10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

ý	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	for the fiscal year ended December 31, 2004
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 0-28774

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.)
2320 Marinship Way, Suite 300, Sausalito, CA	94965
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code    (415) 275-5100

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

None.

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

Title of Each Class	Name of each exchange on which registered
Common Stock Preferred Stock	Nasdaq

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  ý     No  o

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).Yes  oNo  ý

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 was approximately $37.6 million (based on a closing sale price of $8.26 per share as reported on the NASDAQ National Market).

The number of shares of the registrant’s Common Stock outstanding as of March 23, 2005 was 9,013,140.

The Company’s Proxy Statement for the 2004 Annual Meeting of Stockholders is incorporated by reference into Part III of this 10-K.

WILLIS LEASE FINANCE CORPORATION

2004 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

	PART I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
	PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
	PART III
Item 10.	Directors and Executives Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services
	PART IV
Item 15.	Exhibits and Financial Statements Schedules

2

PART I

ITEM 1.BUSINESS

INTRODUCTION

Willis Lease Finance Corporation and its subsidiaries (the “Company”) is a lessor of commercial aircraft engines and other aircraft-related equipment. The Company provides these services to passenger airlines, air cargo carriers and maintenance and repair organizations (“MROs”). Aircraft operators need engines and parts beyond those installed in the aircraft that they operate. These “spare” aircraft engines and parts are required for various reasons including requirements that engines and parts be inspected and repaired at regular intervals based on equipment utilization. Furthermore, unscheduled events such as mechanical failure, Federal Aviation Administration (“FAA”) directives or manufacturer recommended actions for maintenance, repair and overhaul of engines and parts can give rise to demand for spare engines.

The Company’s engine portfolio consists of noise compliant Stage III commercial jet aircraft engines manufactured by CFM International, General Electric, Pratt & Whitney, Rolls Royce and International Aero Engines. These engines are the most widely used aircraft engines in the world, powering Airbus, Boeing and McDonnell Douglas aircraft. As of December 31, 2004, the Company had a total lease portfolio consisting of 115 engines and related equipment, five aircraft, three spare parts packages and various parts and other engine-related equipment with an aggregate net book value of $511.4 million and 43 lessees in 26 countries.

On November 7, 2000, the Company entered into agreements for a series of strategic transactions, each of which closed on November 30, 2000, with Flightlease AG, (now in liquidation) a corporation organized under the laws of Switzerland (“Flightlease”), SR Technics Group, a corporation organized under the laws of Switzerland (“SRT”), FlightTechnics, LLC, a Delaware limited liability company (“FlightTechnics”) and SR Technics Group America, Inc., a Delaware corporation (“SRT Group America”), each of which are affiliated companies. In connection with the strategic transactions, the Company sold 1,300,000 newly issued shares of its common stock to FlightTechnics and granted an option to purchase additional shares.  No shares were issued pursuant to the option which expired in 2002. FlightTechnics has the right to demand up to two registrations of its stock with the Securities and Exchange Commission (“SEC”) which are exercisable beginning November 30, 2003. The Company amended its Rights Agreement dated September 24, 1999 between the Company and American Stock Transfer & Trust Company to include FlightTechnics and its affiliates under the definition of an “Exempt Person”, subject to FlightTechnics and its affiliates owning a certain percentage of the Company’s common stock.

FlightTechnics also may purchase more shares of the Company’s common stock in the open market or from existing stockholders upon the occurrence of certain conditions, but in no event may FlightTechnics and its affiliates collectively own more than 49.9% of the Company’s issued and outstanding common stock before November 30, 2005. Certain stockholders, including Charles F. Willis IV, and FlightTechnics have also agreed to certain voting provisions and to certain restrictions on their abilities to sell their shares of the Company’s common stock.

The Company is a Delaware corporation. Its executive offices are located at 2320 Marinship Way, Suite 300, Sausalito, California 94965. The Company transacts business directly and through its subsidiaries unless otherwise indicated.

The Company maintains a website at www.willislease.com where its 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.

Management considers the continuing operations of the Company to operate in one reportable segment.

AIRCRAFT EQUIPMENT LEASING

As of December 31, 2004 all of the Company’s leases to air carriers, manufacturers and MROs are operating leases as opposed to finance leases. Under an operating lease, the Company retains title to the aircraft equipment thereby retaining the benefit and assuming the risk of the residual value of the aircraft equipment. Operating leases allow airlines greater fleet and financial flexibility due to the relatively small initial capital outlay necessary to obtain use of the aircraft equipment. Operating lease rates are generally higher than finance lease rates, in part because of the risks associated with the residual value. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results.”

3

All of the Company’s lease transactions are “triple-net leases”. A triple-net lease requires the lessee to make the full lease payment and pay any other expenses associated with the use of the equipment, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes. The leases contain detailed provisions specifying maintenance standards and the required condition of the aircraft equipment upon return at the end of the lease. During the term of the lease, the Company generally requires the lessee to maintain the aircraft equipment in accordance with an approved maintenance program designed to ensure that it meets applicable regulatory requirements in the jurisdictions in which the lessee operates. Under short-term leases and certain medium-term leases, the Company may undertake a portion of the maintenance and regulatory compliance risk.

The Company attempts to mitigate risk where possible. For example, the Company makes an independent analysis of the credit risk associated with the lessee before entering into any significant lease transaction. The Company’s credit analysis generally consists of evaluating the prospective lessee’s financial standing utilizing financial statements and trade and/or banking references. In certain circumstances, where the Company believes necessary, the Company may require its lessees to provide additional credit support such as a letter of credit or a guarantee from a bank or a third party or a security deposit. The Company also evaluates insurance and expropriation risk and evaluates and monitors the political and legal climate of the country in which a particular lessee is located in order to determine the Company’s ability to repossess its equipment should the need arise.

At the commencement of a lease, the Company may collect, in advance, a security deposit (normally equal to at least one month’s lease payment), and during the term of the lease, maintenance reserves from the lessee based on the lessee’s use of the engine. The security deposit is returned to the lessee after all return conditions have been met. Maintenance reserves are collected in accounts maintained by the Company or its lenders and are used when normal repairs associated with engine use or maintenance are required. Under longer-term leases, to the extent that cumulative maintenance reserves are inadequate to fund normal repairs required prior to return of the engine to the Company, the lessee is obligated to cover the shortfall. Recovery is therefore dependent upon the financial condition of the lessee. Parts leases generally require that the parts be returned in the same condition as they were in at lease inception.

During the lease period, the Company’s leases require that maintenance and inspection of the leased equipment be performed at qualified maintenance facilities certified by the FAA or its foreign equivalent. In addition, when equipment comes off-lease, it undergoes inspection to verify compliance with lease return conditions.

Despite these guidelines, the Company cannot assure that it will not experience collection problems or significant losses in the future. However, the Company believes that its attention to its lessees and its emphasis on maintenance and inspection contributes to residual values and generally helps the Company to recover its investment in its leased equipment. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Factors That May Affect Future Results.”

Upon termination of a lease, the Company will re-lease or sell the aircraft equipment. The demand for aftermarket aircraft equipment for either sale or re-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 aircraft engines), changes in demand for air travel, fuel costs, changes in the supply and cost of aircraft equipment and technological developments.  In addition, the value of particular used aircraft, spare parts or aircraft engines varies greatly depending upon their condition, the maintenance services performed during the lease term and as applicable the number of hours remaining until the next major maintenance is required. If the Company is unable to re-lease or sell aircraft equipment on favorable terms, its financial results and its ability to service debt may be adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Results.”

The Company’s management frequently reviews opportunities to acquire suitable aircraft equipment based on market demand, customer requirements and in accordance with the Company’s lease portfolio mix criteria and planning strategies for leasing. Before committing to purchase specific equipment, the Company generally takes into consideration such factors as estimates of future values, potential for remarketing, trends in supply and demand for the particular make, model and configuration of the equipment and the anticipated obsolescence of the equipment.

The Company’s parts packages consist of rotable parts for use on commercial aircraft or the engines appurtenant to such aircraft. The Company’s aircraft lease portfolio consists of five de Havilland DHC-8 commuter aircraft. The Company may make further investments in aircraft for lease in the future.

4

As of December 31, 2004, the Company had a total lease portfolio of 115 aircraft engines and related equipment, three spare parts packages, five aircraft and various parts and other engine-related equipment with an aggregate original cost of $595.3 million in its lease portfolio. As of December 31, 2003, the Company had a total lease portfolio of 119 aircraft engines and related equipment, four spare parts packages, seven aircraft and various parts and other engine-related equipment with an aggregate original cost of $577.4 million in its lease portfolio.

As of December 31, 2004, minimum future rentals under noncancelable operating leases of these engines, parts and aircraft assets were as follows:

Year	(in thousands)
2005	$	37,431
2006	22,483
2007	16,527
2008	12,258
2009	9,358
Thereafter	11,008
	$	109,065

As of December 31, 2004, the Company had 43 lessees of commercial aircraft engines, aircraft, and other aircraft-related equipment in 26 countries.

The following table displays the regional profile of the Company’s lease customer base for the years ended December 31, 2004, 2003 and 2002. No single country other than the United States accounted for more than 10% of the Company’s lease revenue for any of the years ended December 31, 2004, 2003 and 2002.

	Year Ended December 31, 2004				Year Ended December 31, 2003				Year Ended December 31, 2002
	Lease Revenue		Percentage		Lease Revenue		Percentage		Lease Revenue		Percentage
	(dollars in thousands)
United States	$	8,094	14	%	$	6,373	11	%	$	9,067	16	%
Canada	238		—		1,042		2		1,041		2
Mexico	4,225		7		4,349		8		2,717		5
Australia/New Zealand	670		1		853		1		305		1
Europe	25,943		45		25,310		45		24,906		45
South America	8,452		15		7,576		13		6,322		11
Asia	4,889		8		5,540		10		6,312		11
Africa	1,064		2		1,373		2		418		1
Middle East	4,602		8		4,561		8		4,309		8
Total	$	58,177	100	%	$	56,977	100	%	$	55,397	100	%

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors that May Affect Future Results.”

FINANCING/SOURCE OF FUNDS

The Company typically acquires the engines it leases with a combination of equity capital and funds borrowed from financial institutions. The Company can typically borrow 83% of an engine purchase price and 50% to 80% of an aircraft or spare parts purchase price on a recourse, non-recourse or partial recourse basis. Under two of the Company’s credit facilities, the lender is entitled to receive a portion of the lease payments associated with the financed equipment to apply to debt service.  Generally, lenders take a security interest in the equipment. The Company retains ownership of the equipment, subject to such security interest. Spreads over the applicable base interest rate index are impacted by a number of variables including the length of the lease , the percentage of purchase price advanced, and the financial condition of the Company. The Company obtains the balance of the purchase price of the equipment, the “equity” portion, from internally generated funds, cash-on-hand, and the net proceeds of prior common stock offerings and private placements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”

5

COMPETITION

The markets for the Company’s products and services are very competitive, and the Company faces competition from a number of sources. These include aircraft engine and aircraft parts manufacturers, aircraft and aircraft engine lessors, airline and aircraft service and repair companies and aircraft spare parts distributors. Certain of the Company’s competitors have substantially greater resources than the Company. 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 the Company serves, thereby significantly increasing industry competition. The Company can give no assurance that competitive pressures will not materially and adversely affect the Company’s business, financial condition or results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Factors That May Affect Future Results.”

INSURANCE

In addition to requiring full indemnification under the terms of its leases, the Company requires its 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. The Company requires that it be named as an additional insured on liability insurance with the Company or its lenders normally identified as the loss payee for damage to the equipment on policies carried by lessees. The Company monitors compliance with the insurance provisions of the leases. The Company also carries contingent physical damage and third party liability insurance as well as product liability insurance.

GOVERNMENT REGULATION

The Company’s customers are subject to a high degree of regulation in the jurisdictions in which they operate. For example, the FAA regulates the manufacture, repair and operation of all aircraft operated in the United States and equivalent regulatory agencies in other countries, such as the Joint Aviation Authority (“JAA”) in Europe, regulate aircraft operated in those countries.  Such regulations also indirectly affect the Company’s 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 the Company’s leasing and reselling business is not regulated, the aircraft, engines and engine parts that the Company leases and sells to its customers 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 generally satisfied by compliance with FAA requirements. Presently, whenever necessary, with respect to a particular engine or engine component, the Company utilizes FAA and/or JAA certified repair stations to repair and certify engines and components to ensure marketability.

Effective January 1, 2000, federal regulations stipulate that all aircraft engines hold, or be capable of holding, a noise certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago Convention, or have been shown to comply with Stage III noise levels set out in Section 36.5 of Appendix C of Part 36 of the FAA Regulations of the United States if the engines are to be used in the continental United States. Additionally, much of Europe has adopted similar regulations. As of December 31, 2004, all of the engines in the Company’s lease portfolio are Stage III engines and are generally suitable for use on one or more commonly used aircraft.

The Company believes that the aviation industry will be subject to continued regulatory activity. Additionally, increased oversight has and will continue to originate from the quality assurance departments of airline operators. The Company has been able to meet all such requirements to date, and believes that it will be able meet any additional requirements that may be imposed. The Company cannot assure, 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 the Company.

EMPLOYEES

As of December 31, 2004, the Company had 44 full-time employees (excluding consultants), in sales and marketing, technical service and administration. None of the Company’s employees is covered by a collective bargaining agreement and the Company believes its employee relations are satisfactory.

6

ITEM 2.PROPERTIES

The Company’s principal offices are located at 2320 Marinship Way, Suite 300, Sausalito, California 94965. The Company occupies space in Sausalito under a lease that covers approximately 9,900 square feet of office space and expires December 31, 2005, but has two one-year renewal options. The Company has given notice that it may exercise its option to extend the lease for at least one further year. The annual lease rental commitment is approximately $352,000 for 2005. Equipment leasing, financing, sales and general administrative activities are conducted from the Sausalito location. The Company also sub-leases from its former parts subsidiary, WASI, now called avioserv, approximately 3,100 square feet of office and warehouse space for the Company’s operations at San Diego, California. This lease expires October 31, 2005, and the remaining lease commitment is approximately $64,000 plus expenses. The Company also leases office space in Shanghai, China. The lease expires June 30, 2005 and the remaining lease commitment is approximately $25,000.

