and ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments - Credit Losses.” ASU 2019-10 amends effective dates for public business entities not meeting the definition of an SEC filer. ASU 2019-11 clarifies and addresses stakeholders’ specific issues around certain aspects of the amendments in ASU 2016-13. The amendments in this ASU are effective for the Company on January 1, 2020, with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2020.

While the Company continues to evaluate certain aspects of the new standard, including those still being revised by the FASB, the Company does not expect the new standard will have a material effect on its financial statements, but it does expect significant new disclosures and controls in order to comply with the new standard requirements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. ASU 2019-12 also improves consistent application of and simplifies Generally Accepted Accounting Principles (“GAAP”) for other areas of Topic 740 by clarifying and amending existing guidance. This ASU is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The Company plans to adopt this guidance effective January 1, 2021 and is currently evaluating the potential impact adoption will have on the consolidated financial statements and related disclosures.

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Cover Page - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Mar. 09, 2020	Jun. 30, 2019
Cover page.
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2019
Document Transition Report	false
Entity File Number	001-15369
Entity Registrant Name	WILLIS LEASE FINANCE CORP
Entity Central Index Key	0001018164
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	68-0070656
Entity Address, Address Line One	4700 Lyons Technology Parkway
Entity Address, City or Town	Coconut Creek
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33073
City Area Code	561
Local Phone Number	349-9989
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	WLFC
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 178.3
Entity Common Stock, Shares Outstanding		5,855,913
Documents Incorporated by Reference	The Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders is incorporated by reference into Part III of this Form 10-K.

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Organization and Summary of Significant Accounting Policies - Property, Equipment and Furnishings and Restricted Cash (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Restricted Cash
Security deposits	$ 20,569	$ 28,047
Minimum
Property, Equipment and Furnishings
Useful life of property, equipment and furnishings	3 years
Maximum
Property, Equipment and Furnishings
Useful life of property, equipment and furnishings	39 years
WEST II
Restricted Cash
Projected maintenance obligation period	6 months
Minimum amount of cash from maintenance reserve payments required to be held in restricted cash account	$ 9,000
West III and West IV
Restricted Cash
Projected maintenance obligation period	9 months
Minimum amount of cash from maintenance reserve payments required to be held in restricted cash account	$ 10,000
Projected maintenance obligation period for security deposit	4 months
West III and West IV | Minimum
Restricted Cash
Security deposits	$ 1,000

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 66,922	$ 43,231
Other comprehensive loss:
Currency translation adjustment	(222)	(770)
Unrealized (loss) gain on derivative instruments	(3,331)	533
Unrealized loss on derivative instruments at joint venture	(774)	0
Net loss recognized in other comprehensive income	(4,327)	(237)
Tax benefit related to items of other comprehensive income	977	54
Other comprehensive loss	(3,350)	(183)
Total comprehensive income	$ 63,572	$ 43,048

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Quarterly Consolidated Financial Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Summary of the unaudited quarterly results of operations

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2019 and 2018 (in thousands, except per share data).

2019	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	103,769	$	95,797	$	120,366	$	89,228	$	409,160
Net income attributable to common shareholders	$	20,056	$	16,144	$	23,232	$	4,156	$	63,588
Basic earnings per common share	$	3.47	$	2.75	$	3.97	$	0.71	$	10.90
Diluted earnings per common share	$	3.35	$	2.66	$	3.81	$	0.68	$	10.50
Basic weighted average common shares outstanding	5,779		5,866		5,847		5,850		5,836
Diluted weighted average common shares outstanding	5,978		6,061		6,094		6,099		6,058

2018	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	70,497	$	78,702	$	80,958	$	118,190	$	348,347
Net income attributable to common shareholders	$	6,261	$	7,528	$	8,834	$	17,274	$	39,898
Basic earnings per common share	$	1.03	$	1.28	$	1.50	$	2.99	$	6.75
Diluted earnings per common share	$	1.00	$	1.26	$	1.47	$	2.91	$	6.60
Basic weighted average common shares outstanding	6,104		5,878		5,900		5,782		5,915
Diluted weighted average common shares outstanding	6,256		5,991		6,004		5,939		6,046

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Quarterly Consolidated Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]
Total revenue	$ 89,228	$ 120,366	$ 95,797	$ 103,769	$ 118,190	$ 80,958	$ 78,702	$ 70,497	$ 409,160	$ 348,347
Net income attributable to common shareholders	$ 4,156	$ 23,232	$ 16,144	$ 20,056	$ 17,274	$ 8,834	$ 7,528	$ 6,261	$ 63,588	$ 39,898
Basic earnings per common share (in dollars per share)	$ 0.71	$ 3.97	$ 2.75	$ 3.47	$ 2.99	$ 1.50	$ 1.28	$ 1.03	$ 10.90	$ 6.75
Diluted earnings common share (in dollars per share)	$ 0.68	$ 3.81	$ 2.66	$ 3.35	$ 2.91	$ 1.47	$ 1.26	$ 1.00	$ 10.50	$ 6.60
Basic weighted average common shares outstanding (in shares)	5,850	5,847	5,866	5,779	5,782	5,900	5,878	6,104	5,836	5,915
Diluted weighted average common shares outstanding (in shares)	6,099	6,094	6,061	5,978	5,939	6,004	5,991	6,256	6,058	6,046

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SCHEDULE II - VALUATION ACCOUNTS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Accounts receivable, allowance for doubtful accounts
Valuation accounts
Balance at Beginning of Period	$ 2,559	$ 949
Additions Charged (Credited) to Expense	(829)	1,610
Net (Deductions) Recoveries	0	0
Balance at End of Period	1,730	2,559
Deferred tax valuation allowance
Valuation accounts
Balance at Beginning of Period	652	806
Additions Charged (Credited) to Expense	(499)	(154)
Net (Deductions) Recoveries	0	0
Balance at End of Period	$ 153	$ 652

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SCHEDULE I - Parent Company Information - Condensed Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
REVENUE
Lease rent revenue									$ 190,690	$ 175,609
Maintenance reserve revenue									108,998	87,009
Spare parts and equipment sales									74,651	71,141
Gain on sale of leased equipment									20,044	6,944
Other revenue									14,777	7,644
Total revenue	$ 89,228	$ 120,366	$ 95,797	$ 103,769	$ 118,190	$ 80,958	$ 78,702	$ 70,497	409,160	348,347
EXPENSES
Transfers from Equipment held for operating lease to Equipment held for sale									10,131	0
Depreciation and amortization expense									86,236	76,814
Cost of spare parts and equipment sales									62,647	61,025
Write-down of equipment									18,220	10,651
General and administrative									86,523	72,021
Technical expense									8,122	11,142
Net finance costs									67,109	64,220
Total expenses									328,857	295,873
Earnings from operations									80,303	52,474
Earnings from joint ventures									8,578	3,800
Income before income taxes									88,881	56,274
Income tax (benefit) expense									(21,959)	(13,043)
Net income									66,922	43,231
Preferred stock dividends									3,250	3,250
Accretion of preferred stock issuance costs									84	83
Net income attributable to common shareholders	$ 4,156	$ 23,232	$ 16,144	$ 20,056	$ 17,274	$ 8,834	$ 7,528	$ 6,261	63,588	39,898
Parent Company
REVENUE
Lease rent revenue									64,566	70,269
Maintenance reserve revenue									48,500	27,407
Spare parts and equipment sales									18,561	35,388
Gain on sale of leased equipment									12,269	6,183
Other revenue									29,644	13,624
Total revenue									173,540	152,871
EXPENSES
Transfers from Equipment held for operating lease to Equipment held for sale									6,681	0
Depreciation and amortization expense									30,934	34,795
Cost of spare parts and equipment sales									17,108	32,331
Write-down of equipment									4,425	2,567
General and administrative									71,522	52,896
Technical expense									8,294	9,858
Net finance costs									18,898	25,210
Total expenses									151,181	157,657
Earnings from operations									22,359	(4,786)
Earnings from joint ventures									8,578	3,800
Income before income taxes									30,937	(986)
Income tax (benefit) expense									(9,456)	280
Equity in income of subsidiaries									45,441	43,937
Net income									66,922	43,231
Preferred stock dividends									3,250	3,250
Accretion of preferred stock issuance costs									84	83
Net income attributable to common shareholders									$ 63,588	$ 39,898

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Stock-Based Compensation Plans - Stock compensation expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 7,787	$ 5,410
2007 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	4,584	5,353
2018 Stock Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	3,117	0
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock compensation expense	$ 86	$ 57

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Leases - Schedule of Future Minimum Lease Payments Under ASU 840 (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Leases [Abstract]
Due next twelve months	$ 922	$ 1,172
Due year two	878	676
Due year three	762	638
Due year four	504	645
Due year five	358	483
Thereafter	896	1,183
Total	$ 4,320	$ 4,797

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Equipment Held for Operating Lease - Lease Revenue by Geographic Region (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Lessor, Lease, Description [Line Items]
Lease rent revenue	$ 190,690	$ 175,609
Europe
Lessor, Lease, Description [Line Items]
Lease rent revenue	84,335	70,842
Asia
Lessor, Lease, Description [Line Items]
Lease rent revenue	42,127	40,717
United States
Lessor, Lease, Description [Line Items]
Lease rent revenue	39,178	40,100
South America
Lessor, Lease, Description [Line Items]
Lease rent revenue	10,030	11,338
Mexico
Lessor, Lease, Description [Line Items]
Lease rent revenue	5,284	4,721
Middle East
Lessor, Lease, Description [Line Items]
Lease rent revenue	4,117	3,286
Canada
Lessor, Lease, Description [Line Items]
Lease rent revenue	3,279	4,585
Africa
Lessor, Lease, Description [Line Items]
Lease rent revenue	$ 2,340	$ 20

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Debt Obligations - Schedule of Notes Payable (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Jul. 31, 2019	Jun. 30, 2019	Feb. 28, 2019	Dec. 31, 2018
Long Term Debt [Line Items]
Long-term debt outstanding	$ 1,270,469,000				$ 1,358,430,000
Less: unamortized debt issuance costs	(19,463,000)				(21,081,000)
Total debt obligations	1,251,006,000				1,337,349,000
Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024
Long Term Debt [Line Items]
Line of credit facility outstanding amount	397,000,000				427,000,000
WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 307,014,000				323,075,000
Fixed rate (as a percent)	4.75%
WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 43,859,000				46,154,000
Fixed rate (as a percent)	5.44%
WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 257,754,000				274,205,000
Fixed rate (as a percent)	4.69%
WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 36,860,000				39,212,000
Fixed rate (as a percent)	6.36%
WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 211,572,000				237,847,000
Fixed rate (as a percent)	5.50%
Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines
Long Term Debt [Line Items]
Long-term debt outstanding	$ 7,286,000			$ 8,100,000	0
Note payable at fixed rate of interest of 3.18%, maturing in July 2024, secured by an aircraft
Long Term Debt [Line Items]
Long-term debt outstanding	$ 9,124,000				$ 10,937,000
Fixed rate (as a percent)	3.18%
Note payable at fixed rate of interest of 3.18%, maturing in July 2024, secured by an aircraft | Maximum
Long Term Debt [Line Items]
Fixed rate (as a percent)		3.18%
Revolving credit facility | Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024
Long Term Debt [Line Items]
Line of credit facility, maximum borrowing capacity	$ 1,000,000,000		$ 1,000,000,000.0
LIBOR | Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024
Long Term Debt [Line Items]
Variable rate spread	1.375%
LIBOR | Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines | Minimum
Long Term Debt [Line Items]
Variable rate spread	1.85%
LIBOR | Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines | Maximum
Long Term Debt [Line Items]
Variable rate spread	2.50%

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Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Basic and Diluted EPS

The following table presents the calculation of basic and diluted EPS:

	Year Ended December 31,
	2019		2018
	(in thousands)
Net income attributable to common shareholders	$	63,588	$	39,898
Basic weighted average common shares outstanding	5,836		5,915
Potentially dilutive common shares	222		131
Diluted weighted average common shares outstanding	6,058		6,046
Basic weighted average earnings per common share	$	10.90	$	6.75
Diluted weighted average earnings per common share	$	10.50	$	6.60

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Debt Obligations (Tables)

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of notes payable

Debt obligations consisted of the following:

	As of December 31,
	2019			2018
	(in thousands)
Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024	$	397,000		$	427,000
WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines	307,014			323,075
WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines	43,859			46,154
WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines	257,754			274,205
WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines	36,860			39,212
WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037, secured by engines	211,572			237,847
Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines	7,286			—
Note payable at fixed rate of interest of 3.18%, maturing in July 2024, secured by an aircraft	9,124			10,937
	1,270,469			1,358,430
Less: unamortized debt issuance costs	(19,463		)	(21,081		)
Total debt obligations	$	1,251,006		$	1,337,349

Schedule or principal outstanding

Principal outstanding at December 31, 2019, is expected to be repayable as follows:

Year	(in thousands)
2020	$	56,118
2021	56,415
2022 (includes $158.4 million outstanding on WEST II Series A 2012 term note)	207,994
2023	34,018
2024 (includes $397.0 million outstanding on revolving credit facility)	430,185
Thereafter	485,739
Total	$	1,270,469

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Leases (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of supplemental balance sheet information

Supplemental balance sheet information related to leases was as follows:

Leases	Classification	December 31, 2019
		(in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets	Other assets	$	4,084
Total leased assets		$	4,084
Liabilities
Operating lease right-of-use liabilities	Accounts payable and accrued expenses	$	3,835
Total lease liabilities		$	3,835
Weighted average remaining lease term (years)
Operating leases		5.17
Weighted average discount rate
Operating leases		4.5		%

Schedule of future maturities operating lease liabilities

Future maturities of the Company's operating lease liabilities at December 31, 2019 are as follows:

Year	(in thousands)
2020	$	947
2021	895
2022	762
2023	504
2024	358
Thereafter	896
Total lease payments	4,362
Less: interest	(527		)
Total lease liabilities	$	3,835

Schedule of future minimum lease payments under noncancelable operating leases

The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2019:

Year	(in thousands)
2020	$	922
2021	878
2022	762
2023	504
2024	358
Thereafter	896
	$	4,320

The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2018 as presented in the Company's 2018 Form 10-K:

Year	(in thousands)
2019	$	1,172
2020	676
2021	638
2022	645
2023	483
Thereafter	1,183
	$	4,797

Schedule of components lease expense

The components of lease expense for the years ended December 31, 2019 and 2018 were as follows:

Lease expense	Classification	2019		2018
		(in thousands)
Operating lease cost	General and administrative	$	1,326	$	1,688
Net lease cost		$	1,326	$	1,688

Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows:

	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	920
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	495

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Investments

12 Months Ended

Dec. 31, 2019

Investments [Abstract]

Investments

Investments

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 fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. As of December 31, 2019, WMES owned a lease portfolio of 36 engines and five aircraft with a net book value of $306.0 million.

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 Engine Lease Company Limited (“CASC Willis”), a joint venture based in Shanghai, China. Each partner holds a fifty percent interest in the joint venture. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on the demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. During 2016, CASC was reorganized, with portions of its partnership interest in CASC Willis being transferred to three Chinese airlines and another government-owned entity. The 2016 CASC reorganization resulted in no voting structure change to the joint venture. CASC Willis owned a lease portfolio of four engines with a net book value of $49.2 million as of December 31, 2019.

Years Ending December 31, 2019 and 2018 (in thousands)	WMES			CASC Willis			Total
Investment in joint ventures as of December 31, 2017	$	36,014		$	14,627		$	50,641
Earnings (loss) from joint ventures	3,899			(99		)	3,800
Distribution	(5,730		)	—			(5,730		)
Foreign currency translation adjustment	—			(770		)	(770		)
Investment in joint ventures as of December 31, 2018	34,183			13,758			47,941
Earnings from joint ventures	8,312			266			8,578
Contribution	5,713			—			5,713
Distribution	(3,300		)	—			(3,300		)
Foreign currency translation adjustment	—			(222		)	(222		)
Other comprehensive loss from joint ventures	(774		)	—			(774		)
Investment in joint ventures as of December 31, 2019	$	44,134		$	13,802		$	57,936

“Other revenue” on the Consolidated Statements of Income includes management fees earned of $2.9 million and $2.6 million during the years ended December 31, 2019 and 2018, respectively, related to the servicing of engines for the WMES lease portfolio.

Unaudited summarized financial information for 100% of WMES is presented in the following table:

	Years Ended December 31,
	2019		2018
	(in thousands)
Revenue	$	55,770	$	38,465
Expenses	41,253		30,934
WMES net income	$	14,517	$	7,531

	As of December 31,
	2019		2018
	(in thousands)
Total assets	$	322,606	$	274,744
Total liabilities	227,052		198,534
Total WMES net equity	$	95,554	$	76,210

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Fair Value Measurements

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of judgment, and therefore cannot be determined with precision.

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

• Cash and cash equivalents, restricted cash, receivables, and accounts payable: The amounts reported in the accompanying Consolidated Balance Sheets approximate fair value due to their short-term nature.

• Notes receivable: The carrying amount of the Company's outstanding balance on its Notes receivable as of December 31, 2019 and 2018 was estimated to have a fair value of approximately $39.7 million and $0.2 million, respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each period end (Level 2 inputs).

• Debt obligations: The carrying amount of the Company’s outstanding balance on its Debt obligations as of December 31, 2019 and 2018 was estimated to have a fair value of approximately $1,262.6 million and $1,348.1 million, respectively, based on the fair value of estimated future payments calculated using interest rates that approximate prevailing market rates at each year end (Level 2 inputs).

Assets Measured and Recorded at Fair Value on a Recurring Basis

As of December 31, 2019 and 2018, the Company measured the fair value of its interest rate based on Level 2 inputs, due to the usage of inputs that can be corroborated by observable market data. The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties’ risk of non-performance. The interest rate swaps had a net fair value representing a $1.7 million net liability and a net asset of $1.7 million as of December 31, 2019 and 2018, respectively. In 2019 and 2018, $0.7 million and $0.4 million, respectively, was realized through the income statement as an adjustment to interest expense.

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

The Company determines fair value of long-lived assets held and used, such as Equipment held for operating lease and Equipment held for sale, by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors. An impairment charge is recorded when the carrying value of the asset exceeds its fair value. The Company used Level 2 inputs to measure write-downs of equipment held for lease and equipment held for sale. 

	Total Losses
	Years Ended December 31,
	2019		2018
	(in thousands)
Equipment held for lease	$	18,132	$	8,893
Equipment held for sale	88		1,758
Total	$	18,220	$	10,651

Write-downs of equipment to their estimated fair values totaled $18.2 million for the year ended December 31, 2019 which included write-downs of $11.8 million due to a management decision to monetize eleven engines either by sale to a third party or for part-out and $6.4 million for the adjustment of the carrying value of seven impaired engines. As of December 31, 2019, $37.8 million book value for 16 of these engines remains within equipment held for operating lease, equipment held for sale and spare parts inventory.

Write-downs of equipment to their estimated fair values totaled $10.7 million for the year ended December 31, 2018 which included write-downs of $8.9 million for the adjustment of the carrying value of seven impaired engines and $1.8 million in third party consignment write-downs. As of December 31, 2018, included within equipment held for lease and equipment held for sale, was $18.3 million in remaining book values of six engines and six airframe parts packages.

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Quarterly Consolidated Financial Information (Unaudited)

12 Months Ended

Dec. 31, 2019

Quarterly Financial Information Disclosure [Abstract]

Quarterly Consolidated Financial Information (Unaudited)

Quarterly Consolidated Financial Information (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2019 and 2018 (in thousands, except per share data).

2019	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	103,769	$	95,797	$	120,366	$	89,228	$	409,160
Net income attributable to common shareholders	$	20,056	$	16,144	$	23,232	$	4,156	$	63,588
Basic earnings per common share	$	3.47	$	2.75	$	3.97	$	0.71	$	10.90
Diluted earnings per common share	$	3.35	$	2.66	$	3.81	$	0.68	$	10.50
Basic weighted average common shares outstanding	5,779		5,866		5,847		5,850		5,836
Diluted weighted average common shares outstanding	5,978		6,061		6,094		6,099		6,058

2018	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total revenue	$	70,497	$	78,702	$	80,958	$	118,190	$	348,347
Net income attributable to common shareholders	$	6,261	$	7,528	$	8,834	$	17,274	$	39,898
Basic earnings per common share	$	1.03	$	1.28	$	1.50	$	2.99	$	6.75
Diluted earnings per common share	$	1.00	$	1.26	$	1.47	$	2.91	$	6.60
Basic weighted average common shares outstanding	6,104		5,878		5,900		5,782		5,915
Diluted weighted average common shares outstanding	6,256		5,991		6,004		5,939		6,046

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SCHEDULE I - Parent Company Information

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

SCHEDULE I - Parent Company Information

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Balance Sheets

(In thousands, except per share data)

	December 31, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	1,187		$	5,302
Equipment held for operating lease, less accumulated depreciation	612,808			618,167
Maintenance rights	—			3,296
Equipment held for sale	120			701
Receivables, net of allowances	3,015			3,468
Spare parts inventory	3,466			483
Due from affiliates, net	5,410			14,877
Deferred income taxes	5,607			13,896
Investments	57,936			47,941
Investment in subsidiaries	156,664			141,792
Property, equipment & furnishings, less accumulated depreciation	15,998			15,077
Intangible assets, net	271			271
Notes receivable	38,145			238
Prepaid deposits	9,134			1,383
Other assets, net	13,398			10,528
Total assets	$	923,159		$	877,420
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	33,182		$	27,128
Due to affiliates, net	62,170			40,187
Debt obligations	400,725			434,053
Maintenance reserves	18,464			27,329
Security deposits	6,399			10,692
Unearned revenue	2,243			1,690
Total liabilities	523,183			541,079
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)	49,638			49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized;  6,356 and 6,176 shares issued and outstanding at December 31, 2019 and 2018, respectively)	64			62
Paid-in capital in excess of par	4,557			—
Retained earnings	348,965			286,623
Accumulated other comprehensive (loss) income, net of income tax benefit	(3,248		)	102
Total shareholders’ equity	350,338			286,787
Total liabilities, redeemable preferred stock and shareholders' equity	$	923,159		$	877,420

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Income

(In thousands)

	Years Ended December 31,
	2019		2018
REVENUE
Lease rent revenue	$	64,566	$	70,269
Maintenance reserve revenue	48,500		27,407
Spare parts and equipment sales	18,561		35,388
Gain on sale of leased equipment	12,269		6,183
Other revenue	29,644		13,624
Total revenue	173,540		152,871
EXPENSES
Depreciation and amortization expense	30,934		34,795
Cost of spare parts and equipment sales	17,108		32,331
Write-down of equipment	4,425		2,567
General and administrative	71,522		52,896
Technical expense	8,294		9,858
Net finance costs	18,898		25,210
Total expenses	151,181		157,657
Earnings from operations	22,359		(4,786		)
Earnings from joint ventures	8,578		3,800
Income before income taxes	30,937		(986		)
Income tax expense (benefit)	9,456		(280		)
Equity in income of subsidiaries, net of tax of $12,504 and $13,323 at December 31, 2019 and 2018, respectively	45,441		43,937
Net income	66,922		43,231
Preferred stock dividends	3,250		3,250
Accretion of preferred stock issuance costs	84		83
Net income attributable to common shareholders	$	63,588	$	39,898