ITEM 3.LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

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

No matters were submitted to a vote of stockholders during the fourth quarter of the fiscal year 2004.

7

PART II

ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following information relates to the Company’s Common Stock, which is listed on the NASDAQ National Market under the symbol WLFC. As of March 23, 2005 there were approximately 1,096 stockholders of the Company’s Common Stock.

The high and low closing sales price of the Common Stock for each quarter of 2004 and 2003, as reported by NASDAQ, are set forth below:

	2004				2003
	High		Low		High		Low
First Quarter	$	8.97	$	6.43	$	5.74	$	4.23
Second Quarter	9.40		8.00		5.64		4.15
Third Quarter	8.99		6.59		5.79		4.75
Fourth Quarter	9.00		7.50		7.62		5.38

During the years ended December 31, 2004 and 2003 the Company did not pay cash dividends to Company stockholders.

The following table outlines the Company’s 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)
Equity compensation plans approved by security holders	1,764,720	$	6.61	812,259
Equity compensation plans not approved by security holders	n/a	n/a		n/a
Total	1,764,720	$	6.61	812,259

8

ITEM 6.SELECTED FINANCIAL DATA

The following table summarizes selected consolidated financial data and operating information of the Company. The selected consolidated financial and operating data should be read in conjunction with the Consolidated Financial Statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-K.

	Years Ended December, 31
	2004		2003		2002		2001		2000 (as restated)
	(dollars in thousands, except per share data)
Revenue:
Lease revenue	$	58,177	$	56,977	$	55,397	$	60,515	$	49,012
Gain on sale of leased equipment	3,085		2,372		482		5,636		8,129
Net gain on debt prepayment	—		—		4,073		—		—
Other income	677		520		—		—		489
Total revenue	$	61,939	$	59,869	$	59,952	$	66,151	$	57,630
Income from continuing operations	$	3,857	$	4,177	$	3,596	$	7,643	$	5,474
Net income	$	3,857	$	4,177	$	3,596	$	6,944	$	7,189
Basic earnings from continuing operations per common share	$	0.43	$	0.47	$	0.41	$	0.87	$	0.73
Diluted earnings from continuing operations per common share	$	0.42	$	0.47	$	0.41	$	0.86	$	0.72

					(as restated)		(as restated)
Balance Sheet Data:
Total assets	$	585,458	$	560,022	$	542,995	$	531,453	$	454,930
Debt (includes capital lease obligation)	$	369,840	$	362,395	$	364,680	$	359,547	$	301,346
Shareholders’ equity	$	116,468	$	110,062	$	104,905	$	100,956	$	95,065
Lease Portfolio:
Engines at end of the period – continuing operations	115		119		120		110		100
Engines at end of the period – discontinued operations	—		—		—		4		10
Spare parts packages at the end of the period	3		4		4		4		4
Aircraft at the end of the period	5		7		6		6		6

As noted above, certain items have been restated. Refer to Note 13 of the Notes to the Consolidated Financial Statements for further discussion.

9

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

OVERVIEW

General. As of December 31, 2004, the Company had a total portfolio of 43 lessees in 26 countries. Its total lease portfolio consisted of 115 engines and related equipment, five aircraft and three spare parts packages with an aggregate net book value of $511.4 million. The Company actively manages its portfolio and structures its leases to maximize the residual values of its leased assets. The Company’s leasing business focuses on popular Stage III commercial jet aircraft engines manufactured by CFMI, General Electric, Pratt & Whitney, Rolls Royce and International Aero Engines. These engines are the most widely used aircraft engines in the world, powering Airbus, Boeing, and McDonnell Douglas aircraft.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of its consolidated financial statements requires the Company 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, the Company evaluates its estimates, including those related to residual values, estimated asset lives, bad debts, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Leasing Related Activities.  Revenue from leasing of aircraft equipment is recognized as operating lease or finance lease revenue over the terms of the applicable lease agreements. Where collection cannot be reasonably assured, for example, upon a lessee bankruptcy, the Company does not recognize revenue until received. The Company also estimates and charges to income a provision for bad debts based on its experience in the business and with each specific customer and the level of past due accounts. The financial condition of the Company’s customers may deteriorate and result in actual losses exceeding the estimated allowances. In addition, any deterioration in the financial condition of the Company’s customers may adversely affect future lease revenues. As of December 31, 2004 all of the Company’s leases are accounted for as operating leases. Under an operating lease, the Company retains title to the leased equipment, thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment.

The Company generally depreciates engines on a straight-line basis over 15 years to a 55% residual value. Spare parts packages are generally depreciated on a straight-line basis over 15 years to a 25% residual value. Aircraft are generally depreciated on a straight-line basis over 13-20 years to a 15%-17% residual value. 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, the Company depreciates the equipment over its estimated life to a residual value based on an estimate of the wholesale value of the parts after disassembly. Currently, 40 engines having a net book value of $107.6 million are depreciated using this policy. If useful lives or residual values are lower than those estimated by the Company, upon sale of the equipment, a loss may be realized. The Company reviews these estimates regularly and a change in either of these estimates would cause an associated change in depreciation expense.

Sales Related Activities. For equipment sold out of the Company’s lease portfolio, the Company recognizes the gain or loss associated with the sale as revenue. Gain consists of sales proceeds less the net book value of the equipment sold and any costs directly associated with the sale. Additionally, to the extent that any deposits or reserves are not included in the sale and the purchaser of the equipment assumes any liabilities associated therewith, such deposits and reserves are included in the gain on sale.

10

Asset Valuation.   Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”  (SFAS 144) requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and long-lived assets and certain identifiable intangibles to be disposed of generally be reported at the lower of carrying amount or fair value less cost to sell. Impairment is identified by comparison of undiscounted forecast cash flows, including estimated sales proceeds, over the life of the asset with the assets’ book value. If the forecast undiscounted cash flows are less than the book value the asset is written down to its fair value. Fair value is determined by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors considered by Management.

For further information on these and other accounting policies adopted by the Company, refer to Note 1 of the Notes to Consolidated Financial Statements.

YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR ENDED DECEMBER 31, 2003

Revenue is summarized as follows:

	Year ended December 31,
	2004				2003
	Amount		%		Amount		%
	(dollars in thousands)
Lease revenue	$	58,177	93.9	%	$	56,977	95.2	%
Gain on sale of leased equipment	3,085		5.0		2,372		4.0
Other income	677		1.1		520		0.8
Total	$	61,939	100.0	%	$	59,869	100.0	%

Leasing Related Activities. Lease related revenue for the year ended December 31, 2004, increased 2% to $58.2 million from $57.0 million for the comparable period in 2003. This increase primarily reflects a reduced amount of equipment off-lease together with increased average lease rate factors. The aggregate of net book value of leased equipment at December 31, 2004 and 2003 was $511.4 million and $505.0 million, respectively, an increase of 1%. At December 31, 2004, and 2003, respectively, approximately 86% and 88% of equipment by net book value was on-lease. However, the Company purchased three engines towards the end of 2004 which were off-lease at year end. Excluding those engines utilization would have been approximately 89% at December 31, 2004. The average utilization for the year ended December 31, 2004 was 89% compared to 87% in the prior year.  During the year ended December 31, 2004, five engines were added to the Company’s lease portfolio at a total cost of $59.4 million (including capitalized costs). During the year ended December 31, 2003, 11 engines and two aircraft were added to the Company’s lease portfolio at a cost of $45.5 million (including capitalized costs).

Gain on Sale of Leased Equipment. During the year ended December 31, 2004, 13 engines, two airframes and various engine-related equipment from the lease portfolio were sold for a net gain of $3.1 million.

During the year ended December 31, 2003, ten engines from the lease portfolio were sold for a net gain of $2.4 million.

Other Income. Other income consists primarily of management fee income and additionally in the year ended December 31, 2003, income resulting from a net insurance recovery of $0.2 million.

Depreciation Expense.  Depreciation expense increased $1.5 million or 7% to $23.2 million for the year ended December 31, 2004, from the comparable period in 2003 due primarily to changes in the estimates of useful lives and residual values of certain older engine types.

Write-down of Equipment.  Write-down of equipment to their estimated fair values from the application of SFAS 144 totaled $0.6 million for the year ended December 31, 2004, compared to $1.3 million for the year ended December 31, 2003, due to management’s decision to dispose of, rather than repair, an engine.

General and Administrative Expenses.  General and administrative expenses increased 7% to $14.8 million for the year ended December 31, 2004, from the comparable period in 2003 due mainly to increases in legal and accounting costs ($0.4 million), engine-related maintenance and inspection costs ($0.2 million), increased travel expenses ($0.2 million), increased insurance costs ($0.2 million), and increased employment related costs ($0.1 million) offset by reduced bad debt expenses ($0.2 million) and outside consultant expenses ($0.1 million).

Net Interest and Finance Costs.  Net interest and finance costs, which are comprised of interest expense and interest income, increased 5% to $18.0 million for the year ended December 31, 2004 from the comparable period in 2003. Interest expense increased 6% to $18.4 million for the year ended December 31, 2004, from the comparable period in 2003, mainly due to an increase in interest rates. Interest income for the year ended December 31, 2004, increased to $0.4 million from $0.2 million for the year ended December 31, 2003, due mainly to increases in interest rates. The majority of the Company’s interest rates are tied to one-month US dollar

11

LIBOR which increased from 1.12% at the beginning of 2004 to 2.40% by year end.

Income Taxes. Income taxes for the year ended December 31, 2004, decreased to $1.5 million from $1.7 million for the comparable period in 2003 reflecting decreased pre-tax income and a lower effective tax rate. The overall effective tax rate for the year ended December 31, 2004 was 28.0% compared to 29.1% for the prior year with the decrease in rate mainly due to the impact of the Company’s deduction for the Extraterritorial Income Exclusion. Recently enacted legislation has repealed this benefit and it will be phased out over the next three years. The Company’s tax rate is subject to change based on changes in the mix of assets leased to domestic and foreign lessees, the proportions of revenue generated within and outside of California and numerous other factors, including changes in tax law.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED DECEMBER 31, 2002.

Revenue is summarized as follows:

	Year ended December 31,
	2003				2002
	Amount		%		Amount		%
	(dollars in thousands)
Lease revenue	$	56,977	95.2	%	$	55,397	92.4	%
Gain on sale of leased equipment	2,372		4.0		482		0.8
Net gain on debt prepayment	—		—		4,073		6.8
Other income	520		0.8		—		—
Total	$	59,869	100.0	%	$	59,952	100.0	%

Leasing Related Activities. Lease related revenue for the year ended December 31, 2003, increased 3% to $57.0 million from $55.4 million for the comparable period in 2002. This increase primarily reflects a reduced amount of equipment off-lease offset by reduced average lease rate factors. The aggregate of net book value of leased equipment and net investment in direct finance lease on December 31, 2003 and 2002 was $505.0 million and $502.2 million, respectively, an increase of 1%. However, approximately $16.0 million was purchased in December 2003 and had no effect on lease revenue. At December 31, 2003 and 2002 respectively, 88% and 86% of equipment by book value were on-lease, however, the average utilization for the year ended December 31, 2003 was 87% compared to 82% in the prior year. During the year ended December 31, 2003, 11 engines and two aircraft were added to the Company’s lease portfolio at a total cost of $45.5 million (including capitalized costs). During the year ended December 31, 2002, 10 engines were added to the Company’s lease portfolio at a total cost of $47.7 million (including capitalized costs).

Gain on the Sale of Leased Equipment. During the year ended December 31, 2003, 10 engines from the lease portfolio were sold for a gain of $2.4 million.

During the year ended December 31, 2002, four engines from the lease portfolio were sold for a gain of $0.5 million.

Other Income.  Other income in 2003 consists primarily of management fee income and income resulting from a net insurance recovery of $0.2 million.

Net Gain on Debt Repayment.  This item for the year ended December 31, 2002, relates to the prepayment of a $35.0 million revolving credit facility at a discount to its carrying value.

Depreciation Expense.  Depreciation expense increased $2.2 million or 12% to $21.7 million for the year ended December 31, 2003, from the comparable period in 2002. Approximately $1.6 million of the increase was due primarily to changes in the estimates of useful lives and residual values of certain older engine types.

Write-Down of Equipment.  Write-down of equipment to their estimated fair values from the application of SFAS144 totaled $1.3 million for the year ended December 31, 2003, compared to $3.1 million for the year ended December 31, 2002, due to reductions in demand and market prices on certain engine types, and management’s decision to dispose of, rather than repair a number of engines.

General and Administrative Expenses.  General and administrative expenses decreased 4% to $13.9 million for the year ended December 31, 2003, from the comparable period in 2002 due mainly to decreases in legal costs ($1.5 million) and engine-related maintenance and inspection costs ($0.4 million) offset by increased staffing costs ($1.2 million).

12

Net Interest and Finance Costs.  Net interest and finance costs, which is comprised of interest expense and interest income decreased 8% to $17.2 million for the year ended December 31, 2003, from the comparable period in 2002. Interest expense decreased 9% to $17.4 million for the year ended December 31, 2003, from the comparable period in 2002, due to a decrease in interest rates. The majority of the Company’s interest rates are tied to one-month US dollar LIBOR which decreased from 1.38% at the beginning of 2003 to 1.12% by year end. Interest income for the year ended December 31, 2003 decreased to $0.2 million from $0.4 million for the year ended December 31, 2002 due mainly to reduction in interest rates.

Income Taxes. Income taxes for the year ended December 31, 2003, increased to $1.7 million from $0.7 million for the comparable period in 2002 reflecting increased pre-tax income and a higher effective tax rate. The overall effective tax rate for the year ended December 31, 2003 was 29% compared to 17% for the prior year. The effective tax rate in 2002 was 28%, before adjustments for state income tax apportionment changes and deferred tax assets valuation allowances. The 2002 effective tax rate also reflects a reduction in the estimated proportion of revenue to be generated within California when the California state tax timing differences reverse, offset by a valuation allowance on deferred tax assets relating to state net operating losses of $0.1 million where management believes realizing the benefit of the loss carry forward is not assured. The Company’s tax rate is subject to change based on changes in the mix of assets leased to domestic and foreign lessees, the proportions of revenue generated within and outside of California and numerous other factors, including changes in tax law.

13

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, FASB issued SFAS No. 153 “Exchanges of Nonmonetary Assets—an amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, was based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The Company did not undertake any transaction in 2004 that would be affected by this Statement.

In December 2004, FASB issued SFAS 123 (R) which is a revision to FASB Statement No. 123, “Accounting for Stock-Based Compensation.” This Statement also supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and its related implementation guidance. The revised Statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Employee share purchase plans will not result in recognition of compensation cost if certain conditions are met; those conditions are much the same as the related conditions in Statement 123. This Statement applies to all awards granted after the required effective date and to awards modified, repurchased, or cancelled after that date. The cumulative effect of initially applying this Statement, if any, is recognized as of the required effective date. The Company has an employee stock option/issuance plan (described in Note 10 of the accompanying Financial Statements) which will be affected by the implementation of this Statement. Currently, under the existing statement the Company does not recognize compensation cost in respect of its plans and opts to make pro-forma disclosure of the impact which is described in Note 1(q) to its Financial Statements.

In December 2003, FASB issued a revision of Interpretation No. 46, “Consolidation of Variable Interest Entities”, FIN46(R). Application of this Interpretation is required in financial statements of public entities that have interests in variable interest entities or potential variable interest entities commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application by public entities (other than small business issuers) for all other types of entities is required in financial statements for periods ending after March 15, 2004. The Interpretation was issued to clarify the consolidation requirements of ARB Opinion No. 51 “Consolidated Financial Statements”, especially with respect to variable interest entities. As of and for the year ended December 31, 2004, the Company did not have any interest in any variable interest entities that were required to be accounted for under this Interpretation.

LIQUIDITY AND CAPITAL RESOURCES

Historically, the Company has financed its growth through borrowings secured by its equipment lease portfolio. Cash of approximately $58.6 million, $68.4 million and $66.4 million, in the years ended December 31, 2004, 2003 and 2002, respectively, was derived from this activity. In these same time periods $51.4 million, $84.0 million and $61.2 million, respectively, was used to pay down related debt. Cash flow from operating activities generated $42.7 million, $41.9 million and $31.6 million in the years ended December 31, 2004, 2003 and 2002, respectively.

The Company’s primary use of funds is for the purchase of equipment for lease. Purchases of equipment (including capitalized costs) totaled $59.4 million, $45.2 million and $47.7 million for the years ended December 31, 2004, 2003 and 2002, respectively.

Cash flows from operations are driven significantly by payments made under the Company’s lease agreements, which comprise lease revenue and maintenance reserves, and interest expense. While the Company has experienced firmer lease rates, these have been offset by increases in interest rates such that the spread between lease rates and interest rates has remained relatively constant throughout 2004. The lease revenue stream, in the short-term, is at fixed rates while a substantial amount of the Company’s debt is at variable rates. If interest rates increase it is unlikely the Company could increase lease rates in the short term and this would cause a reduction in the Company’s earnings. Revenue and maintenance reserves are also affected by the amount of equipment off lease. Approximately 86%, by book value, of the Company’s assets were on-lease at December 31, 2004, compared to approximately 88% at December 31, 2003, and the average utilization rate for the year ended December 31, 2004, was 89% compared to 87% in the prior year. If there is any 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.

At December 31, 2004, notes payable consists of bank loans totaling $369.8 million payable over periods of under 1 year to 7 years with interest rates varying between approximately 4.2% and 8.6% (excluding the effect of the Company’s interest rate hedges).

14

The significant facilities are described below.

At December 31, 2004, the Company had a $148.5 million revolving credit facility to finance the acquisition of aircraft engines for lease as well as for general working capital purposes. As of December 31, 2004, $31.5 million was available under this facility. The facility matures in May 2007. The interest rate on this facility at December 31, 2004 was 1-month LIBOR plus 2.25%. Under the revolver facility, all subsidiaries except WLFC-AC1 and Willis Engine Funding LLC (“WEF”) jointly and severally guarantee payment and performance of the terms of the loan agreement. The maximum guarantee is $148.5 million plus any accrued and unpaid interest, fees or reimbursements but is limited at any given time to the sum of the principal outstanding plus accrued interest and fees. The guaranty would be triggered by a default under the agreement.

At December 31, 2004, the Company had a fully drawn $216.0 million debt warehouse facility. A wholly-owned special purpose entity, WEF, was created in 2002 for the purpose of financing jet aircraft engines. The facility’s revolving period ended March 9, 2005, and commenced a 4-year amortization period during which 90% of the net rents from the collateral are used to pay down principal, followed by a final balloon payment. The facility’s structure is designed to facilitate the issuance of public or private securitized notes. There is no assurance that a securitization can be completed or completed on terms that are favorable or acceptable to the Company. Refer to Factors that May Affect Future Results for further discussion of the risks the Company faces. The facility notes are divided into $194.4 million Class A notes and $21.6 million Class B notes. The Company provides a guaranty to the Class B Noteholders. If WEF defaults on its obligations, the full amount of the Class B notes outstanding (together with any accrued interest and fees) is due and payable immediately. The governing documents of the warehouse facility and the WEF operating agreement require that the assets of WEF and any associated Owner Trust are not available to satisfy the obligations of the Company or any of its affiliates.  WEF is consolidated for financial statement presentation purposes. At December 31, 2004, interest on the Class A notes is a commercial paper rate plus a weighted average spread of 2.26% and interest on the Class B Notes is 1-month LIBOR plus a weighted average spread of 5.32%.

At December 31, 2004, the Company had warehouse and revolving credit facilities totaling $364.5 million compared to $344.0 million at December 31, 2003. At December 31, 2004 and 2003, respectively, $31.5 million and $30.0 million was available under these combined facilities.

At December 31, 2004, the Company had an $18.0 million term loan facility available to a wholly-owned consolidated subsidiary of the Company, WLFC-AC1 Inc., for the financing of jet aircraft engines sold by the Company to such subsidiary. The facility is a five-year term loan with final maturity of June 29, 2005. The interest rate is 1-month LIBOR plus 2.05%. This facility is fully drawn. The Company has guaranteed the obligations of WLFC-AC1 under the terms of this facility.

At December 31, 2004, 1-month LIBOR was approximately 2.4% and the commercial paper rate was approximately 2.21%. At December 31, 2003, the rates were approximately 1.12% and 1.05%, respectively.

Approximately $37.8 million of the Company’s debt is repayable during 2005. Such repayments consist of scheduled installments due under term loans. The table below summarizes the Company’s contractual commitments at December 31, 2004.

			Payment due by period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years
Long-Term Debt Obligations	$	369,840	$	37,839	$	147,286	$	179,553	$	5,162
Operating Lease Obligations	441		441		—		—		—
Purchase Obligations	18,174		18,174		—		—		—
Total	$	388,455	$	56,454	$	147,286	$	179,553	$	5,162

Approximately $351.0 million of the above debt is subject to the Company continuing to comply 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. In addition, the Company can typically borrow 83% of an engine purchase and only between 50% to 80% of an aircraft or spare parts purchase under these facilities, so the Company must have other available funds for the balance of the purchase price of any new equipment to be purchased or it will not be permitted to draw on these facilities. The facilities are also cross-defaulted. If the Company does not comply with the covenants or eligibility requirements, the Company may not be permitted to borrow additional funds and accelerated payments may become necessary. Additionally, debt is secured by engines on lease to customers and to the extent that engines are returned from lease early or are sold, repayment of that portion of the debt could be accelerated. The Company was in compliance with all covenants at December 31, 2004.

The company has commitments to purchase, during 2005, engines and other engine-related equipment totaling $18.2 million.

The Company’s lease of its office premises in Sausalito expires on December 31, 2005, but it has given notice that it may exercise its option to extend the lease for at least one further year. The sublease of Company premises in San Diego expires in October 2005. The lease of office space in Shanghai, China expires in June 2005.  The Company also holds a 7% interest, accounted for under the Cost method, in a joint venture in China, Sichuan Snecma Aero-Engine Maintenance Co. Ltd. The Company has invested $1.5 million to date.

15

The Company believes its equity base, internally generated funds and existing debt facilities are sufficient to maintain the Company’s level of operations through 2005. A decline in the level of internally generated funds such as could result if off-lease rates increase or a decrease in availability under the Company’s existing debt facilities would impair the Company’s ability to sustain its level of operations. The Company is discussing additions to its capital base with its commercial and investment banks. If the Company is not able to access additional capital, its ability to continue to grow its asset base consistent with historical trends will be impaired and its future growth limited to that which can be funded from internally generated capital.

16

Management of Interest Rate Exposure

At December 31, 2004, $357.4 million (97%) of the Company’s borrowings were on a variable rate basis at various interest rates tied to LIBOR or commercial paper rates. The Company’s 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 the Company realizes under its leases and the interest rate that the Company pays under its borrowings. To mitigate exposure to interest rate changes, the Company has entered into interest rate swap agreements which have notional outstanding amounts of $100.0 million, with remaining terms of between 27 and 37 months and fixed rates of between 2.52% and 3.45%. During 2002, the Company purchased a number of forward-commencing caps with notional amounts totaling $60.0 million, terms of 3 years, effective dates which commenced in 2003 and rates capped at 5.5%. The fair value of the swaps at December 31, 2004 and 2003 was positive $1.4 million, representing an asset of the Company and negative $0.7 million, representing a liability of the Company. The fair value of the caps at December 31, 2004 was zero compared to positive $7,000 at December 31, 2003, representing an asset of the Company.

Interest expense for the year ended December 31, 2004, was increased due to the Company’s interest rate hedges by approximately $1.6 million compared to $2.3 million in the comparable period in 2003. For the year ended December 31, 2002, interest expense was increased due to the Company’s interest rate hedges by approximately $2.8 million. The Company will be exposed to risk in the event of non-performance of the interest rate hedge counter-parties. The Company anticipates that it may hedge additional amounts of its floating rate debt during the next year.

Related Party and Similar Transactions

The Company occasionally sells engines to and purchases materials from avioserv, the successor to a former subsidiary of the Company and a current subsidiary of T Group America. T Group America is owned by T Group (f/k/a SR Technics Group), an entity that is related to FlightTechnics LLC, which holds 14% of the Company’s common stock. The Company also leases office space from avioserv with the lease term expiring October 31, 2005. During the year ended December 31, 2004, the Company sold one engine to avioserv. W. William Coon, Jr., a director of the Company, is a director of Flight Technics, LLC and T Group America. He is also Chairman of the Board of Directors of avioserv.

Effective September 13, 2002, the Company entered into a consulting agreement with Hans Jorg Hunziker, a former executive of Flightlease AG, a wholly owned subsidiary of SAir Group. Mr. Hunziker is a former Director of the Company having resigned from the Board on July 1, 2003. The agreement was for a one-year term ending September 13, 2003, and thereafter extended until January 2004 when it was terminated. Mr. Hunziker was to provide strategic advice and investigation into additional sources of capital in Europe.

Gavarnie Holding, LLC, a Delaware Limited Liability Company (“Gavarnie”) owned by Charles F. Willis, IV, purchased the stock of Aloha IslandAir, Inc., a Delaware Corporation, (“IslandAir”) from Aloha AirGroup, Inc. (“Aloha”) on May 11, 2004. Charles F. Willis, IV is the President, CEO and Chairman of the Board of Directors of the Company and owns approximately 34% of the Company’s stock as of December 31, 2004. IslandAir leases five DeHaviland DHC-8-100 aircraft from the Company, under non-cancelable leases which generate lease revenue of approximately $2.5 million per year and have a net book value of $16.0 million, for remaining periods of between two and four years. IslandAir’s obligations under four of these leases are guaranteed by Aloha. However, Aloha has recently filed for reorganization under Chapter 11 of the Bankruptcy Code and the Company expects Aloha’s obligations under the guarantees to be discharged in this proceeding. Gavarnie is required to indemnify Aloha if a claim is made against Aloha in respect of its guaranties of IslandAir’s leases from the Company.

The Company entered into a Consignment Agreement dated April 30, 2004 with Avsets.com, Inc. to sell parts from a disassembled engine.  J.T. Power LLC (“J.T. Power”) has agreed to market these parts on behalf of Avsets.com, Inc. and also shares office space with Avsets.com, Inc. J.T. Power is an entity whose majority shareholder, Austin Willis, is the son of the President and Chief Executive Officer of the Company, and directly and indirectly, a shareholder of the Company. The book value of the parts consigned to Avsets.com is approximately $19,000.

Factors That May Affect Future Results

Except for historical information contained herein, the discussion in this report contains forward-looking statements that involve risks and uncertainties, such as statements of the Company’s plans, objectives, expectations and intentions. Forward-looking statements give the Company’s expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and the Company does not undertake any obligation to update them to reflect changes that occur after that date. The Company’s actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below. The cautionary statements made in this report should be read as being applicable to all related forward-looking statements wherever they appear in this report or in other written or oral statements by the Company.