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I —CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Comprehensive Income

(In thousands)

	Years Ended December 31,
	2019			2018
Net income	$	66,922		$	43,231
Other comprehensive loss:
Currency translation adjustment	(222		)	(770		)
Unrealized (loss) gain on derivative instruments	(3,331		)	533
Unrealized loss on derivative instruments at joint venture	(774		)	—
Net loss recognized in other comprehensive income	(4,327		)	(237		)
Tax benefit related to items of other comprehensive income	977			54
Other comprehensive loss	(3,350		)	(183		)
Total comprehensive income	$	63,572		$	43,048

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Condensed Statements of Cash Flows

(In thousands)

	Years Ended December 31,
	2019			2018
Cash flows from operating activities:
Net income	$	66,922		$	43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries	(45,441		)	(43,937		)
Depreciation expense	30,934			34,795
Write-down of equipment	4,425			2,567
Stock-based compensation expenses	7,787			5,410
Amortization of deferred costs	2,748			3,324
Allowances and provisions	(365		)	439
Gain on sale of leased equipment	(12,269		)	(6,183		)
Income from joint ventures	(8,578		)	(3,800		)
Loss on debt extinguishment	220			—
Loss on disposal of property, equipment and furnishings	19			41
Deferred income taxes	9,554			(434		)
Changes in assets and liabilities:
Receivables	818			4,073
Distributions received from joint ventures	3,300			5,730
Inventory	8,195			7,320
Other assets	(3,640		)	(3,983		)
Accounts payable and accrued expenses	2,946			19,459
Due to / from subsidiaries	31,449			41,449
Maintenance reserves	(6,062		)	(9,500		)
Security deposits	(123		)	(6,773		)
Unearned revenue	553			(3,034		)
Net cash provided by operating activities	93,392			90,194
Cash flows from investing activities:
Increase in investment in subsidiaries	—			(9,104		)
Distributions received from subsidiaries	32,066			388,910
Proceeds from sale of equipment (net of selling expenses)	145,117			48,049
Issuance of notes receivable	(42,857		)	—
Payments received on notes receivable	4,950			—
Capital contributions to joint ventures	(5,713		)	—
Purchase of equipment held for operating lease and for sale	(184,505		)	(417,857		)
Purchase of property, equipment and furnishings	(2,607		)	(1,104		)
Net cash (used in) provided by investing activities	(53,549		)	8,894
Cash flows from financing activities:
Proceeds from issuance of debt obligations	332,000			386,000
Debt issuance cost	(3,142		)	—
Principal payments on debt obligations	(363,813		)	(462,119		)
Interest bearing security deposits	(1,046		)	—
Proceeds from shares issued under stock compensation plans	335			245
Repurchase of common stock	(3,567		)	(16,136		)
Preferred stock dividends	(3,250		)	(3,348		)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475		)	(1,288		)
Net cash used in financing activities	(43,958		)	(96,646		)
(Decrease)/Increase in cash and cash equivalents	(4,115		)	2,442
Cash and cash equivalents at beginning of period	5,302			2,860
Cash and cash equivalents at end of period	$	1,187		$	5,302
Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	17,891		$	23,525
Income Taxes	$	(341	)	$	795
Supplemental disclosures of non-cash investing and financing activities:
Engines and equipment transferred to the subsidiaries from the parent	$	—		$	42,456
Transfers from Equipment held for lease to Equipment held for sale	$	6,681		$	—
Transfers from Equipment held for sale to Spare parts inventory	$	13,805		$	26,387
Accrued preferred stock dividends	$	686		$	686
Accretion of preferred stock issuance costs	$	84		$	83

The accompanying note is an integral part of the Consolidated financial statements.

1. Organization and Summary of Presentation

The accompanying condensed financial statements include the activity of the Parent Company. These condensed financial statements have been presented for the parent company only and should be read in conjunction with the Consolidated Financial Statements and notes thereto of the Company set forth in Part II, Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.

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Organization and Summary of Significant Accounting Policies - Investments and Lease Costs (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Amortization of initial direct costs associated with leases	$ 2.0	$ 1.9
Ownership interest	50.00%
Previously held interest (as a percent)	50.00%

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Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Equipment held for operating lease, accumulated depreciation	$ 414,835	$ 385,483
Operating lease related receivable, allowances	1,730	2,559
Property, equipment & furnishings, accumulated depreciation	$ 8,666	$ 6,945
Redeemable preferred stock - par value (in dollars per share)	$ 0.01	$ 0.01
Redeemable preferred stock - shares authorized (in shares)	2,500,000	2,500,000
Redeemable preferred stock - shares outstanding (in shares)	2,500,000	2,500,000
Redeemable preferred stock - shares issued (in shares)	2,500,000	2,500,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	6,356,000	6,176,000
Common stock, shares outstanding (in shares)	6,356,000	6,176,000
Accumulated other comprehensive loss, income tax expense	$ (896)	$ 81
Restricted cash	56,948	70,261
Maintenance rights	3,133	14,763
Spare parts inventory	41,759	48,874
Other assets	28,038	14,926
Debt obligations	1,251,006	1,337,349
Variable Interest Entity
Cash	134	656
Restricted cash	56,523	70,261
Equipment	1,004,851	1,032,599
Maintenance rights	3,133	11,466
Spare parts inventory	2,832	4,921
Other assets	668	1,075
Debt obligations	$ 842,996	$ 903,296

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Organization and Summary of Significant Accounting Policies - Organization and Revenue Recognition (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2019	Aug. 22, 2018	Aug. 04, 2017
Revenue Recognition
Lease rent receivables past due	$ 2.7
Maintenance reserve receivables past due	$ 3.8
Minimum number of days for which lease rent and maintenance reserve payments are past due	30 days
Unbilled revenue associated with outstanding contracts	$ 0.8
WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines
Organizations [Line Items]
Aggregate principal amount		$ 326.8
WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines
Organizations [Line Items]
Aggregate principal amount		$ 46.7
WEST III | WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines
Organizations [Line Items]
Aggregate principal amount			$ 293.7
WEST III | WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines
Organizations [Line Items]
Aggregate principal amount			$ 42.0
WEST II
Organizations [Line Items]
Acquisition of the remaining outstanding shares (as a percent)	100.00%

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Consolidated Statements of Redeemable Preferred Stock and Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Statement of Stockholders' Equity [Abstract]
Net unrealized gain (loss) from currency translation adjustment, tax (benefit) expense	$ (50)	$ (174)
Net unrealized gain (loss) from derivative instruments, tax (benefit) expense	$ (753)	$ 120
Preferred stock, dividends	$ 1.30	$ 1.30

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Earnings Per Share [Abstract]
Shares not included in computation of diluted weighted average earnings per common (in shares)									0	400
Net income attributable to common shareholders	$ 4,156	$ 23,232	$ 16,144	$ 20,056	$ 17,274	$ 8,834	$ 7,528	$ 6,261	$ 63,588	$ 39,898
Basic weighted average common shares outstanding (in shares)	5,850,000	5,847,000	5,866,000	5,779,000	5,782,000	5,900,000	5,878,000	6,104,000	5,836,000	5,915,000
Potentially dilutive common shares (in shares)									222,000	131,000
Diluted weighted average common shares outstanding (in shares)	6,099,000	6,094,000	6,061,000	5,978,000	5,939,000	6,004,000	5,991,000	6,256,000	6,058,000	6,046,000
Basic weighted average earnings per common share (in dollars per share)	$ 0.71	$ 3.97	$ 2.75	$ 3.47	$ 2.99	$ 1.50	$ 1.28	$ 1.03	$ 10.90	$ 6.75
Diluted weighted average earnings per common share (in dollars per share)	$ 0.68	$ 3.81	$ 2.66	$ 3.35	$ 2.91	$ 1.47	$ 1.26	$ 1.00	$ 10.50	$ 6.60

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Debt Obligations - Narrative (Details)	12 Months Ended
	Dec. 31, 2019 USD ($) engine	Dec. 31, 2018 USD ($)	Jul. 31, 2019	Jun. 30, 2019 USD ($)	Feb. 28, 2019 USD ($)	Apr. 30, 2016 USD ($)
Long Term Debt [Line Items]
One month LIBOR at period end	1.76%	2.50%
Three month LIBOR at period end	1.91%
Loss on extinguishment of debt	$ 220,000	$ 0
Long-term debt outstanding	$ 1,270,469,000	1,358,430,000
Number of assets used to secure debt | engine	2
WEST IV
Long Term Debt [Line Items]
Long-term debt outstanding	$ 350,900,000	369,200,000
WEST III
Long Term Debt [Line Items]
Long-term debt outstanding	294,600,000	313,400,000
WEST II
Long Term Debt [Line Items]
Long-term debt outstanding	$ 211,572,000	237,847,000
Fixed rate (as a percent)	5.50%
Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024, secured by an aircraft
Long Term Debt [Line Items]
Long-term debt outstanding	$ 9,124,000	10,937,000
Fixed rate (as a percent)	3.18%
Note payable due July 2022
Long Term Debt [Line Items]
Long-term debt outstanding	$ 7,286,000	0			$ 8,100,000
Maximum | Note payable at fixed interest rates ranging from 2.60% to 2.97%, maturing in July 2024, secured by an aircraft
Long Term Debt [Line Items]
Fixed rate (as a percent)			3.18%
LIBOR | Revolving credit facility
Long Term Debt [Line Items]
Variable rate spread	1.375%
LIBOR | Minimum | Note payable due July 2022
Long Term Debt [Line Items]
Variable rate spread	1.85%
LIBOR | Maximum | Note payable due July 2022
Long Term Debt [Line Items]
Variable rate spread	2.50%
Revolving credit facility | Revolving credit facility
Long Term Debt [Line Items]
Line of credit facility maximum borrowing Capacity before amendment						$ 890,000,000.0
Line of credit facility, maximum borrowing capacity under accordion feature	$ 1,300,000,000					$ 1,000,000,000.0
Line of credit facility, maximum borrowing capacity	1,000,000,000			$ 1,000,000,000.0
Debt issuance costs, line of credit				$ 2,800,000
Loss on extinguishment of debt	200,000
Maximum leverage ratio				4.50		4.00
Line of credit facility, remaining borrowing capacity	$ 603,000,000.0	$ 463,000,000.0

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Income Taxes - Summary of Unrecognized Tax Benefits and Temporary Differences (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Unrecognized tax benefits
Balance at the beginning of the period	$ 182,000	$ 191,000
Increases related to current year tax positions	250,000
Decreases due to tax positions expired	(162,000)	(9,000)
Balance at the end of the period	270,000	182,000
Uncertain tax positions, reserved for tax exposure in Europe	200,000	0
Deferred tax assets:
Unearned lease revenue	1,277,000	1,094,000
State taxes	152,000	77,000
Reserves and allowances	1,988,000	1,187,000
Other accruals	4,974,000	3,795,000
Foreign tax credit	19,000	26,000
Lease liability	271,000	0
Net operating loss carry forward	12,091,000	39,996,000
Charitable contributions	57,000	38,000
Total deferred tax assets	20,829,000	46,213,000
Less: valuation allowance	(153,000)	(652,000)
Net deferred tax assets	20,676,000	45,561,000
Deferred tax liabilities:
Depreciation and impairment on aircraft engines and equipment	(118,595,000)	(133,453,000)
Inventory	(2,350,000)	0
Right of use liability	(6,900,000)	0
Other deferred tax assets (liabilities)	(4,198,000)	(2,365,000)
Net deferred tax liabilities	(132,043,000)	(135,818,000)
Other comprehensive loss deferred tax liability	949,000
Other comprehensive loss deferred tax liability		28,000
Net deferred tax liabilities	(110,418,000)	$ (90,285,000)
Valuation allowance of net operating loss	200,000
Federal
Deferred tax liabilities:
Operating loss carryforwards	55,800,000
State
Deferred tax liabilities:
Operating loss carryforwards	$ 400,000