17

The business in which the Company is engaged is capital intensive. Accordingly, the Company’s ability to successfully execute its business strategy and to sustain its operations is dependent, in large part, on the availability of debt and equity capital. There can be no assurance that the necessary amount of capital will continue to be available to the Company on favorable terms or at all. The Company’s inability to obtain sufficient capital, or to renew its credit facilities could result in increased funding costs and would limit the Company’s ability to: (i) add new equipment to its portfolio, (ii) fund its working capital needs, and (iii) finance possible future acquisitions.  The Company’s inability to obtain sufficient capital would have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The Company retains title to the equipment that it leases to third parties. Upon termination of a lease, the Company will seek to re-lease or sell the equipment. The Company also engages in the selective purchase and resale of commercial aircraft engines. On occasion, the Company purchases engines without having a firm commitment for their lease or sale. Numerous factors, many of which are beyond the Company’s control, may have an impact on the Company’s ability to re-lease or sell equipment on a timely basis, including the following: (i) general market conditions, (ii) the condition of the equipment upon termination of the lease, (iii) the maintenance services performed during the lease term and, as applicable, the number of hours remaining until the next major maintenance is required, (iv) regulatory changes (particularly those imposing environmental, maintenance and other requirements on the operation of aircraft engines), (v) changes in the supply of, or demand for, or cost of aircraft engines, and (vi) technological developments. There is no assurance that the Company will be able to re-lease or sell equipment on a timely basis or on favorable terms. The failure to re-lease aircraft equipment on a timely basis or on favorable terms or sell aircraft equipment on favorable terms could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The Company experiences fluctuations in its operating results. Such fluctuations may be due to a number of factors, including: (i) general economic conditions, (ii) the timing of sales of engines, (iii) financial difficulties experienced by airlines, (iv) interest rates, (v) downturns in the air transportation industry, (vi) changes in fuel prices (vii) unanticipated early lease termination or a default by a lessee, (viii) the timing of engine acquisitions, (ix) engine marketing activities, (x) fluctuations in market prices for the Company’s assets, (xi) downward pressure on lease rates, and (xii) other terrorism and geo-political risks. The Company anticipates that fluctuations from period to period will continue in the future. As a result, the Company believes that comparisons to results of operations for preceding periods are not necessarily meaningful and that results of prior periods should not be relied upon as an indication of future performance.

As of December 31, 2004, approximately 58% by value of the Company’s equipment available for lease was either off-lease, on month-to-month leases or on leases expiring in 2005. At December 31, 2003, approximately 55% by value of the Company’s equipment was similarly categorized. The ability of the Company to successfully remarket this equipment will have a significant impact on the Company’s future results and on its ability to draw under certain of its credit facilities.

A lessee may default in performance of its lease obligations and the Company may be unable to enforce its remedies under a lease. The Company’s inability to collect receivables due under a lease or to repossess aircraft equipment in the event of a default by a lessee could have a material adverse effect on the Company’s business, financial condition and/or results of operations. Various airlines have experienced financial difficulties in the past, certain airlines have filed for bankruptcy and a number of such airlines have ceased operations. In the United States where a debtor seeks protection under Chapter 11 of Title 11 of the United States Code (the 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. The scope of Section 1110 has been the subject of significant litigation and there is no assurance that the provisions of Section 1110 will protect the Company’s investment in an aircraft, aircraft engines or parts 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. Leases of spare parts may involve additional risks. For example, it is likely to be more difficult to recover parts in the event of a lessee default and the residual value of parts may be less ascertainable than an engine.

The Company’s leases are generally structured at fixed rental rates for specified terms while the majority of the Company’s borrowings (97%) are at floating rates. Increases in interest rates could narrow, or result in a negative spread, between the rental revenue the Company realizes under its leases and the interest rate the Company pays under its borrowings, and have a material adverse effect on the Company’s business, financial condition and/or results of operations.

18

For the twelve months ended December 31, 2004, 86% of the Company’s lease revenue (in 2003, the percentage was 89%) was generated by leases to non-US customers. Such international leases may present greater risks to the Company because certain foreign laws, regulations and judicial procedures may not be as protective of lessor rights as those which apply in the United States. All leases require payment in US dollars. If the lessees’ currency devalues against the US dollar, the lessees could potentially encounter difficulty in making their lease payments. The Company is also subject to the timing and access to courts and the remedies local laws impose in order to collect its lease payments and recover its assets. In addition, political instability abroad and changes in international policy also present risk of expropriation of the Company’s leased engines. Furthermore, many foreign countries have currency and exchange laws regulating the international transfer of currencies.

There is no assurance that the Company will be able to effectively manage its existing or the possible future expansion of its operations, or that the Company’s systems, procedures or controls will be adequate to support the Company’s operations, in which event the Company’s business, financial condition and/or results of operations could be adversely affected. The Company may also acquire businesses that would complement or expand the Company’s existing businesses. Any acquisition or expansion made by the Company may result in one or more of the following events: (i) the incurrence of additional debt, (ii) future charges to earnings related to the impairment of goodwill and other intangible assets, (iii) difficulties in the assimilation of operations, services, products and personnel, (iv) an inability to sustain or improve historical revenue levels, (v) diversion of management’s attention from ongoing business operations, and (vi) potential loss of key employees. Any of the foregoing factors could have a material adverse effect on the Company’s business, financial condition and/or results of operations.

The markets for the Company’s products and services are extremely competitive, and the Company faces competition from a number of sources. These include aircraft engine and aircraft parts manufacturers, aircraft and aircraft engine lessors, aircraft and engine service and repair companies and aircraft spare parts distributors. Certain of the Company’s competitors have substantially greater resources than the Company, including greater name recognition, a broader range of engines, complementary lines of business and greater financial, marketing and other resources. In addition, equipment manufacturers, and other aviation aftermarket suppliers may vertically integrate into the markets that the Company serves, thereby significantly increasing industry competition. There can be no assurance that competitive pressures will not materially and adversely affect the Company’s business, financial condition and/or results of operations.

The Company’s leasing activities generate significant depreciation allowances that provide the Company with substantial tax benefits on an ongoing basis. In addition, the Company’s lessees enjoy favorable accounting and tax treatment by entering into operating leases. The Company also benefits from the Extraterritorial Income Exclusion regulations which significantly reduce the Company’s effective tax rate. As a result of recent legislation this benefit is being phased out over the next three years and the Company’s effective tax rate will increase. Other changes to tax laws or accounting principles that make operating lease financing less attractive or affect the Company’s recognition of revenue or expense would have a material impact on the Company’s business, financial condition and/or results of operations.

As a public company, Willis Lease is subject to certain regulatory requirements including, but not limited to, compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Such compliance results in significant additional costs to the Company both directly, through increased audit and consulting fees, and indirectly, through the time required by management to address the regulations. However, the SEC has recently delayed the implementation date of Section 404 for non-accelerated filers until 2006. Such costs will likely have an adverse effect on the Company’s business, financial condition and/or results of operations.

In September 2004, the Company acquired a Canadair Challenger 601-1A aircraft for general corporate purposes and for charter to third parties. The Company expects that annual ownership costs will be approximately $1.1 million with additional operating costs depending on usage.. The Company has also negotiated a management contract which should generate net charter revenues of approximately $0.6 million per annum depending on usage that will reduce overall cost.  However there can be no assurance that these revenues will be realized.

The Company obtains a substantial portion of its engines and aircraft from airlines, overhaul facilities and other suppliers. There is no organized market for engines and aircraft. The Company relies on its representatives, advertisements and its reputation in order to generate opportunities to purchase such equipment. The market for bulk sales of engines and aircraft is highly competitive, in some instances involving a bidding process. While the Company has been able to purchase engines and aircraft in this manner successfully in the past, there is no assurance that engines and aircraft will be available on acceptable terms or that the Company will continue to compete effectively in the purchase of such equipment.

19

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s primary market risk exposure is that of interest rate risk. A change in the LIBOR, or the commercial paper rates, would affect the Company’s cost of borrowing. Increases in interest rates to the Company, which may cause the Company to raise the implicit rates charged to its customers, could result in a reduction in demand for the Company’s leases. Alternatively, the Company may price its leases based on market rates so as to keep the fleet on-lease and suffer a decrease in its operating margin due to interest costs that it may not be able to pass on to its customers.  Approximately $357.4 million (97%) of the Company’s outstanding debt is variable rate debt. The Company estimates a one percent increase or decrease in the Company’s variable rate debt (net of hedges) would result in an increase or decrease, respectively, in interest expense of $2.6 million per annum (in 2003, $2.7 million per annum). The Company estimates a two percent increase or decrease in the Company’s variable rate debt (net of hedges) would result in an increase or decrease, respectively, in interest expense of $5.2 million per annum (in 2003, $5.4 million per annum).

The Company hedges a portion of its borrowings, effectively fixing the rate of these borrowings. Based on the implied forward rates for 1-month LIBOR, the Company expects interest expenses will be reduced by approximately $0.2 million for the year ending December 31, 2005 as a result of its hedges.  Such hedging activities may limit the Company’s ability to participate in the benefits of any decrease in interest rates, but may also protect the Company from increases in interest rates. Furthermore, since lease rates tend to vary with interest rate levels, it is possible that the Company 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.

The Company is also exposed to currency devaluation risk. During 2004, 86% (in 2003, the percentage was 89%) of the Company’s total lease revenues came from non-United States domiciled lessees. All of the leases require payment in US dollars. If these lessees’ currency devalues against the US dollar, the lessees could potentially encounter difficulty in makingtheir lease payments.

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 29.

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

None.

ITEM 9A.CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company’s periodic reports.

There have been no significant changes in the Company’s internal controls or in other factors that could affect the controls since the date of the last evaluation of internal controls.

20

PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Company has adopted a Standards of Ethical Conduct Policy (“Code of Ethics”) that applies to all employees and directors including the Company’s Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and Chief Accounting Officer. The Code of Ethics is available on the Company’s website at www.willislease.com. The Company will also provide, free of charge, a copy of the Code of Ethics by writing to the following address:

Attention: Director of Human Resources

Willis Lease Finance Corporation

2320 Marinship Way, Ste. 300

Sausalito, CA 94965

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

ITEM 11.EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the Company’s Proxy Statement.

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

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

ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the Company’s Proxy Statement.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company was billed the following amounts by its principal accountant:

	2004		2003
Audit fees	$	360,000	$	370,440
Audit-related fees	6,125		9,500
Tax fees	—		40,700
All other fees	—		—
	$	366,125	$	420,640

Amounts billed under Audit-related fees for 2004 and 2003 consist of accounting advice.

Amounts billed under Tax fees for 2003 primarily consist of fees for tax compliance and tax planning advice.

The remaining information required by this item is incorporated by reference to the Company’s Proxy Statement.

21

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 29.

(a) (2) Financial Statement Schedules

Schedule II Valuation Accounts are submitted as a separate section of this report on page 52.

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.

EXHIBITS

Exhibit Number	Description
3.1	Certificate of Incorporation, filed on March 12, 1998 together with Certificate of Amendment of Certificate of Incorporation filed on May 6, 1998. Incorporated by reference to Exhibits 4.01 and 4.02 of the Company’s report on Form 8-K filed on June 23, 1998.
3.2	Bylaws, as amended.
3.3	Amendment to Bylaws of Willis Lease Finance Corporation dated November 13, 2001.
4.1	Specimen of Common Stock Certificate. Incorporated by reference to Exhibit 4.1 of the Company’s report on Form 10-Q for the quarter ended June 30, 1998.
4.2	Rights Agreement dated September 24, 1999, by and between the Company and American Stock Transfer and Trust Company, as Rights Agent. Incorporated by reference to Exhibit 4.1 of the Company’s report on Form 8-K filed on October 4, 1999.
4.3	First Amendment to Rights Agreement, dated as of November 30, 2000, by and between the Company and American Stock Transfer and Trust Company. Incorporated by reference to Exhibit 10.1 of the Company’s report on Form 8-K filed December 15, 2000.
10.1	Form of Indemnification Agreement entered into between the Company and its directors and officers. Incorporated by reference to Exhibit 10.3 to Registration Statement No. 333-5126-LA filed on June 21, 1996.
10.2	Employment Agreement between the Company and Charles F. Willis IV dated November 7, 2000. Incorporated by reference to Exhibit 10.2 of the Company’s report on Form 10-K for the year ended December 31, 2000.
10.3	Employment Agreement between the Company and Donald A. Nunemaker dated November 21, 2000. Incorporated by reference to Exhibit 10.3 of the Company’s report on Form 10-K for the year ended December 31, 2000.
10.4	Employment contract between the Company and Monica J. Burke dated June 21, 2002. Incorporated by reference to Exhibit 10.5 to the Company’s report on Form 10-Q for the quarter ended June 30, 2002.
10.5	The Company’s 1996 Stock Option/Stock Issuance Plan, as amended and restated as of May 22, 2001. Incorporated by reference to the Company’s Proxy Statement dated May 1, 2001.
10.6	Stockholders’ Agreement, dated as of November 7, 2000, by and among the Company, Charles F. Willis, IV, CFW Partners, L.P., Austin Chandler Willis 1995 Irrevocable Trust and FlightTechnics LLC. Incorporated by reference to Exhibit 10.8 on Form 8-K filed on November 13, 2000.
10.7*	Credit Agreement dated May 1, 2001 among the Company, certain banking institutions, National City Bank and Fortis Bank (Nederland) N.V. Incorporated by reference to Exhibit 10.24 of the Company’s report on Form 10-Q for the quarter ended June 30, 2001.
10.8*	Credit Agreement dated September 21, 2001 between the Company and ABB Credit Finance AB (publ.). Incorporated by reference to Exhibit 10.25 to the Company’s report on Form 10-Q for the quarter ended September 30, 2001.