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Revenue from Contracts with Customers (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Revenue from Contracts with Customers
Leasing revenue									$ 299,688	$ 262,618
Maintenance reserve revenue									108,998	87,009
Gain on sale of leased equipment									20,044	6,944
Total revenue	$ 89,228	$ 120,366	$ 95,797	$ 103,769	$ 118,190	$ 80,958	$ 78,702	$ 70,497	409,160	348,347
Spare parts and equipment sales
Revenue from Contracts with Customers
Maintenance reserve revenue									74,651	71,141
Managed services
Revenue from Contracts with Customers
Maintenance reserve revenue									10,843	7,287
Other revenue
Revenue from Contracts with Customers
Maintenance reserve revenue									3,934	357
Operating Segments | Leasing and Related Operations
Revenue from Contracts with Customers
Leasing revenue									299,688	262,618
Gain on sale of leased equipment									20,044	6,944
Total revenue									353,154	307,263
Operating Segments | Leasing and Related Operations | Spare parts and equipment sales
Revenue from Contracts with Customers
Maintenance reserve revenue									18,684	30,122
Operating Segments | Leasing and Related Operations | Managed services
Revenue from Contracts with Customers
Maintenance reserve revenue									10,843	7,287
Operating Segments | Leasing and Related Operations | Other revenue
Revenue from Contracts with Customers
Maintenance reserve revenue									3,895	292
Operating Segments | Spare Parts Sales
Revenue from Contracts with Customers
Leasing revenue									0	0
Gain on sale of leased equipment									0	0
Total revenue									56,244	42,746
Operating Segments | Spare Parts Sales | Spare parts and equipment sales
Revenue from Contracts with Customers
Maintenance reserve revenue									55,967	41,019
Operating Segments | Spare Parts Sales | Managed services
Revenue from Contracts with Customers
Maintenance reserve revenue									0	0
Operating Segments | Spare Parts Sales | Other revenue
Revenue from Contracts with Customers
Maintenance reserve revenue									277	1,727
Eliminations
Revenue from Contracts with Customers
Leasing revenue									0	0
Gain on sale of leased equipment									0	0
Total revenue									(238)	(1,662)
Eliminations | Spare parts and equipment sales
Revenue from Contracts with Customers
Maintenance reserve revenue									0	0
Eliminations | Managed services
Revenue from Contracts with Customers
Maintenance reserve revenue									0	0
Eliminations | Other revenue
Revenue from Contracts with Customers
Maintenance reserve revenue									$ (238)	$ (1,662)

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Equipment Held for Operating Lease - Payments to be Received, Maturity by Year (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020	$ 155,970
2021	95,015
2022	59,033
2023	33,418
2024	21,287
Thereafter	14,754
Total operating lease payments to be received	$ 379,477

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Stock-Based Compensation Plans - Restricted stock activity (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Apr. 01, 2018	May 24, 2007
2007 Stock Incentive Plan
Aggregate Grant Date Fair Value
Number of shares authorized (in shares)				2,800,000
2007 Stock Incentive Plan | Restricted Stock
Number Outstanding
Balance at the beginning of the period (in shares)	417,890	328,122
Shares granted (in shares)	279,400	270,454
Shares forfeited (in shares)	(3,866)	(9,900)
Shares vested (in shares)	(187,957)	(170,786)
Balance at the end of the period (in shares)	505,467	417,890
Weighted Average Grant Date Fair Value
Balance at the beginning of the period (in dollars per share)	$ 30.54	$ 23.49
Shares granted (in dollars per share)	42.28	33.91
Shares cancelled (in dollars per share)	30.43	32.06
Shares vested (in dollars per share)	28.74	22.25
Balance at the end of the period (in dollars per share)	$ 37.70	$ 30.54
Aggregate Grant Date Fair Value
Balance at beginning of period	$ 12,763,000	$ 7,707,000
Granted	11,813,000	9,172,000
Vested	(5,402,000)	(3,799,000)
Forfeited	(118,000)	(317,000)
Balance at end of period	$ 19,056,000	$ 12,763,000
Remaining average vesting period for recognition of unrecognized compensation expense	1 year 8 months 12 days
Unrecognized compensation expense	$ 12,600,000
Intrinsic value of unvested shares	$ 29,800,000
Number of shares awarded (in shares)	279,400
Employee Stock Purchase Plan
Weighted Average Grant Date Fair Value
Shares granted (in dollars per share)	$ 23.20	$ 9.42
Aggregate Grant Date Fair Value
Number of shares authorized (in shares)			325,000
Maximum percentage of cash compensation allowed to be deducted for the purchase of common stock by eligible employees	10.00%
Maximum number of shares to be purchased by employee in one calendar year (in shares)	1,000
Maximum amount of shares to be purchased by employee in one calendar year	$ 25,000
Purchase price expressed as a percentage of the market price of the common stock on the purchase date or on the date of entry	85.00%
Shares issued (in shares)	13,193	11,132

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SCHEDULE I - Parent Company Information - Condensed Statements of Comprehensive Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Condensed Financial Statements, Captions [Line Items]
Net income	$ 66,922	$ 43,231
Other comprehensive loss:
Currency translation adjustment	(222)	(770)
Unrealized (loss) gain on derivative instruments	(3,331)	533
Unrealized loss on derivative instruments at joint venture	(774)	0
Net loss recognized in other comprehensive income	(4,327)	(237)
Tax benefit related to items of other comprehensive income	977	54
Other comprehensive loss	(3,350)	(183)
Total comprehensive income	63,572	43,048
Parent Company
Condensed Financial Statements, Captions [Line Items]
Net income	66,922	43,231
Other comprehensive loss:
Currency translation adjustment	(222)	(770)
Unrealized (loss) gain on derivative instruments	(3,331)	533
Unrealized loss on derivative instruments at joint venture	(774)	0
Net loss recognized in other comprehensive income	(4,327)	(237)
Tax benefit related to items of other comprehensive income	977	54
Other comprehensive loss	(3,350)	(183)
Total comprehensive income	$ 63,572	$ 43,048

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SCHEDULE I - Parent Company Information - Condensed Balance Sheets (Details) - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017
ASSETS
Cash and cash equivalents		$ 6,720	$ 11,688
Equipment held for operating lease, less accumulated depreciation		1,650,918	1,673,135
Maintenance rights		3,133	14,763
Equipment held for sale		120	789
Receivables, net of allowances		24,059	23,270
Spare parts inventory		41,759	48,874
Deferred income taxes		20,676	45,561
Investments		57,936	47,941
Property, equipment & furnishings, less accumulated depreciation		31,520	27,679
Intangible assets, net		1,312	1,379
Notes receivable		38,145	238
Prepaid Deposits		10,600	1,900
Other assets, net		28,038	14,926
Total assets	[1]	1,940,608	1,934,943
Liabilities:
Accounts payable and accrued expenses		45,648	42,939
Debt obligations		1,251,006	1,337,349
Maintenance reserves		106,870	94,522
Security deposits		20,569	28,047
Unearned revenue		6,121	5,460
Total liabilities	[2]	1,540,632	1,598,602
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)		49,638	49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,356 and 6,176 shares issued and outstanding at December 31, 2019 and 2018, respectively)		64	62
Paid-in capital in excess of par		4,557	0
Retained earnings		348,965	286,623
Accumulated other comprehensive income, net of income tax benefit		(3,248)	102
Total shareholders’ equity		350,338	286,787	$ 258,910
Total liabilities, redeemable preferred stock and shareholders' equity		1,940,608	1,934,943
Parent Company
ASSETS
Cash and cash equivalents		1,187	5,302
Equipment held for operating lease, less accumulated depreciation		612,808	618,167
Maintenance rights		0	3,296
Equipment held for sale		120	701
Receivables, net of allowances		3,015	3,468
Spare parts inventory		3,466	483
Due from affiliates, net		5,410	14,877
Deferred income taxes		5,607	13,896
Investments		57,936	47,941
Investment in subsidiaries		156,664	141,792
Property, equipment & furnishings, less accumulated depreciation		15,998	15,077
Intangible assets, net		271	271
Notes receivable		38,145	238
Prepaid Deposits		9,134	1,383
Other assets, net		13,398	10,528
Total assets		923,159	877,420
Liabilities:
Accounts payable and accrued expenses		33,182	27,128
Due to affiliates, net		62,170	40,187
Debt obligations		400,725	434,053
Maintenance reserves		18,464	27,329
Security deposits		6,399	10,692
Unearned revenue		2,243	1,690
Total liabilities		523,183	541,079
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)		49,638	49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,356 and 6,176 shares issued and outstanding at December 31, 2019 and 2018, respectively)		64	62
Paid-in capital in excess of par		4,557	0
Retained earnings		348,965	286,623
Accumulated other comprehensive income, net of income tax benefit		(3,248)	102
Total shareholders’ equity		350,338	286,787
Total liabilities, redeemable preferred stock and shareholders' equity		$ 923,159	$ 877,420

[1] Total assets at December 31, 2019 and December 31, 2018 include the following assets of variable interest entity’s (“VIE’s”) that can only be used to settle the liabilities of the VIE’s: Cash, $134 and $656; Restricted Cash, $56,523 and $70,261, Equipment, $1,004,851 and $1,032,599; Maintenance Rights, $3,133 and $11,466; Inventory, $2,832 and $4,921; and Other, $668 and $1,075 respectively.

[2] Total liabilities at December 31, 2019 and December 31, 2018 include the following liabilities of VIE’s for which the VIE’s creditors do not have recourse to Willis Lease Finance Corporation: Debt obligations, $842,996 and $903,296, respectively.

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Commitments, Contingencies, Guarantees and Indemnities (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Purchase commitments	$ 459.3
Purchase commitment, settlement period	4 years

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Label	Element	Value
Accounting Standards Update 2018-02 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 0
Accounting Standards Update 2018-02 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	59,000
Accounting Standards Update 2018-02 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	(59,000)
Accounting Standards Update 2016-02 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	233,000
Accounting Standards Update 2016-02 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 233,000

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Reportable Segments (Details) $ in Thousands		3 Months Ended								12 Months Ended
		Dec. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2019 USD ($) item	Dec. 31, 2018 USD ($)
Reportable Segments
Number of operating segments | item										2
Revenue:
Lease rent revenue										$ 190,690	$ 175,609
Maintenance reserve revenue										108,998	87,009
Gain on sale of leased equipment										20,044	6,944
Total revenue		$ 89,228	$ 120,366	$ 95,797	$ 103,769	$ 118,190	$ 80,958	$ 78,702	$ 70,497	409,160	348,347
Expenses:
Depreciation expense										86,236	76,814
Cost of spare parts and equipment sales										62,647	61,025
Write-down of equipment										18,220	10,651
General and administrative										86,523	72,021
Technical expense										8,122	11,142
Interest expense										66,889	64,220
Loss on extinguishment of debt										220	0
Net finance costs										67,109	64,220
Total expenses										328,857	295,873
Earnings from operations										80,303	52,474
Total assets	[1]	1,940,608				1,934,943				1,940,608	1,934,943
Eliminations
Revenue:
Gain on sale of leased equipment										0	0
Total revenue										(238)	(1,662)
Expenses:
Depreciation expense										0
Cost of spare parts and equipment sales										0
Write-down of equipment										0
General and administrative										0
Technical expense										0
Interest expense										0
Loss on extinguishment of debt										0
Net finance costs										0
Total expenses										0
Earnings from operations										(238)	(1,662)
Total assets		0				0				0	0
Leasing and Related Operations | Operating Segments
Revenue:
Gain on sale of leased equipment										20,044	6,944
Total revenue										353,154	307,263
Expenses:
Depreciation expense										86,159	76,502
Cost of spare parts and equipment sales										15,241	28,290
Write-down of equipment										18,220	10,651
General and administrative										81,302	67,608
Technical expense										8,122	11,142
Interest expense										66,889
Loss on extinguishment of debt										220
Net finance costs										67,109	64,220
Total expenses										276,153	258,413
Earnings from operations										77,001	48,850
Total assets		1,898,313				1,882,860				1,898,313	1,882,860
Spare Parts Sales | Operating Segments
Revenue:
Gain on sale of leased equipment										0	0
Total revenue										56,244	42,746
Expenses:
Depreciation expense										77	312
Cost of spare parts and equipment sales										47,406	32,735
Write-down of equipment										0
General and administrative										5,221	4,413
Technical expense										0
Interest expense										0
Loss on extinguishment of debt										0
Net finance costs										0
Total expenses										52,704	37,460
Earnings from operations										3,540	5,286
Total assets		$ 42,295				$ 52,083				42,295	52,083
Lease Rent Revenue [Member]
Revenue:
Lease rent revenue										190,690	175,609
Lease Rent Revenue [Member] | Eliminations
Revenue:
Lease rent revenue										0	0
Lease Rent Revenue [Member] | Leasing and Related Operations | Operating Segments
Revenue:
Lease rent revenue										190,690	175,609
Lease Rent Revenue [Member] | Spare Parts Sales | Operating Segments
Revenue:
Lease rent revenue										0	0
Maintenance Reserve Revenue [Member]
Revenue:
Lease rent revenue										108,998	87,009
Maintenance Reserve Revenue [Member] | Eliminations
Revenue:
Lease rent revenue										0	0
Maintenance Reserve Revenue [Member] | Leasing and Related Operations | Operating Segments
Revenue:
Lease rent revenue										108,998	87,009
Maintenance Reserve Revenue [Member] | Spare Parts Sales | Operating Segments
Revenue:
Lease rent revenue										0	0
Spare parts and equipment sales
Revenue:
Maintenance reserve revenue										74,651	71,141
Spare parts and equipment sales | Eliminations
Revenue:
Maintenance reserve revenue										0	0
Spare parts and equipment sales | Leasing and Related Operations | Operating Segments
Revenue:
Maintenance reserve revenue										18,684	30,122
Spare parts and equipment sales | Spare Parts Sales | Operating Segments
Revenue:
Maintenance reserve revenue										55,967	41,019
Managed Services And Other Revenue [Member]
Revenue:
Maintenance reserve revenue										14,777	7,644
Managed Services And Other Revenue [Member] | Eliminations
Revenue:
Maintenance reserve revenue										(238)	(1,662)
Managed Services And Other Revenue [Member] | Leasing and Related Operations | Operating Segments
Revenue:
Maintenance reserve revenue										14,738	7,579
Managed Services And Other Revenue [Member] | Spare Parts Sales | Operating Segments
Revenue:
Maintenance reserve revenue										$ 277	$ 1,727

[1] Total assets at December 31, 2019 and December 31, 2018 include the following assets of variable interest entity’s (“VIE’s”) that can only be used to settle the liabilities of the VIE’s: Cash, $134 and $656; Restricted Cash, $56,523 and $70,261, Equipment, $1,004,851 and $1,032,599; Maintenance Rights, $3,133 and $11,466; Inventory, $2,832 and $4,921; and Other, $668 and $1,075 respectively.

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Commitments, Contingencies, Guarantees and Indemnities

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments, Contingencies, Guarantees and Indemnities

Commitments, Contingencies, Guarantees and Indemnities

Other obligations 

Other obligations, such as certain purchase obligations are not recognized as liabilities in the consolidated financial statements but are required to be disclosed in the footnotes to the financial statements. These funding commitments could potentially require the Company’s performance in the event of demands by third parties or contingent events. As of December 31, 2019, the Company had $459.3 million in purchase commitments of equipment that will be satisfied within four fiscal years. The purchase obligations are subject to escalation based on the closing date of each transaction.

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Revenue from Contracts with Customers

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

The following table disaggregates revenue by major source for the years ended December 31, 2019 and 2018 (in thousands):

Year ended December 31, 2019	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue	$	299,688	$	—	$	—		$	299,688
Spare parts and equipment sales	18,684		55,967		—			74,651
Gain on sale of leased equipment	20,044		—		—			20,044
Managed services	10,843		—		—			10,843
Other revenue	3,895		277		(238		)	3,934
Total revenue	$	353,154	$	56,244	$	(238	)	$	409,160

Year ended December 31, 2018	Leasing and  Related Operations		Spare Parts Sales		Eliminations (1)			Total
Leasing revenue (2)	$	262,618	$	—	$	—		$	262,618
Spare parts and equipment sales	30,122		41,019		—			71,141
Gain on sale of leased equipment	6,944		—		—			6,944
Managed services (2)	7,287		—		—			7,287
Other revenue (2)	292		1,727		(1,662		)	357
Total revenue	$	307,263	$	42,746	$	(1,662	)	$	348,347

________________________________________________________

(1) Represents revenue generated between our reportable segments.

(2)

Certain amounts have been reclassified to conform with the classification as of December 31, 2019.

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Derivative Instruments

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Derivative Instruments

The Company periodically holds interest rate derivative instruments to mitigate exposure to changes in interest rates, to predominantly one-month LIBOR, with $404.3 million and $427.0 million of variable rate borrowings at December 31, 2019 and 2018, respectively. As a matter of policy, management does not use derivatives for speculative purposes. As of December 31, 2019, the Company has two interest rate swap agreements. One interest rate swap agreement was entered into during 2016 which has notional outstanding amount of $100.0 million, with remaining terms of 16 months as of December 31, 2019. During October 2019, the Company entered into one additional fixed-rate interest swap agreement which has a notional outstanding amount of $100.0 million, with remaining terms of 54 months as of December 31, 2019. The derivative instruments were designated as a cash flow hedge and recorded at fair value.

The Company evaluated the effectiveness of the swaps to hedge the interest rate risk associated with its variable rate debt and concluded at the swap inception date that the swaps were highly effective in hedging that risk. The Company evaluates the effectiveness of the hedging relationship on an ongoing basis.

The Company estimates the fair value of derivative instruments using a discounted cash flow technique and has used creditworthiness inputs that corroborate observable market data evaluating the Company’s and counterparties' risk of non-performance. Valuation of the derivative instruments requires certain assumptions for underlying variables and the use of different assumptions would result in a different valuation. Management believes it has applied assumptions consistently during the period. The Company applies hedge accounting and accounts for the change in fair value of its cash flow hedges through other comprehensive income for all derivative instruments.

The net fair value of the interest rate swaps was a $1.7 million net liability and a $1.7 million net asset at December 31, 2019 and 2018, respectively. The Company recorded an adjustment to interest expense of $0.7 million and $0.4 million during the years ended December 31, 2019 and 2018, respectively, from derivative investments.

Effect of Derivative Instruments on Earnings in the Statements of Income and of Comprehensive Income

The following table provides additional information about the financial statement effects related to the cash flow hedges for the years ended December 31, 2019 and 2018:

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)					Location of Gain Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain Reclassified from Accumulated OCI into  Income (Effective Portion)
	Years Ended December 31,						Years Ended December 31,
	2019			2018			2019		2018
	(in thousands)						(in thousands)
Interest rate contracts	$	(3,331	)	$	533	Interest expense	$	713	$	359
Total	$	(3,331	)	$	533	Total	$	713	$	359

The effective portion of the change in fair value on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings or it is probable that the forecasted transaction will not occur. The ineffective portion of the hedges, if any, is recorded in earnings in the current period. There was no ineffectiveness in the hedges for the year ended December 31, 2019 and 2018.

Counterparty Credit Risk

The Company evaluates the creditworthiness of the counterparties under its hedging agreements. The counterparties for both interest rate swaps are large financial institutions that possessed an investment grade credit rating. Based on this rating, the Company believes that the counterparties were credit-worthy and that their continuing performance under the hedging agreement was probable and did not require the counterparties to provide collateral or other security to the Company.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Schedule of components of income (loss) from continuing operation before income taxes

The components of income before income taxes are as follows:

	Years ended December 31,
	2019		2018
	(in thousands)
United States	$	88,182	$	55,117
Foreign	699		1,157
Income before income taxes	$	88,881	$	56,274

Schedule of components of income tax expense

The components of income tax expense for the years ended December 31, 2019 and 2018 were as follows:

	Federal		State			Foreign		Total
	(in thousands)
2019
Current	$	—	$	722		$	163	$	885
Deferred	20,205		869			—		21,074
Total	$	20,205	$	1,591		$	163	$	21,959
2018
Current	$	—	$	364		$	622	$	986
Deferred	12,871		(814		)	—		12,057
Total	$	12,871	$	(450	)	$	622	$	13,043

Schedule of reconciliation of the federal income tax expense at the statutory rate to the effective income tax expense

The following is a reconciliation of the federal income tax expense at the statutory rate of 21% for the years ended December 31, 2019 and 2018 to the effective income tax expense:

	Years Ended December 31,
	2019			2018
	(in thousands)
Statutory federal income tax expense	$	18,665		$	11,818
State taxes, net of federal benefit	1,440			(526		)
Foreign tax paid	—			622
Foreign jurisdiction rate differential	475			—
Permanent differences-nondeductible executive compensation	2,083			1,144
Permanent differences and other	(704		)	(15		)
Effective income tax expense	$	21,959		$	13,043

Summary of activity related to the Company's unrecognized tax benefits

The following table summarizes the activity related to the Company’s unrecognized tax benefits:

	(in thousands)
Balance as of December 31, 2017	$	191
Decreases due to tax positions expired	(9		)
Balance as of December 31, 2018	182
Increases related to current year tax positions	250
Decreases due to tax positions expired	(162		)
Balance as of December 31, 2019	$	270

Schedule of tax effects of temporary differences of the deferred tax assets and liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:

	As of December 31,
	2019			2018
	(in thousands)
Deferred tax assets:
Unearned lease revenue	$	1,277		$	1,094
State taxes	152			77
Reserves and allowances	1,988			1,187
Other accruals	4,974			3,795
Foreign tax credit	19			26
Lease liability	271			—
Net operating loss carry forward	12,091			39,996
Charitable contributions	57			38
Total deferred tax assets	20,829			46,213
Less: valuation allowance	(153		)	(652		)
Net deferred tax assets	20,676			45,561
Deferred tax liabilities:
Depreciation and impairment on aircraft engines and equipment	(118,595		)	(133,453		)
Inventory	(2,350		)	—
Right of use liability	(6,900		)	—
Other deferred tax assets (liabilities)	(4,198		)	(2,365		)
Net deferred tax liabilities	(132,043		)	(135,818		)
Other comprehensive loss deferred tax liability	949			(28		)
Net deferred tax liabilities	$	(110,418	)	$	(90,285	)

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Equipment Held for Operating Lease (Tables)

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Schedule of geographic information about the entity's leased aircraft equipment grouped by domicile of the lessee

The tables below set forth geographic information about the leased equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):

	Years Ended December 31,
Lease rent revenue	2019		2018
	(in thousands)
Region
Europe	$	84,335	$	70,842
Asia	42,127		40,717
United States	39,178		40,100
South America	10,030		11,338
Mexico	5,284		4,721
Middle East	4,117		3,286
Canada	3,279		4,585
Africa	2,340		20
Totals	$	190,690	$	175,609