22

10.9*	Amended and Restated Eighth Amendment to Amended and Restated Series 1997-1 Supplement among WLFC Funding Corporation and the Bank of New York, dated May 3, 2002. Incorporated by reference to Exhibit 10.23 to the Company’s report on Form 10-Q for the quarter ended June 30, 2002.
10.10	Eighth Amendment to the Note Purchase Agreement, dated as of May 3, 2002, by and among the Company, WLFC Funding Corporation and Variable Funding Capital Corporation. Incorporated by reference to Exhibit 10.24 to the Company’s report on Form 10-Q for the quarter ended June 30, 2002.
10.11*	Contribution and Sale Agreement between the Company and Willis Engine Funding LLC dated as of September 12, 2002. Incorporated by reference to Exhibit 10.25 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.12*	Series 2002-1 Supplement dated September 12, 2002 to Indenture between Willis Engine Funding LLC and The Bank of New York, Indenture Trustee. Incorporated by reference to Exhibit 10.26 to the Company’s report on Form10-Q for the quarter ended September 30, 2002.
10.13	Guaranty between the Company, Barclays Bank PLC and Fortis Bank (Nederland) N.V. dated as of September 12, 2002. Incorporated by reference to Exhibit 10.27 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.14*	Administration Agreement among Willis Engine Funding LLC, the Company, Barclay’s Bank PLC, and The Bank of New York, dated as of September 12, 2002. Incorporated by reference to Exhibit 10.28 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.15	Class A Note Purchase Agreement among Willis Engine Funding LLC, the Company, Sheffield Receivables Corporation and Barclay’s Bank PLC dated as of September 12, 2002. Incorporated by reference to Exhibit 10.29 to the Company’s report on Form10-Q for the quarter ended September 30, 2002.
10.16	Class B Note Purchase Agreement among Willis Engine Funding LLC, the Company, Fortis Bank (Nederland) N.V., and Barclay’s Bank PLC dated as of September 12, 2002. Incorporated by reference to Exhibit 10.30 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.17	Indenture Agreement between Willis Engine Funding LLC and The Bank of New York dated as of September 12, 2002. Incorporated by reference to Exhibit 10.31 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.18	Custodial Agreement by and among BNY Midwest Trust Company, Willis Engine Funding LLC, the Company, The Bank of New York and Barclay’s Bank PLC dated as of September 12, 2002. Incorporated by reference to Exhibit 10.32 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.19	Servicing Agreement between the Company and Willis Engine Funding LLC dated as of September 12, 2002. Incorporated by reference to Exhibit 10.33 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.20	Independent Contractor Agreement between the Company and Hans Joerg Hunziker dated September 13, 2002. Incorporated by reference to Exhibit 10.34 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.21	Amendment No. 1 to Credit Agreement by and between the Company and ABB New Finance AB (publ) dated November 12, 2002. Incorporated by reference to Exhibit 10.35 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.
10.22	Amendment No. 2 to Credit Agreement among the Company, certain banking institutions, National City Bank and Fortis Bank (Nederland) N.V. dated as of November 13, 2002. Incorporated by reference to Exhibit 10.36 to the Company’s report on Form 10-Q for the quarter ended September 30, 2002.

23

10.23*	Amended and Restated Contribution and Sale Agreement between the Company and Willis Engine Funding LLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.27 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.24*	Amended and Restated Series 2002-1 Supplement between Willis Engine Funding LLC and The Bank of New York dated as of December 13, 2002. Incorporated by reference to Exhibit 10.28 to the Company’s report on Form 10-K for the year ended December 31, 2002.

24

10.25	Amended and Restated Guaranty between the Company, Barclays Bank PLC and Fortis Bank (Nederland) N.V. dated as of December 13, 2002. Incorporated by reference to Exhibit 10.29 to the Company’s report on Form10-K for the year ended December 31, 2002.
10.26*	Amended and Restated Administration Agreement among Willis Engine Funding LLC, the Company, Barclays Bank PLC and The Bank of New York dated as of December 13, 2002. Incorporated by reference to Exhibit 10.30 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.27	Amended and Restated Subclass A-1 Note Purchase Agreement among Willis Engine Funding LLC, the Company, Sheffield Receivables Corporation and Barclays Bank PLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.31 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.28	Subclass A-2 Note Purchase Agreement among Willis Engine Funding LLC, the Company, Sheffield Receivables Corporation and Barclays Bank PLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.32 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.29	Amended and Restated Subclass B-1 Note Purchase Agreement among Willis Engine Funding LLC, the Company, Fortis Bank (Nederland) N.V. and Barclays Bank PLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.33 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.30	Subclass B-2 Note Purchase Agreement among Willis Engine Funding LLC, the Company and Barclays Bank PLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.34 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.31	Amended and Restated Indenture between Willis Engine Funding LLC, and The Bank of New York dated as of December 13, 2002. Incorporated by reference to Exhibit 10.35 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.32	Amended and Restated Servicing Agreement between the Company and Willis Engine Funding LLC dated as of December 13, 2002. Incorporated by reference to Exhibit 10.36 to the Company’s report on Form 10-K for the year ended December 31, 2002.
10.33*	First Supplemental Indenture between Willis Engine Funding LLC and the Bank of New York dated October 10, 2003. Incorporated by reference to Exhibit 10.33 to the Company’s report on Form 10-Q for the quarter ended September 30, 2003.
10.34*	First Amendment to Series Supplement between Willis Engine Funding LLC and the Bank of New York dated October 10, 2003. Incorporated by reference to Exhibit 10.34 to the Company’s report on Form 10-Q for the quarter ended September 30, 2003.
10.35	Amendment No. 1 to Note Purchase Agreements between Willis Lease Finance Corporation, Willis Engine Funding LLC, Sheffield Receivables Corporation, Fortis Bank (Nederland) N.V., and Barclays Bank plc dated October 10, 2003. Incorporated by reference to Exhibit 10.35 to the Company’s report on Form 10-Q for the quarter ended September 30, 2003.
10.36	The Company’s 1996 Stock Option/Stock Issuance Plan, as amended and restated as of March 31, 2003. Incorporated by reference to Exhibit 99.1 of the Company’s Form S-8 filed on September 26, 2003.
10.37	Employment letter between the Company and Thomas C. Nord dated June 11, 2003. Incorporated by reference to Exhibit 10.38 to the Company’s report on Form 10-K for the year ended December 31, 2003.
10.38*	Amended and Restated Credit Agreement, dated as of June 29, 2004 among Willis Lease Finance Corporation, and Certain Banking Institutions Named Herein with National City Bank and Fortis Bank (Nederland) N.V. Incorporated by reference to Exhibit 10.39 of the Company’s Form 10-Q for the quarter ended June 30, 2004.
10.39	The Company’s Employee Stock Purchase Plan As Amended and Restated Effective August 1, 2004. Incorporated by reference to Exhibit 99.1 of the Company’s Form S-8 filed on August 11, 2004.

25

10.40	First Amendment to Amended and Restated Credit Agreement dated as of September 23, 2004 among the Company, National City Bank, Fortis Bank (Nederland) N.V. and CDC Finance – CDC IXIS. Incorporated by reference to Exhibit 10.41 of the Company’s Form 10-Q for the quarter ended September 30, 2004.
10.41	Letter Agreement dated September 30, 2004 between the Company, Willis Engine Funding LLC, The Bank of New York, Sheffield Receivables Corporation, Barclays Bank PLC and Fortis Bank (Nederland) N.V. to extend the Company’s warehouse facility. Incorporated by reference to Exhibit 10.42 of the Company’ Form 10-Q for the quarter ended September 30, 2004.
10.42	Loan and Aircraft Security Agreement dated October 29, 2004 between Fleet Capital Corporation and Willis Lease Finance Corporation.
10.43	Second Amendment to Amended and Restated Credit Agreement dated as of December 9, 2004 among Willis Lease Finance Corporation, National City Bank, Certain Named Banking Institutions and Fortis Bank (Nederland) N.V.
10.44	Amendment No. 1 to Loan and Aircraft Security Agreement dated as of December 9, 2004 between Fleet Capital Corporation and Willis Lease Finance Corporation.
11.1	Statement regarding computation of per share earnings.
21.1	Subsidiaries of the Company
23.1	Consent and Report of KPMG LLP, Independent Auditors on Schedule II.
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 Monica J. Burke 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.

26

*Portions of these exhibits have been omitted pursuant to a request for confidential treatment and the redacted material has been filed separately with the Commission.

(b)Reports on Form 8-K

(i)On November 9, 2004, the Company filed a Form 8-K disclosing under Item 2.02, “Results of the Operations and Financial Condition”, Item 7.01, “Regulation FD Disclosure”, and Item 9.01, “Financial Statements and Exhibits”, its Press Release on Earnings for the quarter and nine months ended September 30, 2004.

(ii)On December 15, 2004, the Company filed a Form 8-K disclosing under Item 1.01, “Entry into a Material Definitive Agreement” and Item 2.03, “Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant” that it had amended its revolving credit agreement to reflect the increase in the facility from $138.5 million to $148.5 million.

(d)Financial Statements

Financial Statements are submitted as a separate section of this report beginning on page 29.

27

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, thereunto duly authorized.

Dated:	March 18, 2005
		Willis Lease Finance Corporation
		By:	/s/ CHARLES F. WILLIS, IV
			Charles F. Willis, IV
			Chairman of the Board, President, and
			Chief Executive Officer

Dated:	Title	Signature
Date: March 18, 2005	Chief Executive Officer and Director	/s/ CHARLES F. WILLIS, IV
	(Principal Executive Officer)	Charles F. Willis, IV
Date: March 18, 2005	Chief Financial Officer	/s/ MONICA J. BURKE
		Monica J. Burke
Date: March 18, 2005	Corporate Controller and	/s/ ANDREW STOKES
	Chief Accounting Officer	Andrew Stokes
Date: March 18, 2005	Director	/s/ WILLIAM M. LEROY
		William M. LeRoy
Date: March 18, 2005	Director	/s/ GLENN L. HICKERSON
		Glenn L. Hickerson
Date: March 18, 2005	Director	/s/ W. WILLIAM COON, JR.
		W. William Coon, Jr.
Date: March 18, 2005	Director	/s/ GERARD LAVIEC
		Gerard Laviec

28

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Willis Lease Finance Corporation:

We have audited the accompanying consolidated balance sheets of Willis Lease Finance Corporation and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Willis Lease Finance Corporation and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/	KPMG LLP
San Francisco, California
March 18, 2005

30

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share data)

	December 31, 2004		December 31, 2003
ASSETS
Cash and cash equivalents including restricted cash of $46,324 and $33,784 at December 31, 2004 and 2003, respectively	$	51,864	$	42,986
Equipment held for operating lease, less accumulated depreciation of $83,881 and $67,873 at December 31, 2004 and 2003, respectively	511,443		499,454
Net investment in direct finance lease	—		5,551
Operating lease related receivable, net of allowances of $400 and $440 at December 31, 2004 and 2003, respectively	1,630		2,095
Notes receivable	436		—
Investment	1,480		1,480
Assets under derivative instruments	1,398		7
Property, equipment & furnishings, less accumulated depreciation of $1,259 and $1,193 at December 31, 2004 and 2003, respectively	7,537		877
Other assets	9,670		7,572
Total assets	$	585,458	$	560,022
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	7,280	$	5,753
Liabilities under derivative instruments	—		696
Deferred income taxes	27,530		25,283
Notes payable	369,840		362,395
Maintenance reserves	56,871		46,408
Security deposits	2,088		2,314
Unearned lease revenue	5,381		7,111
Total liabilities	468,990		449,960
Shareholders’ equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized; none outstanding)	—		—
Common stock, ($0.01 par value, 20,000,000 shares authorized; 8,998,365 and 8,846,805 shares issued and outstanding at December 31, 2004 and 2003, respectively)	90		88
Paid-in capital in excess of par	62,631		61,710
Accumulated other comprehensive gain/(loss), net of tax expense of $355 and tax benefit of $584 at December 31, 2004 and 2003, respectively	966		(660		)
Retained earnings	52,781		48,924
Total shareholders’ equity	116,468		110,062
Total liabilities and shareholders’ equity	$	585,458	$	560,022

See accompanying notes to the consolidated financial statements.

31

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Income

(In thousands, except per share data)

	Years Ended December 31,
	2004			2003			2002
REVENUE
Lease revenue	$	58,177		$	56,977		$	55,397
Gain on sale of leased equipment	3,085			2,372			482
Net gain on debt prepayment	—			—			4,073
Other income	677			520			—
Total revenue	61,939			59,869			59,952
EXPENSES
Depreciation expense	23,198			21,686			19,449
Write-down of equipment	577			1,272			3,052
General and administrative	14,791			13,852			14,439
Total expenses	38,566			36,810			36,940
Earnings from operations	23,373			23,059			23,012
Interest expense	18,449			17,409			19,110
Interest income	(434		)	(244		)	(432		)
Net interest and finance costs	18,015			17,165			18,678
Income before income taxes	5,358			5,894			4,334
Income tax expense	(1,501		)	(1,717		)	(738		)
Net income	$	3,857		$	4,177		$	3,596
Basic earnings per common share:	$	0.43		$	0.47		$	0.41
Diluted earnings per common share:	$	0.42		$	0.47		$	0.41
Average common shares outstanding	8,925			8,840			8,831
Diluted average common shares outstanding	9,276			8,888			8,851

See accompanying notes to the consolidated financial statements.

32

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity and Comprehensive Income

Years Ended December 31, 2004, 2003 and 2002

(In thousands)

	Issued and outstanding shares of common stock	Common Stock		Paid-in Capital in Excess of par		Accumulated Other Comprehensive Income/(Loss) (net)			Retained earnings		Total shareholders’ equity
Balances at December 31, 2001 (as restated)	8,826	$	88	$	61,532	$	(1,815	)	$	41,151	$	100,956
Net Income	—	—		—		—			3,596		3,596
Other comprehensive income
Net gain on cashflow hedging instruments, net of tax of $131	—	—		—		239			—		239
Total comprehensive income											3,835
Shares issued under stock compensation plans	8	—		40		—			—		40
Tax benefit on disqualified dispositions of shares	—	—		74		—			—		74
Balances at December 31, 2002 (as restated)	8,834	88		61,646		(1,576		)	44,747		104,905
Net Income	—	—		—		—			4,177		4,177
Other comprehensive income
Net gain on cashflow hedging instruments, net of tax of $376	—	—		—		916			—		916
Total comprehensive income											5,093
Shares issued under stock compensation plans	13	—		61		—			—		61
Tax benefit on disqualified dispositions of shares	—	—		3		—			—		3
Balances at December 31, 2003	8,847	88		61,710		(660		)	48,924			110,062
Net Income	—	—		—		—			3,857		3,857
Other comprehensive income
Net gain on cashflow hedging instruments, net of tax of $939	—	—		—		1,626			—		1,626
Total comprehensive income											5,483
Shares issued under stock compensation plans	151	2		755		—			—		757
Tax benefit on disqualified dispositions of shares	—	—		166		—			—		166
Balances at December 31, 2004	8,998	$	90	$	62,631	$	966		$	52,781	$	116,468

See accompanying notes to the consolidated financial statements.

33

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(In thousands)

	Years ended December 31,
	2004			2003			2002
Cash flows from operating activities:
Net income	$	3,857		$	4,177		$	3,596
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	23,198			21,686			19,449
Write-down of equipment	577			1,272			3,052
Amortization of loan discount	256			—			—
Allowances and provisions	(40		)	141			200
Loss on derivative instruments	—			—			99
Gain on sale of leased equipment	(3,085		)	(2,372		)	(482		)
Write-off of deferred costs	135			312			781
Changes in assets and liabilities:
Receivables	505			1,144			(1,030		)
Other assets	1,735			(205		)	366
Accounts payable and accrued expenses	1,527			1,314			(686		)
Deferred income taxes	1,474			1,707			729
Maintenance reserves	14,368			12,197			5,297
Security deposits	(226		)	(26		)	(8		)
Unearned lease revenue	(1,620		)	546			234
Net cash provided by operating activities	42,661			41,893			31,597
Cash flows from investing activities:
Proceeds from sale of equipment held for operating lease (net of selling expenses)	19,007			20,386			16,400
Proceeds from principal payment of notes receivable	1,778			—			—
Proceeds from sale of property, plant & equipment	33			—			—
Purchase of equipment held for operating lease	(59,371		)	(31,881		)	(47,652		)
Purchase of property, equipment and furnishings	(7,445		)	(78		)	(267		)
Net principal payments received on direct finance lease	5,551			1,281			467
Net cash (used in)/provided by investing activities	(40,447		)	(10,292		)	(31,052		)
Cash flows from financing activities:
Proceeds from issuance of notes payable	58,633			68,376			66,378
Debt issuance cost	(1,282		)	(363		)	(2,457		)
Purchase of derivative instruments	—			—			(789		)
Proceeds from issuance of common stock	757			61			40
Principal payments on notes payable	(51,444		)	(83,978		)	(61,245		)
Net cash (used in)/provided by financing activities	6,664			(15,904		)	1,927
Increase in cash and cash equivalents and restricted cash	8,878			15,697			2,472
Cash and cash equivalents at beginning of period including restricted cash of $33,784, $24,486 and $20,351 at December 31, 2003, 2002 and 2001, respectively	42,986			27,289			24,817
Cash and cash equivalents at end of period including restricted cash of $46,324, $33,784 and $24,486 at December 31, 2004, 2003 and 2002, respectively	$	51,864		$	42,986		$	27,289
Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	15,762		$	14,933		$	11,449
Income Taxes	$	25		$	29		$	15
Supplemental disclosures of non-cash investing activities:
In 2003, a liability of $13,317 was incurred in connection with the Company’s purchase of aircraft and engines.

See accompanying notes to the consolidated financial statements

34

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(1)Organization and Summary of Significant Accounting Policies

(a)Organization

Willis Lease Finance Corporation (“Willis” or the “Company”) is a provider of aviation services whose primary focus is on providing operating leases of aftermarket commercial aircraft engines and other aircraft-related equipment to air carriers, manufacturers and overhaul/repair facilities worldwide. Willis also engages in the selective purchase and resale of commercial aircraft engines.

T-11 Inc. (T-11), and WLFC-AC1 Inc. are wholly-owned consolidated subsidiaries of Willis. T-11 is a California corporation and WLFC-AC1 Inc., is incorporated in Delaware and were established to purchase, lease and resell commercial aircraft engines and parts.

WLFC (Ireland) Limited is a wholly-owned subsidiary of Willis. WLFC (Ireland) Limited was formed in 1998 to facilitate certain of Willis’ international leasing activities.

During 2004, Terandon Leasing Corporation, T-2 Inc., T-4 Inc., T-5 Inc., T-7 Inc., T-8 Inc., T-10 Inc. and WLFC Engine Pooling Company were merged into their parent and dissolved.

Willis Engine Funding LLC (“WEF”) is a wholly owned subsidiary of Willis. WEF is a Delaware limited liability company and was established in 2002 for the purpose of financing aircraft engines and is a special-purpose bankruptcy-remote entity. WLFC Funding (Ireland) Limited is a wholly-owned subsidiary of WEF and was established in 2001 to facilitate certain international leasing activities.

Management considers the continuing operations of the Company to operate in one reportable segment.

(b)Principles of Consolidation

The consolidated financial statements include the accounts of Willis, WEF, WLFC-AC1 Inc., WLFC Funding (Ireland) Limited and WLFC (Ireland) Limited (together, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

(c)Revenue Recognition

Revenue from leasing of aircraft equipment is recognized as operating lease or finance lease revenue over the terms of the applicable lease agreements. Revenue is not recognized when cash collection is not reasonably assured.

(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 add economic value, are capitalized and depreciated over the estimated remaining useful life of the equipment. Overhauls paid for from the accumulated maintenance reserves are not capitalized.

The Company generally depreciates engines on a straight-line basis over a 15 year period from the acquisition date to a 55% residual value.  The Company believes that this methodology accurately reflects the Company’s typical holding period for the assets and, that the residual value assumption reasonably approximates the selling price of the assets 15 years from date of acquisition.

For 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.

The spare parts packages owned by the Company are depreciated on a straight-line basis over an estimated useful life of 14 years to a 25% residual value.

35

The aircraft 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.

Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”  (SFAS 144) requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and long-lived assets and certain identifiable intangibles to be disposed of generally be reported at the lower of carrying amount or fair value less cost to sell. Impairment is identified by comparison of undiscounted forecast cash flows, including estimated sales proceeds,over the life of the asset with the assets’ book value. If the forecast undiscounted cash flows are less than the book value the asset is written down to its fair value. Fair value is determined by reference to independent appraisals, quoted market prices (e.g. an offer to purchase) and other factors considered relevant by Management. The Company conducts a formal annual review of the carrying value of long-lived assets. Such reviews resulted in impairment charges for engines and aircraft of $0.6 million, $1.3 million and $3.1 million (disclosed separately as “Write-down of equipment” in the Consolidated Statements of Income) in 2004, 2003 and 2002, respectively.

(e)Loan Commitment and Related Fees

To the extent that the Company is required to pay fees in order to secure debt, such fees are capitalized and amortized over the life of the related loan using the interest method.

(f)Maintenance and Repair Costs

Maintenance and repair costs under the Company’s leases are generally the responsibility of the lessees. Under many of the Company’s leases, lessees pay periodic use fees to the Company based on the usage of the asset. The Company records a Maintenance reserve liability in respect of the use fees collected. Upon the completion of approved maintenance of an asset, such fees are returned to the lessee up to the amount of the repair but not exceeding the use fees paid by the lessee. Under certain of the Company’s leases, the lessee is not obligated to perform maintenance on the asset. At the end of the lease, any un-reimbursed maintenance reserves are retained by the Company, and recognized as income upon sale of the related engine. Such amounts recognized were $0.9 million for the years ended December 31, 2004 and 2003.

(g)Interest Rate Hedging

The Company has entered into various hedge agreements to mitigate its exposure on its variable rate borrowings.  The differential to be paid or received under the hedge agreements is charged or credited to interest expense.

The Company accounts for derivatives and hedging activities in accordance with SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (as amended), and under these Statements the Company’s interest rate swaps were designated as cash flow hedges. Cash flow hedges are recognized on the balance sheet at their fair value. The Company formally documents, at the contract’s inception, all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all cash-flow hedges to liabilities on the balance sheet. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive income, until earnings are affected by the variability in cash flows of the designated hedged item.

The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised or management determines that designation of the derivative as a hedging instrument is no longer appropriate.

During the year ended December 31, 2002, the Company recorded adjustments to Accumulated Other Comprehensive Income/(Loss) of $239,000 (net of tax of $131,000) for changes in fair value of effective cash flow hedges and charges of $0.1 million to interest expense for changes in fair value of ineffective cash flow hedges.

During the year ended December 31, 2003, the Company recorded adjustments to Accumulated Other Comprehensive Income/(Loss) of $0.9 million (net of tax of $0.4 million) for changes in fair value of effective cash flow hedges.

During the year ended December 31, 2004, the Company recorded adjustments to Accumulated Other Comprehensive Income/(Loss) of $1.6 million (net of tax expense of $0.9 million). Refer to Note 5 for further details.

36

(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.

(i)Property, Equipment and Furnishings

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

(j)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 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 or maintenance reserves associated with the engine are not included in the sale the Company includes such items in its calculation of gain or loss. The Company also engages in engine exchanges and where the cash element of the exchange exceeds 25% of the fair value of the transaction the exchange is treated as a monetary one and the gain or loss on sale is recognized.

(k)  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. Certain bank accounts are subject to restrictions in connection with the Company’s borrowings. Under the warehouse facility cash is collected in a restricted account, which is used to service the debt and any amounts remaining after debt service and defined expenses are distributed to the Company. Additionally, under this facility maintenance reserve payments and lease security deposits are accumulated in a restricted account and are not available for general use. Further, the Company must maintain a cash reserve equal to 2% of the outstanding warehouse debt at all times. The WLFC-AC1 credit facility has similar maintenance reserve and security deposit accounts restricted from general use. Maintenance reserve accounts are only available to meet the costs of specified engine maintenance or repair provisions and will usually be reimbursed to the lessee. In the event an engine is sold, accumulated maintenance reserves may then be available to the Company (see note 1(j) above). Security deposits are held until the end of the lease, at which time provided return conditions have been met, the deposit will be returned to the lessee.  To the extent return conditions are not met, these deposits may be retained by the Company.

(l)Reclassifications

Certain items in the consolidated financial statements of prior years have been reclassified to conform to the current year’s presentation.

(m)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 the Company 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, the Company evaluates its estimates, including those related to residual values, estimated asset lives, bad debts, income taxes, contingencies and litigation. The Company bases its estimates 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 useful life of equipment, residual values and asset impairment are critical to the results of operations.

If the useful lives or residual values are lower than those estimated by the Company, 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.

37

(n)Comprehensive Income

The Company reports changes in equity from all sources. For the years ended December 31, 2004, 2003 and 2002, comprehensive income includes net income and the net gain or loss on the change in fair value of cash flow hedges.

(o)Per share information

Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. The computation of fully diluted earnings per share is similar to the computation of basic earnings per share, except for the inclusion of all potentially dilutive common shares. The reconciliation between basic common shares and fully diluted common shares is presented below:

	Years ended December 31,
	2004	2003	2002
	(in thousands)
Shares:
Weighted-average number of common shares outstanding	8,925	8,840	8,831
Potentially dilutive common shares	351	48	20
Total Shares	9,276	8,888	8,851
Potential common stock excluded as anti-dilutive in period	406	1,645	1,263

(p)Investment

The Company’s investment is in a non-marketable security where management does not have significant influence and is recorded at cost. Management evaluates the investment for impairment quarterly. No adjustment to the carrying value was required during the periods presented.

(q)Stock Options

The Company accounts for its two stock based compensation plans (as described in Note 10) using the intrinsic value method prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations, as allowed under SFAS No. 123, “Accounting for Stock Based Compensation” and SFAS No. 148, “Accounting for Stock Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.” APB 25 requires compensation expense to be recognized over the employee service period based on the excess, if any, of the quoted market price of the stock at the date the award is granted or other measurement date, as applicable, over an amount the employee must pay to acquire the stock. As a result no compensation expense has been recognized during the three years ended December 31, 2004.

Had compensation cost for the Company’s two stock-based compensation plans been determined consistent with SFAS 148, the Company’s net income and earnings per share would have been as follows:

	2004			2003			2002
Net income as reported	$	3,857		$	4,177		$	3,596
Deduct: Total stock-based employees compensation expense determined under fair value based method for all awards, net of related tax effect	(748		)	(651		)	(929		)
Proforma net income	$	3,109		$	3,526		$	2,667
Basic earnings per common share as reported	$	0.43		$	0.47		$	0.41
Basic earnings per common share pro forma	$	0.35		$	0.40		$	0.30
Diluted earnings per common share as reported	$	0.42		$	0.47		$	0.41
Diluted earnings per common share pro forma	$	0.34		$	0.40		$	0.30

The fair value of the purchase rights under the Purchase Plan, the Plan is estimated using the Black-Scholes option pricing model.

38

The assumptions underlying the estimates derived using the Black-Scholes model are as follows:

	1996 Stock Option/ Stock Issuance Plan						Employee Stock Purchase Plan
	2004		2003		2002		2004		2003		2002
Expected Dividend Yield	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Risk-free Interest Rate	3.61	%	2.89	%	3.47	%	1.84	%	1.21	%	3.94	%
Expected Volatility	69.15	%	72.07	%	72.80	%	69.59	%	71.35	%	72.80	%
Expected Life (in years)	5.17		3.97		3.89		0.5 – 2.0		0.5 -1.0		0.5-2.0

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock plans have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s stock plans and the warrants.

(r)Initial Direct Costs associated with Leases

The Company accounts for the initial direct costs, including sales commission, incurred in obtaining a new lease by deferring and amortizing those costs over the term of the lease.

39

(2)Equipment Held For Lease and Net Investment in Direct Finance Lease

At December 31, 2004, the Company had 115 aircraft engines and related equipment with an aggregate original cost of $559.8 million, 3 spare parts packages with an aggregate original cost of $3.6 million and five aircraft with an aggregate original cost of $24.0 million and engine-related equipment with an aggregate original cost of $8.7 million, in its operating lease portfolio. At December 31, 2003, the Company had 119 aircraft engines and related equipment with an aggregate original cost of $534.0 million, 4 spare parts packages with an aggregate original cost of $10.4 million, seven aircraft with an aggregate original cost of $29.6 million and engine-related equipment with an aggregate original cost of $3.4 million in its operating and finance lease portfolio.