Schedule of lease status of the equipment held for operating lease

	As of December 31,
Net book value of equipment held for operating lease	2019		2018
	(in thousands)
Region
Europe	$	554,529	$	624,913
Asia	427,246		368,690
United States	240,454		260,095
South America	110,563		118,508
Mexico	51,573		33,795
Middle East	26,732		43,602
Canada	22,640		18,792
Africa	2,597		2,597
Off-lease and other	214,584		202,143
Totals	$	1,650,918	$	1,673,135

As of December 31, 2019, the lease status of the equipment held for operating lease (in thousands) was as follows:

Lease Term	Net Book Value
Off-lease and other	$	214,584
Month-to-month leases	196,143
Leases expiring 2020	549,244
Leases expiring 2021	131,217
Leases expiring 2022	323,383
Leases expiring 2023	97,613
Leases expiring 2024	70,507
Leases expiring thereafter	68,227
	$	1,650,918

Schedule of minimum future payments under non-cancelable leases

As of December 31, 2019, minimum future payments under non-cancelable leases were as follows:

Year	(in thousands)
2020	$	155,970
2021	95,015
2022	59,033
2023	33,418
2024	21,287
Thereafter	14,754
	$	379,477

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Leases - Components of Lease Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Leases [Abstract]
Operating lease cost	$ 1,326	$ 1,688
Net lease cost	1,326	$ 1,688
Cash paid for amounts included in the measurement of lease liabilities, operating leases	920
Right-of-use assets obtained in exchange for lease obligations, operating leases	$ 495

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Equipment Held for Operating Lease - Leased Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	$ 1,650,918	$ 1,673,135
Off-lease and other
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	214,584	202,143
Europe
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	554,529	624,913
Asia
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	427,246	368,690
United States
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	240,454	260,095
South America
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	110,563	118,508
Mexico
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	51,573	33,795
Middle East
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	26,732	43,602
Canada
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	22,640	18,792
Africa
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	2,597	$ 2,597
Month-to-month leases
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	196,143
Leases expiring 2020
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	549,244
Leases expiring 2021
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	131,217
Leases expiring 2022
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	323,383
Leases expiring 2023
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	97,613
Leases expiring 2024
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	70,507
Leases expiring thereafter
Lessor, Lease, Description [Line Items]
Net book value of equipment held for operating lease	$ 68,227

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Subsequent Event (Details) $ in Millions	Mar. 03, 2020	Mar. 03, 2020 engine	Mar. 03, 2020 USD ($)	Mar. 03, 2020 airframe	Dec. 31, 2019 engine
Subsequent Event [Line Items]
Number of assets used to secure debt | engine					2
WEST V | Subsequent Event
Subsequent Event [Line Items]
Number of assets used to secure debt		54		3
Delivery period	270 days
WEST V | WEST V Notes | Subsequent Event
Subsequent Event [Line Items]
Aggregate principal amount			$ 366.2
WEST V | WEST V Series A Notes | Subsequent Event
Subsequent Event [Line Items]
Aggregate principal amount			303.0
Fixed rate (as a percent)	3.228%
Notes issue price, percentage of par	99.99859%
WEST V | WEST V Series B Notes | Subsequent Event
Subsequent Event [Line Items]
Aggregate principal amount			42.1
Fixed rate (as a percent)	4.212%
Notes issue price, percentage of par	99.99493%
WEST V | WEST V Series C Notes | Subsequent Event
Subsequent Event [Line Items]
Aggregate principal amount			$ 21.1
Fixed rate (as a percent)	6.6657%
Notes issue price, percentage of par	99.99918%

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Employee 401(k) Plan (Details) - USD ($)	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Retirement Benefits [Abstract]
Maximum percentage of pretax salary, which can be deferred by employees	75.00%
Maximum amount of wages, which can be deferred by employees	$ 19,000
Maximum amount of wages, which can be deferred by employees at least 50 years of age	$ 25,000
Minimum age of employees for a specified contribution amount of wages	50 years
Percentage of employee's salary for which the company contributes a matching contribution	50.00%
Maximum amount of employee's salary for which the company contributes a matching contribution	$ 12,500,000
Amount of employer contribution	$ 500,000	$ 300,000

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SCHEDULE I - Parent Company Information - Condensed Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net income	$ 66,922	$ 43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	86,236	76,814
Write-down of equipment	18,220	10,651
Stock-based compensation expenses	7,787	5,410
Amortization of deferred costs	6,364	6,403
Allowances and provisions	(272)	1,503
Gain on sale of leased equipment	(20,044)	(6,944)
Income from joint ventures	(8,578)	(3,800)
Loss on debt extinguishment	220	0
Loss (gain) on disposal of property, equipment and furnishings	42	(41)
Deferred income taxes	21,074	12,057
Changes in assets and liabilities:
Receivables	(517)	(5,925)
Distributions received from joint ventures	3,300	5,730
Inventory	29,114	12,111
Other assets	(2,519)	(3,453)
Accounts payable and accrued expenses	2,131	12,543
Maintenance reserves	22,282	21,964
Security deposits	(2,108)	3,075
Unearned revenue	661	(2,642)
Net cash provided by operating activities	230,315	188,687
Cash flows from investing activities:
Proceeds from sale of equipment (net of selling expenses)	191,891	64,429
Issuance of notes receivable	(42,857)	0
Payments received on notes receivable	4,950	0
Capital contributions to joint ventures	(5,713)	0
Purchase of equipment held for operating lease and for sale	(289,385)	(441,416)
Purchase of property, equipment and furnishings	(6,330)	(3,487)
Net cash used in investing activities	(147,444)	(380,474)
Cash flows from financing activities:
Proceeds from issuance of debt obligations	340,120	759,439
Debt issuance costs	(3,142)	(7,748)
Principal payments on debt obligations	(428,081)	(504,753)
Interest bearing security deposits	(2,092)	0
Proceeds from shares issued under stock compensation plans	335	245
Repurchase of common stock	(3,567)	(16,135)
Preferred stock dividends	(3,250)	(3,348)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475)	(1,288)
Net cash (used in) provided by financing activities	(101,152)	226,412
Increase/(Decrease) in cash, cash equivalents and restricted cash	(18,281)	34,625
Cash, cash equivalents and restricted cash at beginning of period	81,949	47,324
Cash, cash equivalents and restricted cash at end of period	63,668	81,949
Net cash paid for:
Interest	63,585	59,122
Income Taxes	222	1,073
Supplemental disclosures of non-cash activities:
Transfers from Equipment held for operating lease to Equipment held for sale	10,131	0
Transfers from Equipment held for operating lease to Spare parts inventory	23,931	18,220
Accrued preferred stock dividends	686	686
Accretion of preferred stock issuance costs	84	83
Parent Company
Cash flows from operating activities:
Net income	66,922	43,231
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries	(45,441)	(43,937)
Depreciation expense	30,934	34,795
Write-down of equipment	4,425	2,567
Stock-based compensation expenses	7,787	5,410
Amortization of deferred costs	2,748	3,324
Allowances and provisions	(365)	439
Gain on sale of leased equipment	(12,269)	(6,183)
Income from joint ventures	(8,578)	(3,800)
Loss on debt extinguishment	220	0
Loss (gain) on disposal of property, equipment and furnishings	19	41
Deferred income taxes	9,554	(434)
Changes in assets and liabilities:
Receivables	818	4,073
Distributions received from joint ventures	3,300	5,730
Inventory	8,195	7,320
Other assets	(3,640)	(3,983)
Accounts payable and accrued expenses	2,946	19,459
Due to / from subsidiaries	31,449	41,449
Maintenance reserves	(6,062)	(9,500)
Security deposits	(123)	(6,773)
Unearned revenue	553	(3,034)
Net cash provided by operating activities	93,392	90,194
Cash flows from investing activities:
Increase in investment in subsidiaries	0	(9,104)
Distributions received from subsidiaries	32,066	388,910
Proceeds from sale of equipment (net of selling expenses)	145,117	48,049
Issuance of notes receivable	(42,857)	0
Payments received on notes receivable	4,950	0
Capital contributions to joint ventures	(5,713)	0
Purchase of equipment held for operating lease and for sale	(184,505)	(417,857)
Purchase of property, equipment and furnishings	(2,607)	(1,104)
Net cash used in investing activities	(53,549)	8,894
Cash flows from financing activities:
Proceeds from issuance of debt obligations	332,000	386,000
Debt issuance costs	(3,142)	0
Principal payments on debt obligations	(363,813)	(462,119)
Interest bearing security deposits	(1,046)	0
Proceeds from shares issued under stock compensation plans	335	245
Repurchase of common stock	(3,567)	(16,136)
Preferred stock dividends	(3,250)	(3,348)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475)	(1,288)
Net cash (used in) provided by financing activities	(43,958)	(96,646)
Increase/(Decrease) in cash, cash equivalents and restricted cash	(4,115)	2,442
Cash, cash equivalents and restricted cash at beginning of period	5,302	2,860
Cash, cash equivalents and restricted cash at end of period	1,187	5,302
Net cash paid for:
Interest	17,891	23,525
Income Taxes	(341)	795
Supplemental disclosures of non-cash activities:
Engines and equipment transferred to the subsidiaries from the parent	0	42,456
Transfers from Equipment held for operating lease to Equipment held for sale	6,681	0
Transfers from Equipment held for operating lease to Spare parts inventory	13,805	26,387
Accrued preferred stock dividends	686	686
Accretion of preferred stock issuance costs	$ 84	$ 83

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SCHEDULE I - Parent Company Information - Condensed Balance Sheets - Additional Information (Details) - $ / shares	Dec. 31, 2019	Dec. 31, 2018
Redeemable preferred stock - par value (in dollars per share)	$ 0.01	$ 0.01
Redeemable preferred stock - shares authorized (in shares)	2,500,000	2,500,000
Issuance of preferred stock (in shares)	2,500,000	2,500,000
Redeemable preferred stock - shares outstanding (in shares)	2,500,000	2,500,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	6,356,000	6,176,000
Common stock, shares outstanding (in shares)	6,356,000	6,176,000
Parent Company
Redeemable preferred stock - par value (in dollars per share)	$ 0.01	$ 0.01
Redeemable preferred stock - shares authorized (in shares)	2,500,000	2,500,000
Issuance of preferred stock (in shares)	2,500,000	2,500,000
Redeemable preferred stock - shares outstanding (in shares)	2,500,000	2,500,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	6,356,000	6,176,000
Common stock, shares outstanding (in shares)	6,356,000	6,176,000

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Equity (Details) - USD ($)					12 Months Ended
	Sep. 27, 2017	Sep. 22, 2017	Oct. 14, 2016	Oct. 11, 2016	Dec. 31, 2019	Dec. 31, 2018
Common Stock Repurchase
Repurchase of common stock authorized by Board of Directors						$ 60,000,000.0
Common stock repurchased, value					$ 3,567,000	$ 16,205,000
Weighted average price per share (in dollars per share)					$ 49.29	$ 34.36
Stock repurchase program, remaining authorized repurchase amount					$ 56,400,000
Redeemable preferred stock - shares issued (in shares)					2,500,000	2,500,000
Dividend rate (as a percent)					6.50%
Redeemable preferred stock - par value (in dollars per share)					$ 0.01	$ 0.01
Preferred stock dividends						$ (3,300,000)
Liquidation preference (in dollars per share)					20.00
Redemption price (in dollars per share)					$ 20.00
Common Stock
Common Stock Repurchase
Shares repurchased (in shares)					72,324	471,595
Common stock repurchased, value					$ 1,000	$ 5,000
Series A-1 Preferred Stock
Common Stock Repurchase
Redeemable preferred stock - shares issued (in shares)				1,000,000
Dividend rate (as a percent)				6.50%
Redeemable preferred stock - par value (in dollars per share)				$ 0.01
Purchase price (in dollars per share)				$ 20.00
Net proceeds after deducting investor fees			$ 19,800,000
Series A-2 Preferred Stock
Common Stock Repurchase
Redeemable preferred stock - shares issued (in shares)		1,500,000
Dividend rate (as a percent)		6.50%
Redeemable preferred stock - par value (in dollars per share)		$ 0.01
Purchase price (in dollars per share)		$ 20.00
Net proceeds after deducting investor fees	$ 29,700,000

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Leases

12 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Leases

As lessor, and as of December 31, 2019, all of our leases were operating leases with the exception of two leases entered into during the first quarter of 2019 which are classified as notes receivable under the failed sale leaseback guidance provided by ASC 842.