A majority of the Company’s aircraft equipment is leased and operated internationally. All leases relating to this equipment are denominated and payable in U.S. dollars.

The Company leases its aircraft equipment to lessees domiciled in 9 geographic regions. The tables below set forth geographic information about the Company’s leased aircraft equipment grouped by domicile of the lessee (which is not necessarily indicative of the asset’s actual location):

	Years ended December 31,
Lease revenue	2004		2003		2002
	(in thousands)
Region
United States	$	8,094	$	6,373	$	9,067
Canada	238		1,042		1,041
Mexico	4,225		4,349		2,717
Australia/New Zealand	670		853		305
Europe	25,943		25,310		24,906
South America	8,452		7,576		6,322
Asia	4,889		5,540		6,312
Africa	1,064		1,373		418
Middle East	4,602		4,561		4,309
Totals	$	58,177	$	56,977	$	55,397

Lease revenue less applicable depreciation, and  interest:	Years ended December 31,
	2004				2003			2002
	(in thousands)
Region:
United States	$	2,284			$	1,148		$	3,071
Canada	216				914			488
Mexico	980				1,143			1,177
Australia/New Zealand	194				426			141
Europe	12,241				13,421			12,461
South America	3,852				4,111			3,257
Asia	2,313				2,736			2,978
Africa	571				775			135
Middle East	2,299				2,460			1,860
Off-lease and other	(4,552			)	(4,682		)	(8,097		)
Totals	$		20,398		$	22,452		$	17,471

40

	As of December 31,
Net book value of equipment held for operating lease:	2004		2003		2002 (as restated)
			(in thousands)
Region
United States	$	70,611	$	48,575	$	47,484
Canada	—		—		13,415
Mexico	38,387		37,025		26,776
Australia/New Zealand	—		10,470		18,103
Europe	170,088		195,887		179,230
South America	67,927		59,064		44,265
Asia	41,073		38,213		42,450
Africa	5,860		5,884		15,462
Middle East	38,024		38,475		34,173
Off-lease and other	79,473		65,861		74,040
Totals	$	511,443	$	499,454	$	495,398

Included in “off-lease and other” is equipment that is held for disposal totaling approximately $5.5 million at December 31, 2004 and $7.0 million at December 31, 2003.

As of December 31, 2004 and 2003, the lease status of the equipment held for operating lease was as follows:

Lease Term	December 31, 2004 Net Book Value
	(in thousands)
Off-lease and other	$	79,473
Month-to-month leases	35,252
Leases expiring 2005	180,261
Leases expiring 2006	79,046
Leases expiring 2007	32,988
Leases expiring 2008	29,008
Leases expiring 2009	6,418
Leases expiring thereafter	68,997
	$	511,443

Lease Term	December 31, 2003 Net Book Value
	(in thousands)
Off lease and other	$	65,861
Month-to-month leases	74,325
Leases expiring 2004	134,970
Leases expiring 2005	51,473
Leases expiring 2006	61,745
Leases expiring 2007	34,650
Leases expiring 2008	28,160
Leases expiring thereafter	48,270
	$	499,454

The net investment in direct finance leases on December 31, 2004 and 2003 was as follows:

	2004		2003
	(in thousands)
Minimum payments receivable	$	—	$	714
Guaranteed residual value of leased assets	—		4,950
Unearned income	—		(113		)
Net investment in finance lease	$	—	$	5,551

The finance lease terminated during 2004.

41

As of December 31, 2004, minimum future payments under non-cancelable leases were as follows:

Year	(in thousands)
2005	$	37,431
2006	22,483
2007	16,527
2008	12,258
2009	9,358
Thereafter	11,008
	$	109,065

(3)Notes Receivable

At December 31, 2004, the Company had Notes Receivable of $0.4 million relating to the sale of two airframes in 2004. The notes are payable over two years at 6% per annum interest. The final payment is due July 2006.

42

(4)Notes Payable

Notes payable consisted of the following:

	As of December 31,
	2004		2003
	(in thousands)
Notes payable at a fixed interest rate of 8.63%.  Secured by aircraft engines. The note matures in September 2006.	$	2,291	$	2,658
Note payable at a fixed interest rate of 6.95% secured by aircraft.  The note matures in September 2005.	4,944		5,904
Class A notes payable of $194.4 million payable at a floating rate of interest based on commercial paper rates plus an average weighted spread of 2.26% and $21.6 million Class B notes payable at LIBOR plus an average weighted spread of 5.32%. The facility has a revolving period which ended in March 2005, followed by a 4-year amortization period. The Company has a guarantee to Class B Noteholders to a maximum of $21.6 million. The assets of the Issuer (WEF) and any associated Owner Trust are not available to satisfy the obligations of the Company or any of its affiliates.	216,000		219,000
Credit facility at a floating rate of interest of LIBOR plus 2.25% (2003, 1.75%).  Secured by engines. The facility has a committed amount of $148.5 million (2003, $125.0 million), which revolves until May 2006 and matures in May 2007.	117,000		95,000
Note payable at a floating rate of LIBOR + 2.75%. The note had a maturity of December 2009 but was repaid in 2004.	—		415
Note payable at a floating rate of LIBOR + 2.05%. The note matures in June, 2005. Secured by aircraft engines.	17,958		22,225
Note payable at a fixed interest rate of 7.75% secured by aircraft. The note matures in December 2006.	2,644		3,876
Note payable at a fixed interest rate of 6% secured by an aircraft engine. The note was repaid in 2004.	—		4,436
Note payable at fixed interest rate of 6% maturing in 2005. Secured by an engine.	2,592		—
Note payable at a floating rate of LIBOR + 1.78% maturing in 2011. Secured by an aircraft. A second tranche of $0.55 million was committed but unused as of December 31, 2004.	6,411		—
Note payable, with no interest rate, secured by aircraft, engines and related equipment. The note was repaid in 2004 (net of 6% imputed discount of $256).	—		8,881
Total notes payable	$	369,840	$	362,395

43

At December 31, 2004, 1-month LIBOR was approximately 2.4% and the Commercial Paper rate was approximately 2.21%. At December 31, 2003, the rates were 1.12% and 1.05%, respectively.

The fair value of the Company’s long-term debt is estimated based on quoted market prices for the same or similar issues or on the rates offered to the Company for debt of the same remaining maturities. The fair value of the Company’s debt is estimated by the Company to be $369.6 million at December 31, 2004.

Principal outstanding at December 31, 2004, is repayable as follows:

Year	(in thousands)
2005	$	37,839
2006	16,430
2007	130,856
2008	14,511
2009	165,042
Thereafter	5,162
	$	369,840

Certain of the debt instruments above also have covenant requirements such as a minimum tangible net worth and interest coverage. As of December 31, 2004, the Company was in compliance with all covenant requirements.

At December 31, 2004, the Company had a $148.5 million revolving credit facility to finance the acquisition of aircraft engines for lease as well as for general working capital purposes. As of December 31, 2004, $31.5 million was available under this facility. The facility matures in May 2007. The interest rate on this facility at December 31, 2004 was 1-month LIBOR plus 2.25%. Under the revolver facility, all subsidiaries except WLFC-AC1 and Willis Engine Funding LLC (“WEF”) jointly and severally guarantee payment and performance of the terms of the loan agreement. The maximum guarantee is $148.5 million plus any accrued and unpaid interest, fees or reimbursements but is limited at any given time to the sum of the principal outstanding plus accrued interest and fees. The guaranty would be triggered by a default under the agreement.

At December 31, 2004, the Company had a fully drawn $216.0 million debt warehouse facility. A wholly-owned special purpose entity, WEF, was created in 2002 for the purpose of financing jet aircraft engines. The facility had a six-month revolving period which ended March 9, 2005, followed by a four-year amortization period, during which 90% of the net rents from the collateral are used to pay down principal, followed by a final balloon payment The facility’s structure is designed to facilitate the issuance of public or private securitized notes. There is no assurance that a securitization can be completed or completed on terms that are favorable or acceptable to the Company. The Company will either renegotiate this facility with its lenders or the facility will go into its amortization period.  The facility notes are divided into $194.4 million Class A notes and $21.6 million Class B notes. The Company has a guaranty to the Class B Noteholders determined by a formula in the debt agreement. The maximum amount of the guaranty at December 31, 2004 is $21.6 million. If WEF defaults on its obligations, the full amount of the Class B notes outstanding (together with any accrued interest and fees) is due and payable immediately. The governing documents of the warehouse facility and the WEF operating agreement require that the assets of WEF and any associated Owner Trust are not available to satisfy the obligations of the Company or any of its affiliates.  WEF is consolidated for financial statement presentation purposes. At December 31, 2004, interest on the Class A notes is a commercial paper rate plus a weighted average spread of approximately 2.26% and interest on the Class B Notes is 1-month LIBOR plus a weighted average spread of 5.32%.

At December 31, 2004, the Company had warehouse and revolving credit facilities totaling $364.5 million compared to $344.0 million at December 31, 2003. At December 31, 2004 and 2003, respectively, $31.5 million and $30.0 million was available under these combined facilities.

At December 31, 2004, the Company had an $18.0 million term loan facility available to a wholly-owned consolidated subsidiary of the Company, WLFC-AC1, for the financing of jet aircraft engines sold by the Company to such subsidiary. The facility is a five-year term loan with final maturity of June 29, 2005. The interest rate is 1-month LIBOR plus 2.05%. This facility is fully drawn. The Company guarantees the obligations of WLFC-AC1 under the terms of this facility.

44

(5)Derivative Instruments

The Company holds a number of interest rate hedges to mitigate its exposure to changes in interest rates, in particular LIBOR, as 97% of the Company’s borrowings are at variable rates. In addition, WEF is required under its credit agreement to hedge a portion of its borrowings. These hedges have been documented and designated as cash flow hedges under SFAS 133 “Accounting for Derivative Instruments and Hedging Activities” (as amended). At December 31, 2004, the Company was a party to interest rate swap agreements with notional outstanding amounts of $100.0 million, remaining terms of between 27 and 37 months and fixed rates of between 2.52% and 3.45%. The fair value of these swaps at December 31, 2004, was positive $1.4 million and represented the estimated amount the Company would receive if it terminated the swaps. The Company purchased a number of forward-commencing interest rate caps, documented and designated as cash flow hedges, during the second quarter of 2002. These caps have notional amounts of $60.0 million, with 3 year terms, and effective dates commencing in 2003 and rates capped at 5.5%. At December 31, 2004, the estimated fair value of the caps was zero.

Under the swap contracts, the difference between the index and the fixed rate that is paid or received by the Company is charged or credited to interest expense.

The Company uses an external provider to ascertain the fair value of the hedges and assess the effectiveness of the hedges during the period. Valuation of the hedges 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 and has not changed its method of valuation or assessment of effectiveness during the period.

The Company reviews the effectiveness of its interest rate hedges on a quarterly basis and adjusts the fair value of the interest rate hedges through either Accumulated Other Comprehensive Income/(Loss) and/or earnings for the period. For the year ended December 31, 2004, the change in fair value of the interest rate hedges recorded to Accumulated Other Comprehensive Income/(Loss) was a gain of $1.6 million (net of tax expense of $0.9 million). For the year ended December 31, 2003, the change in fair value of the interest rate hedges recorded to Accumulated Other Comprehensive Income/(Loss) was a gain of $0.9 million (net of tax expense of $0.4 million). Interest expense for the years ended December 31, 2004 and 2003, was increased due to the Company’s interest rate hedges by approximately $1.6 million and $2.3 million, respectively. A reclassification into earnings from Accumulated Other Comprehensive Income/(Loss) may occur if the Company changes the terms of its debt such that the terms of the hedges no longer match or the hedges are terminated ahead of their maturity. The Company has no plans to undertake such transactions and accordingly, does not expect any reclassification into earnings within the next 12 months. Based on the implied forward rate for LIBOR at December 31, 2004, the Company anticipates that interest expense will be decreased by approximately $0.2 million for the year ending December 31, 2005.

45

(6)Income Taxes

The components of income tax for the years ended December 31, 2004, 2003 and 2002, included in the accompanying consolidated statements of income were as follows:

	Federal		State			Total
	(in thousands)
December 31, 2004
Current	$	—	$	23		$	23
Deferred	902		410			1,312
Charges in Lieu of Tax	145		21			166
	$	1,047	$	454		$	1,501
December 31, 2003
Current	$	—	$	10		$	10
Deferred	1,184		519			1,703
Charges in Lieu of Tax	3		1			4
	$	1,187	$	530		$	1,717
December 31, 2002
Current	$	—	$	13		$	13
Deferred	988		(337		)	651
Charges in Lieu of Tax	86		(12		)	74
	$	1,074	$	(336	)	$	738

The following is a reconciliation of the federal income tax expense at the statutory rate of 34% to the effective income tax expense on continuing operations:

	Years ended December 31,
	2004				2003				2002
			(in thousands and % of pre-tax income)
	$		%		$		%		$		%
Statutory federal income tax expense	1,822		34		2,004		34		1,474		34
State taxes, net of federal benefit	307		6		350		6		(222	)	(5	)
Extraterritorial income exclusion	(671	)	(13	)	(661	)	(11	)	(533	)	(12	)
Other	43		1		24		—		19		—
Effective income tax expense	1,501		28		1,717		29		738		17

In 2004, 2003, and 2002, the Company determined that a number of assets and their associated leases qualify for exclusion from federal taxable income under the Extraterritorial Income Exclusion rules, resulting in a reduction in the federal effective tax rate.

In 2002, the Company changed its estimated apportionment of income attributable to California, due to a change in the composition of the Company’s revenue, resulting in an income tax benefit of $0.6 million. In addition, the Company has provided for a gross valuation allowance of $0.1 million relating to California net operating losses expiring in 2006 where management believes realizing the benefit of the loss carry-forward is not assured, and included in state taxes in the table above.