As lessee, the significant majority of leases the Company enters are for real estate (office and warehouse space for our operations as well as automobiles). These lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of January 1, 2019, the Company did not have any significant leases that had not yet commenced but that created significant rights and obligations. Leases with terms of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Some of the Company's leases include variable non-lease components (e.g., taxes) which are not separated from associated lease components (e.g. fixed rent, common-area maintenance costs, vehicle protection plans and other service fees) as elected under the practical expedient package provided by ASC 842.

The Company's leases have remaining lease terms of one to seven years, some of which include options to renew or extend the lease term from one to five years. Our automobile leases include an option to purchase the vehicle at lease termination. The depreciable life of assets is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The exercise of lease renewal options or purchase at lease termination is at the Company's sole discretion. If it is reasonably certain that we will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of our ROU assets and lease liabilities.

Supplemental balance sheet information related to leases was as follows:

Leases	Classification	December 31, 2019
		(in thousands, except lease term and discount rate)
Assets
Operating lease right-of-use assets	Other assets	$	4,084
Total leased assets		$	4,084
Liabilities
Operating lease right-of-use liabilities	Accounts payable and accrued expenses	$	3,835
Total lease liabilities		$	3,835
Weighted average remaining lease term (years)
Operating leases		5.17
Weighted average discount rate
Operating leases		4.5		%

The weighted average discount rate is based on the discount rate for each lease and the remaining balance of the lease payments for each lease at the reporting date.

Future maturities of the Company's operating lease liabilities at December 31, 2019 are as follows:

Year	(in thousands)
2020	$	947
2021	895
2022	762
2023	504
2024	358
Thereafter	896
Total lease payments	4,362
Less: interest	(527		)
Total lease liabilities	$	3,835

The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2019:

Year	(in thousands)
2020	$	922
2021	878
2022	762
2023	504
2024	358
Thereafter	896
	$	4,320

The following table represents future minimum lease payments under noncancelable operating leases at December 31, 2018 as presented in the Company's 2018 Form 10-K:

Year	(in thousands)
2019	$	1,172
2020	676
2021	638
2022	645
2023	483
Thereafter	1,183
	$	4,797

The components of lease expense for the years ended December 31, 2019 and 2018 were as follows:

Lease expense	Classification	2019		2018
		(in thousands)
Operating lease cost	General and administrative	$	1,326	$	1,688
Net lease cost		$	1,326	$	1,688

Supplemental cash flow information related to leases for the year ended December 31, 2019 was as follows:

	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	920
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	495

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Debt Obligations

12 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt Obligations

Debt Obligations

Debt obligations consisted of the following:

	As of December 31,
	2019			2018
	(in thousands)
Credit facility at a floating rate of interest of one-month LIBOR plus 1.375% at December 31, 2019, secured by engines. The facility has a committed amount of $1.0 billion at December 31, 2019, which revolves until the maturity date of June 2024	$	397,000		$	427,000
WEST IV Series A 2018 term notes payable at a fixed rate of interest of 4.75%, maturing in September 2043, secured by engines	307,014			323,075
WEST IV Series B 2018 term notes payable at a fixed rate of interest of 5.44%, maturing in September 2043, secured by engines	43,859			46,154
WEST III Series A 2017 term notes payable at a fixed rate of interest of 4.69%, maturing in August 2042, secured by engines	257,754			274,205
WEST III Series B 2017 term notes payable at a fixed rate of interest of 6.36%, maturing in August 2042, secured by engines	36,860			39,212
WEST II Series A 2012 term notes payable at a fixed rate of interest of 5.50%, maturing in September 2037, secured by engines	211,572			237,847
Note payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% at December 31, 2019, maturing in July 2022, secured by engines	7,286			—
Note payable at fixed rate of interest of 3.18%, maturing in July 2024, secured by an aircraft	9,124			10,937
	1,270,469			1,358,430
Less: unamortized debt issuance costs	(19,463		)	(21,081		)
Total debt obligations	$	1,251,006		$	1,337,349

One-month LIBOR was 1.76% and 2.50% as of December 31, 2019 and December 31, 2018, respectively. Three-month LIBOR was 1.91% as of December 31, 2019.

Principal outstanding at December 31, 2019, is expected to be repayable as follows:

Year	(in thousands)
2020	$	56,118
2021	56,415
2022 (includes $158.4 million outstanding on WEST II Series A 2012 term note)	207,994
2023	34,018
2024 (includes $397.0 million outstanding on revolving credit facility)	430,185
Thereafter	485,739
Total	$	1,270,469

At December 31, 2019, the Company had a revolving credit facility to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement. In April 2016, the Company entered into a Third Amended and Restated Credit Agreement with a revolving credit facility of $890.0 million and a term to April 2021. This $890.0 million revolving credit facility had an accordion feature which would expand the entire credit facility up to $1.0 billion.

In June 2019, the Company entered into the Fourth Amended and Restated Credit Agreement (“Amended Credit Agreement”) which increased the revolving credit facility from $890.0 million to $1.0 billion. The Amended Credit Agreement incorporates an accordion feature that can expand the credit facility up to $1.3 billion, extends the maturity of the credit facility to June 2024 and provides for certain other amendments to covenants, interest rates and commitment fees.

In connection with entering into the Amended Credit Agreement in June 2019, the Company incurred and deferred an additional $2.8 million of debt issuance costs, and recognized a loss on debt extinguishment of $0.2 million. Unamortized debt issuance costs are included as a reduction to “Debt Obligations” in the consolidated balance sheets and are amortized to “Interest expense” on a straight-line basis through the maturity date of the Amended Credit Agreement. Pursuant to the Amended Credit Agreement, all obligations under the revolving credit facility are collateralized by the title and interest of the Company and certain of its subsidiaries, and to substantially all of its assets and properties. In December 2019, the Company entered into Amendment No. 1 to the Fourth Amended and Restated Credit Agreement and Amendment No. 5 to the Security Agreement. The Amendments, which among other things, increase the maximum leverage ratio from 4.00:1.00 to 4.50:1.00 through December 31, 2020, if a permitted change in control is consummated.

As of December 31, 2019 and 2018, $603.0 million and $463.0 million were available under this facility, respectively. On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility. Under the revolving credit facility, all subsidiaries except WEST II, WEST III, and WEST IV jointly and severally guarantee payment and performance of the terms of the loan agreement. The guarantee would be triggered by a default under the agreement.

At December 31, 2019 and 2018, $350.9 million and $369.2 million of WEST IV term notes were outstanding, respectively. At December 31, 2019 and 2018,  $294.6 million and $313.4 million of WEST III term notes were outstanding, respectively. At December 31, 2019 and 2018, $211.6 million and $237.8 million of WEST II term notes were outstanding, respectively.

The assets of WEST II, WEST III and WEST IV are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity. WEST II, WEST III and WEST IV are consolidated for financial statement presentation purposes. WEST II, WEST III and WEST IV’s ability to make distributions and pay dividends to the Company is subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital. Under WEST II, WEST III and WEST IV, cash is collected in a restricted account, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. The WEST II, WEST III, and WEST IV indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.

In July 2019, the Company’s note payable secured by a corporate aircraft was repriced at a fixed interest rate of 3.18% and will continue to mature in July 2024. The balance outstanding on these loans was $9.1 million and $10.9 million as of December 31, 2019 and December 31, 2018, respectively.

In February 2019, the Company entered into a new $8.1 million loan with a financial institution and has a maturity date of July 2022. Interest is payable at three-month LIBOR plus a margin ranging from 1.85% to 2.50% and principal and interest are paid quarterly.  The loan is secured by two engines.

Virtually all of the above debt requires ongoing compliance with the covenants of each financing, including debt/equity ratios, minimum tangible net worth and minimum interest coverage ratios, and other eligibility criteria including customer and geographic

concentration restrictions. The Company also has certain negative financial covenants such as liens, advances, change in business, sales of assets, dividends and stock repurchases. These covenants are tested either monthly or quarterly and the Company was in full compliance with all financial covenant requirements at December 31, 2019.

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Earnings Per Share

12 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Basic earnings per common share is computed by dividing net income, less preferred stock dividends and accretion of preferred stock issuance costs, by the weighted average number of common shares outstanding for the period. Treasury stock is excluded from the weighted average number of shares of common stock outstanding. Diluted earnings per share attributable to common stockholders is computed based on the weighted average number of shares of common stock and dilutive securities outstanding during the period. Dilutive

securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the vesting of restricted stock using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is anti-dilutive. Additionally, redeemable preferred stock is not convertible and does not affect dilutive shares.

There were no anti-dilutive shares included in the computations of diluted weighted average earnings per common share for the year ended December 31, 2019. The computations of diluted weighted average earnings per common share do not include approximately 400 restricted shares for the year ended December 31, 2018 as the effect of their inclusion would have been anti-dilutive to earnings per share.

The following table presents the calculation of basic and diluted EPS:

	Year Ended December 31,
	2019		2018
	(in thousands)
Net income attributable to common shareholders	$	63,588	$	39,898
Basic weighted average common shares outstanding	5,836		5,915
Potentially dilutive common shares	222		131
Diluted weighted average common shares outstanding	6,058		6,046
Basic weighted average earnings per common share	$	10.90	$	6.75
Diluted weighted average earnings per common share	$	10.50	$	6.60

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Schedule of fair value hierarchy of assets measured on nonrecurring basis and gain (losses) recorded

	Total Losses
	Years Ended December 31,
	2019		2018
	(in thousands)
Equipment held for lease	$	18,132	$	8,893
Equipment held for sale	88		1,758
Total	$	18,220	$	10,651

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Investments (Tables)

12 Months Ended

Dec. 31, 2019

Investments [Abstract]

Schedule of investments

Years Ending December 31, 2019 and 2018 (in thousands)	WMES			CASC Willis			Total
Investment in joint ventures as of December 31, 2017	$	36,014		$	14,627		$	50,641
Earnings (loss) from joint ventures	3,899			(99		)	3,800
Distribution	(5,730		)	—			(5,730		)
Foreign currency translation adjustment	—			(770		)	(770		)
Investment in joint ventures as of December 31, 2018	34,183			13,758			47,941
Earnings from joint ventures	8,312			266			8,578
Contribution	5,713			—			5,713
Distribution	(3,300		)	—			(3,300		)
Foreign currency translation adjustment	—			(222		)	(222		)
Other comprehensive loss from joint ventures	(774		)	—			(774		)
Investment in joint ventures as of December 31, 2019	$	44,134		$	13,802		$	57,936

Summarized financial information

Unaudited summarized financial information for 100% of WMES is presented in the following table:

	Years Ended December 31,
	2019		2018
	(in thousands)
Revenue	$	55,770	$	38,465
Expenses	41,253		30,934
WMES net income	$	14,517	$	7,531

	As of December 31,
	2019		2018
	(in thousands)
Total assets	$	322,606	$	274,744
Total liabilities	227,052		198,534
Total WMES net equity	$	95,554	$	76,210

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Employee 401(k) Plan

12 Months Ended

Dec. 31, 2019

Retirement Benefits [Abstract]

Employee 401(k) Plan

Employee 401(k) Plan

The Company adopted The Willis 401(k) Plan (the “401(k) Plan”) effective as of January 1997. The 401(k) Plan provides for deferred compensation as described in Section 401(k) of the Internal Revenue Code. The 401(k) Plan is a contributory plan available to all full-time and part-time employees in the United States. In 2019, employees who participated in the 401(k) Plan could elect to defer and contribute to the 401(k) Plan up to 75% of pretax salary or wages up to $19,000 (or $25,000 for employees at least 50 years of age). The Company matches 50% of employee contributions and was capped at $12,500 per employee in 2019. The Company match totaled $0.5 million and $0.3 million for the years ended December 31, 2019 and 2018, respectively.

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Subsequent Events

12 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

WEST V Securitization

On March 3, 2020, the Company renamed its wholly owned subsidiary, WEST II, to Willis Engine Structured Trust V (“WEST V”) and issued $366.2 million in aggregate principal amount of fixed rate notes (the “WEST V Notes”). The WEST V Notes consist of three series; Series A Notes in an aggregate principal amount of $303.0 million bearing a 3.228% fixed rate coupon issued at a price of 99.99859% of par, Series B Notes in an aggregate principal amount of $42.1 million bearing a 4.212% fixed rate coupon issued at a price of 99.99493% of par, and Series C Notes in an aggregate principal amount of $21.1 million bearing a 6.6657% fixed rate coupon issued at a price of 99.99918% of par. The WEST V Notes will be secured by, among other things, WEST V’s direct and indirect interests in a portfolio of 54 aircraft engines and three airframes.

The net proceeds of the WEST V Notes will be primarily applied to (i) repay in full the aggregate principal amount of outstanding Class 2012-A Fixed Rate Term Notes issued by WEST II and pay any accrued and unpaid interest thereon, (ii) pay fees and expenses related to the issuance of the WEST V Notes, (iii) pay WLFC periodically over a 270-day delivery period as consideration for the aircraft engines and the airframes acquired by WEST V from WLFC in connection with the financing and (iv) make a distribution to WLFC with some or all of the excess proceeds, to the extent any excess proceeds remain after giving effect to the foregoing. The Company will apply any net proceeds it receives for general corporate purposes.

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Organization and Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jan. 01, 2019	Dec. 31, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU assets	$ 4,084
Total lease liabilities	3,835
Retained earnings	$ 348,965		$ 286,623
ASU 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
ROU assets		$ 4,500
Total lease liabilities		4,300
Retained earnings		$ 200

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Consolidated Balance Sheets - USD ($) $ in Thousands		Dec. 31, 2019	Dec. 31, 2018
ASSETS
Cash and cash equivalents		$ 6,720	$ 11,688
Restricted cash		56,948	70,261
Equipment held for operating lease, less accumulated depreciation of $414,835 and $385,483 at December 31, 2019 and 2018, respectively		1,650,918	1,673,135
Maintenance rights		3,133	14,763
Equipment held for sale		120	789
Receivables, net of allowances of $1,730 and $2,559 at December 31, 2019 and 2018, respectively		24,059	23,270
Spare parts inventory		41,759	48,874
Investments		57,936	47,941
Property, equipment & furnishings, less accumulated depreciation of $8,666 and $6,945 at December 31, 2019 and 2018, respectively		31,520	27,679
Intangible assets, net		1,312	1,379
Notes receivable		38,145	238
Other assets		28,038	14,926
Total assets	[1]	1,940,608	1,934,943
Liabilities:
Accounts payable and accrued expenses		45,648	42,939
Deferred income taxes		110,418	90,285
Debt obligations		1,251,006	1,337,349
Maintenance reserves		106,870	94,522
Security deposits		20,569	28,047
Unearned revenue		6,121	5,460
Total liabilities	[2]	1,540,632	1,598,602
Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2019 and 2018, respectively)		49,638	49,554
Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,356 and 6,176 shares issued and outstanding at December 31, 2019 and 2018, respectively)		64	62
Paid-in capital in excess of par		4,557	0
Retained earnings		348,965	286,623
Accumulated other comprehensive (loss) income, net of income tax (benefit) expense of $(896) and $81 at December 31, 2019 and 2018, respectively.		(3,248)	102
Total shareholders’ equity		350,338	286,787
Total liabilities, redeemable preferred stock and shareholders' equity		$ 1,940,608	$ 1,934,943

[1] Total assets at December 31, 2019 and December 31, 2018 include the following assets of variable interest entity’s (“VIE’s”) that can only be used to settle the liabilities of the VIE’s: Cash, $134 and $656; Restricted Cash, $56,523 and $70,261, Equipment, $1,004,851 and $1,032,599; Maintenance Rights, $3,133 and $11,466; Inventory, $2,832 and $4,921; and Other, $668 and $1,075 respectively.

[2] Total liabilities at December 31, 2019 and December 31, 2018 include the following liabilities of VIE’s for which the VIE’s creditors do not have recourse to Willis Lease Finance Corporation: Debt obligations, $842,996 and $903,296, respectively.

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Organization and Summary of Significant Accounting Policies - Equipment Held of Operating Lease (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) engine	Dec. 31, 2018 USD ($)
Equipment Held for Operating Lease
Impairment charge	$ 18,220	$ 10,651
Minimum
Equipment Held for Operating Lease
Estimated useful life	3 years
Maximum
Equipment Held for Operating Lease
Estimated useful life	39 years
Engines and related equipment
Equipment Held for Operating Lease
Number of engines | engine	47
New engine | Maximum
Equipment Held for Operating Lease
Estimated useful life	25 years
Aircraft | Minimum
Equipment Held for Operating Lease
Residual value (as a percent)	15.00%
Estimated useful life	13 years
Aircraft | Maximum
Equipment Held for Operating Lease
Residual value (as a percent)	17.00%
Estimated useful life	20 years
Engines and aircraft
Equipment Held for Operating Lease
Equipment net book value	$ 51,100
Engines and aircraft | Minimum
Equipment Held for Operating Lease
Estimated useful life	1 month
Engines and aircraft | Maximum
Equipment Held for Operating Lease
Estimated useful life	79 months
Equipment held for lease
Equipment Held for Operating Lease
Impairment charge	$ 6,400	$ 5,300
Equipment held for lease | Engines and related equipment
Equipment Held for Operating Lease
Residual value (as a percent)	55.00%
Estimated useful life	15 years
Equipment held for lease | Spare part packages
Equipment Held for Operating Lease
Residual value (as a percent)	25.00%
Equipment held for lease | Spare part packages | Minimum
Equipment Held for Operating Lease
Estimated useful life	14 years
Equipment held for lease | Spare part packages | Maximum
Equipment Held for Operating Lease
Estimated useful life	15 years

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Consolidated Statements of Redeemable Preferred Stock and Shareholders' Equity - USD ($) $ in Thousands	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Balances, beginning of period (in shares) at Dec. 31, 2017		2,500,000	6,419,000
Balances, beginning of period at Dec. 31, 2017	$ 258,910	$ 49,471	$ 64	$ 2,319	$ 256,301	$ 226
Increase (Decrease) in Shareholders' Equity
Net income	43,231				43,231
Net unrealized gain (loss) from currency translation adjustment, net of tax benefit	(596)					(596)
Net unrealized gain (loss) from derivative instruments, net of tax expense	413					413
Shares repurchased (in shares)			(471,595)
Shares repurchased	(16,205)		$ (5)	(6,683)	(9,517)
Shares issued under stock compensation plans (in shares)			272,000
Shares issued under stock compensation plans	245		$ 3	242
Cancellation of restricted stock units in satisfaction of withholding tax (in shares)			(43,000)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,288)			(1,288)
Stock-based compensation, net of forfeitures	5,410			5,410
Accretion of preferred stock issuance costs	(83)	$ 83			(83)
Preferred stock dividends paid	(3,250)				(3,250)
Balances, end of period (in shares) at Dec. 31, 2018		2,500,000	6,176,000
Balances, end of period at Dec. 31, 2018	286,787	$ 49,554	$ 62	0	286,623	102
Increase (Decrease) in Shareholders' Equity
Net income	66,922				66,922
Net unrealized gain (loss) from currency translation adjustment, net of tax benefit	(172)					(172)
Net unrealized gain (loss) from derivative instruments, net of tax expense	(3,178)					(3,178)
Shares repurchased (in shares)			(72,324)
Shares repurchased	(3,567)		$ (1)	(2,087)	(1,479)
Shares issued under stock compensation plans (in shares)			289,000
Shares issued under stock compensation plans	335		$ 3	332
Cancellation of restricted stock units in satisfaction of withholding tax (in shares)			(37,000)
Cancellation of restricted stock units in satisfaction of withholding tax	(1,475)			(1,475)
Stock-based compensation, net of forfeitures	7,787			7,787
Accretion of preferred stock issuance costs	(84)	$ 84			(84)
Preferred stock dividends paid	(3,250)				(3,250)
Balances, end of period (in shares) at Dec. 31, 2019		2,500,000	6,356,000
Balances, end of period at Dec. 31, 2019	$ 350,338	$ 49,638	$ 64	$ 4,557	$ 348,965	$ (3,248)

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Derivative Instruments - Interest rate swap agreement (Details) $ in Millions	12 Months Ended
	Dec. 31, 2019 USD ($) item	Oct. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2016 USD ($)
Interest rate contracts
Derivative instruments
Borrowings at variable interest rates	$ 404.3		$ 427.0
Number of interest rate swap agreements | item	2
Notional amount outstanding		$ 100.0		$ 100.0
Net fair value of swap liability	$ 1.7		$ 1.7
2016 Swap Agreement
Derivative instruments
Remaining maturity term	16 months
2019 Swap Agreement
Derivative instruments
Remaining maturity term	54 months

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Income Taxes - Components of Income Before Taxes and of Income Tax Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
United States	$ 88,182	$ 55,117
Foreign	699	1,157
Income before income taxes	88,881	56,274
Federal
Current	0	0
Deferred	20,205	12,871
Total	20,205	12,871
State
Current	722	364
Deferred	869	(814)
Total	1,591	(450)
Foreign
Current	163	622
Deferred	0	0
Total	163	622
Total
Current	885	986
Deferred	21,074	12,057
Income tax expense	21,959	13,043
Reconciliation of the federal income tax expense at the statutory rate to the effective income tax expense
Statutory federal income tax expense	18,665	11,818
State taxes, net of federal benefit	1,440	(526)
Foreign tax paid	0	622
Change in federal tax rate	475	0
Permanent differences-nondeductible executive compensation	2,083	1,144
Permanent differences and other	(704)	(15)
Effective income tax expense	$ 21,959	$ 13,043

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Fair Value Measurements - Nonrecurring Basis (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2019 USD ($) engine	Dec. 31, 2018 USD ($) engine	Dec. 31, 2018 USD ($) airframe_part_package	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Assets at fair value and gains (losses) recorded
Asset write-down	$ 18,220			$ 10,651
Number of assets impaired	16	6	6
Impaired assets, remaining carrying value	$ 37,800	$ 18,300	$ 18,300	18,300
Nonrecurring
Assets at fair value and gains (losses) recorded
Total losses on equipment held for lease	18,132			8,893
Total losses on equipment held for sale	88			1,758
Total losses on assets	18,220			10,651
Asset write-down	$ 18,200			8,900	$ 10,700
Inventory write-offs				$ 1,800
Assets To Be Sold Or Parted Out
Assets at fair value and gains (losses) recorded
Number of assets impaired | engine	11
Assets To Be Sold Or Parted Out | Nonrecurring
Assets at fair value and gains (losses) recorded
Asset write-down	$ 11,800
Impaired Assets
Assets at fair value and gains (losses) recorded
Number of assets impaired | engine	7	7
Impaired Assets | Nonrecurring
Assets at fair value and gains (losses) recorded
Asset write-down	$ 6,400