46

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,
	2004			2003
	(in thousands)
Deferred tax assets:
Charitable contribution	$	83		$	67
Unearned lease revenue	1,968			2,411
State Taxes	8			9
Reserves and allowances	309			161
Alternative minimum tax credit	335			335
Net operating loss carry forward	37,789			30,410
Total gross deferred tax assets	40,492			33,393
Less valuation allowances	(115		)	(115		)
Net deferred tax assets	40,377			33,278
Deferred tax liabilities:
Depreciation on aircraft engines and equipment	(67,552		)	(59,145		)
	(27,175		)	(25,867		)
Deferred tax (liability)/asset related to unrealized (gain)/loss on derivative instruments	(355		)	584
Net deferred tax liability	$	(27,530	)	$	(25,283	)

As of December 31, 2004, the Company had net operating loss carry forwards of approximately $108.2 million for federal tax purposes and $17.0 million for state tax purposes. The federal net operating loss carry forwards will expire at various times from 2019 to 2024 and the state net operating loss carry forwards will expire at various times from 2006 to 2014. However, in 2002, the Company provided for a valuation allowance against California net operating losses (NOLs) totaling $2.0 million that expire in 2006 and realization is not assured. Net operating losses can be used as a deduction against future income arising from the U.S. consolidated filing group. As of December 31, 2004, the Company also had alternative minimum tax credits of approximately $0.3 million for federal income tax purposes which have no expiration date and which should be available to offset future alternative minimum tax liabilities. Management believes that no valuation allowance is required on deferred tax assets, other than the California NOL as stated, as it is more likely than not that all amounts are recoverable through future taxable income.

(7)Risk Management Issues

Risk Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash deposits, receivables and non-payment of maintenance reserves due at lease end.

The Company places its cash deposits with financial institutions and other creditworthy issuers and limits the amount of credit exposure to any one party. Concentrations of credit risk with respect to lease receivables are limited due to the large number of customers comprising the Company’s 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, risk is considered limited due to the number of these lessees which have this provision in the lease.

Interest Rate Risk Management

To mitigate exposure to interest rate changes, the Company has entered into interest rate swap and cap agreements.  As of December 31, 2004, such swap agreements had notional outstanding amounts of $100.0 million, average remaining terms of between 27 and 37 months and average fixed rates of between 2.52% and 3.45%. Caps had notional amounts of $60.0 million, effective dates commencing in 2003, with remaining terms of between three and four months and rates capped at 5.5%

As a result of these hedge arrangements, interest expense was increased in 2004 and 2003 by $1.6 million and $2.3 million. For further information see Note 1(g) and Note 5.

(8)Commitments, Contingencies, Guarantees and Indemnities

The Company has three leases for its office space. The annual lease rental commitment for the Sausalito office for 2005 is approximately $352,000 and the lease expires on December 31, 2005 but has two one-year renewal options. The Company has given notice that it may exercise its options to extend the lease for at least one further year. The remaining lease rental commitment, for premises for the San Diego operation, is approximately $64,000 plus expenses and the lease expires on October 31, 2005. The lease for premises in Shanghai, China expires in June 2005 and the remaining lease commitment is approximately $25,000.

47

The Company has a number of guaranties in respect of its credit facilities. Refer to Note 4 for a full description of the nature and terms of these guaranties. Additionally, the Company generally indemnifies the purchaser of its equipment against any taxes arising from the sale of the equipment (except taxes incurred by the purchaser). The amount of the indemnification is not determinable and the Company has not had to make any payments under such indemnifications.

The Company has commitments to purchase, during 2005, engines and other engine-related equipment totaling $18.2 million.

In July 2004, one of the Company’s engines (with a net investment of $1.9 million) was damaged while on lease to a customer. The Company does not believe that a loss will be incurred; however, no assurance can be given on the eventual outcome.

(9)Investments

In July 1999, the Company entered into an agreement to participate in a joint venture formed as a limited company — Sichuan Snecma Aero-engine Maintenance Co. Ltd. (Sichuan Snecma). The Company’s investment is 7% in the venture. Sichuan Snecma focuses on providing maintenance services for CFM56 series engines and is located in Chengdu, China. Other participants in the joint venture are Air China International Company and Snecma Services. As of the year ended December 31, 2004, $1.5 million has been contributed. This investment is recorded at cost.

(10)Employee Benefit Plans

Employee Stock Purchase Plan

The Company has a 1996 Employee Stock Purchase Plan (the “Purchase Plan”) under which 175,000 shares of common stock have been reserved for issuance. This plan was effective in September 1996. Eligible employees may designate not more than 10% of their cash compensation to be deducted each pay period for the purchase of common stock under the Purchase Plan, and participants may purchase not more than 1,000 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 fiscal 2004 and 2003, 11,262 and 9,077 shares of common stock, respectively were issued under the Purchase Plan.

The weighted average per share fair value of the employee’s purchase rights under the Purchase Plan for the rights granted in 2004 and 2003 were $2.23 and $1.87, respectively.

1996 Stock Option/Stock Issuance Plan

In June 1996, the Board of Directors approved the 1996 Stock Option/Stock Issuance Plan (the “Plan”). The Plan was amended by the Stockholders and restated in May 2003, to provide for an increase in the number of shares reserved for issuance under the Plan from 2,525,000 shares to 3,025,000 shares. The plan includes a Discretionary Option Grant Program, a Stock Issuance Program and an Automatic Option Grant Program for eligible non-employee Board members. The stock options vest over a period determined by the Plan Administrator (usually 4 years), have a life of up to 10 years and the exercise price on grant is equal to the market value of the shares on that date.

48

A summary of the activity under the plan is as follows:

	Options Outstanding
	Options Available for Grant		Options		Weighted Average Exercise Price		Weighted Average Fair Value
Balances at December 31, 2001	946,521		1,274,506		$	7.67
Options Granted	(317,542	)	317,542		4.67		$	2.63
Options Canceled	54,636		(54,636	)	5.37
Balances at December 31, 2002	683,615		1,537,412		$	7.13
Additional Options Made Available	500,000		—		—
Options Granted	(447,210	)	447,210		4.91		$	2.84
Options Exercised	—		(3,750	)	5.54
Options Canceled	68,222		(68,222	)	9.85
Balance as of December 31, 2003	804,627		1,912,650		$	6.52
Options Granted	(25,817	)	25,817		5.33
Options Exercised	—		(140,298	)	5.01		$		5.91
Options Canceled	33,449		(33,449	)	7.44
Balance as of December 31, 2004	812,259		1,764,720		$	6.61

A summary of the outstanding, exercisable options and their weighted average exercise prices is as follows:

	Options	Weighted Average Exercise Price
At December 31, 2002	822,367	$	8.63
At December 31, 2003	1,062,934	$	7.63
At December 31, 2004	1,258,711	$	7.19

The following table summarizes information concerning outstanding and exercisable options at December 31, 2004:

	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Outstanding	Weighted Average Exercise Price
From $1.30 to $5.01	709,076	7.47	$	4.58	387,364	$	4.29
From $5.07 to $6.05	620,157	5.81	5.43		448,780	5.48
From $6.50 to $22.12	435,487	4.87	11.58		422,567	11.67
From $1.30 to $22.12	1,764,720	6.25	$	6.61	1,258,711	$	7.19

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 of the Company in the United States.  In 2004, employees who participated in the 401(k) Plan could elect to defer and contribute to the 401(k) Plan up to 20% of pretax salary or wages up to $13,000 (or $16,000 for employees at least 50 years of age). The Company matches employee contributions up to 50% of 8% of the employee’s salary which totaled $158,000 in 2004, $129,000 in 2003 and $94,000 in 2002.

49

(11)Quarterly Consolidated Financial Information (Unaudited)

The following is a summary of the unaudited quarterly results of operations for the years ended December 31, 2004, 2003 and 2002 (in thousands, except per share data).

Fiscal 2004	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter			Full Year
Total Revenue	$	15,086	$	15,057	$	14,684	$	17,112		$	61,939
Net income	969		915		508		1,465			3,857
Basic earnings per common share Net income	$	0.11	$	0.10	$	0.06	$		0.16	$		0.43
Diluted earnings per common share Net income	$	0.11	$	0.10	$	0.05	$		0.16	$	0.42
Average common shares outstanding	8,856		8,908		8,959		8,975			8,925
Diluted average common shares outstanding	9,161		9,315		9,297		9,330			9,276

Fiscal 2003	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total Revenue	$	14,042	$	15,612	$	14,185	$	16,030	$	59,869
Net income	842		1,152		745		1,438		4,177
Basic earnings per common share Net income	0.10		0.13		0.08		0.16		0.47
Diluted earnings per common share Net income	0.09		0.13		0.08		0.16		0.47
Average common shares outstanding	8,836		8,838		8,841		8,844		8,840
Diluted average common shares outstanding	8,875		8,874		8,889		8,960		8,888

Fiscal 2002	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter		Full Year
Total Revenue	$	14,352	$	13,408	$	14,005	$	18,187	$	59,952
Net income	966		577		33		2,020		3,596
Basic earnings per common share Net income	0.11		0.07		0.00		0.23		0.41
Diluted earnings per common share Net income	0.11		0.07		0.00		0.23		0.41
Average common shares outstanding	8,828		8,830		8,832		8,834		8,831
Diluted average common shares outstanding	8,854		8,852		8,841		8,857		8,851

50

(12) Related Party and Similar Transactions

The Company occasionally sells engines to and purchases materials from avioserv, the successor to a former subsidiary of the Company and a current subsidiary of T Group America. T Group America is owned by T Group (f/k/a SR Technics Group), an entity that is related to FlightTechnics LLC, which holds 14% of the Company’s common stock. The Company also leases office space from avioserv with the lease term expiring October 31, 2005. During the year ended December 31, 2004, the Company sold one engine to avioserv. W. William Coon, Jr., a director of the Company, is a director of Flight Technics, LLC and T Group America. He is also Chairman of the Board of Directors of avioserv.

Effective September 13, 2002, the Company entered into a consulting agreement with Hans Jorg Hunziker, a former executive of Flightlease AG, a wholly-owned subsidiary of SAir Group. Mr. Hunziker is a former Director of the Company having resigned from the Board on July 1, 2003. The agreement was for a one-year term ending September 13, 2003, and thereafter extended until January 2004 when it was terminated. Mr. Hunziker was to provide strategic advice and investigation into additional sources of capital in Europe.

Gavarnie Holding, LLC, a Delaware Limited Liability Company (“Gavarnie”) owned by Charles F. Willis, IV, purchased the stock of Aloha IslandAir, Inc., a Delaware Corporation, (“IslandAir”) from Aloha AirGroup, Inc. (“Aloha”) on May 11, 2004. Charles F. Willis, IV is the President, CEO and Chairman of the Board of Directors of the Company and owns approximately 34% of the Company’s stock as of December 31, 2004. IslandAir leases five DeHaviland DHC-8-100 aircraft from the Company, under non-cancelable leases which generate lease revenue of approximately $2.5 million per year and have a net book value of $16.0 million, for remaining periods of between two and four years. IslandAir’s obligations under four of these leases are guaranteed by Aloha. However, Aloha has recently filed for reorganization under Chapter 11 of the Bankruptcy Code and the Company expects Aloha’s obligations under the guarantees to be discharged in this proceeding. Gavarnie is required to indemnify Aloha if a claim is made against Aloha in respect of its guaranties of IslandAir’s leases from the Company.

The Company entered into a Consignment Agreement dated April 30, 2004 with Avsets.com, Inc. to sell parts from a disassembled engine.  J.T. Power LLC (“J.T. Power”) has agreed to market these parts on behalf of Avsets.com, Inc. and also shares office space with Avsets.com, Inc. J.T. Power is an entity whose majority shareholder, Austin Willis, is the son of the President and Chief Executive Officer of the Company, and directly and indirectly, a shareholder of the Company. The book value of the parts consigned to Avsets.com is approximately $19,000.

(13) Restatement

The Company has restated its Consolidated Financial Statements for the year ended December 31, 2000 as a result of an accounting error, discovered during the second quarter of 2003, in calculating the cost of goods sold of an inventory item disposed of in 2000. As a result of the error, income from discontinued operations, net income and retained earnings for the year ended December 31, 2000, have been reduced by $625,000 (net of tax benefit of $375,000). Equipment held for operating lease and deferred income taxes were reduced by $1.0 million and $375,000, respectively. The restatement also affects retained earnings, equipment held for operating lease and deferred income taxes by the same amounts at December 31, 2001 and 2002. There is no effect on operating, finance or investing cash flows for any period.

51

Schedule II

Valuation Accounts

Willis Lease Finance Corporation

Valuation Accounts

(in thousands)

	Balance at Beginning of period		Additions Charged to Expense		Recoveries		Deductions			Balance at End of Period
December 31, 2002
Accounts receivable, allowance for doubtful accounts	$	175	$	200	$	—	$	(76	)	$	299
December 31, 2003
Accounts receivable, allowance for doubtful accounts	299		112		53		(24		)	440
December 31, 2004
Accounts receivable, allowance for doubtful accounts	440		—		17		(57		)	400

52

EX-3.2

Exhibit 3.2

BYLAWS

OF

WILLIS LEASE FINANCE CORPORATION

(a Delaware corporation)

Amendment Date: April 18, 2001

TABLE OF CONTENTS

ARTICLE I. Offices
SECTION 1.01.	Registered Office
SECTION 1.02.	Other Offices
ARTICLE II. Meetings of Stockholders
SECTION 2.01.	Annual Meetings
SECTION 2.02.	Special Meetings
SECTION 2.03.	Place of Meetings
SECTION 2.04.	Notice of Meetings
SECTION 2.05.	Quorum
SECTION 2.06.	Voting
SECTION 2.07.	Fixing Date for Determination of Stockholders of Record
SECTION 2.08.	List of Stockholders Entitled to Vote
SECTION 2.09.	Judges
SECTION 2.10.	Notice of Stockholder Business and Nominations
ARTICLE III. Board of Directors
SECTION 3.01.	General Powers
SECTION 3.02.	Number and Term of Office
SECTION 3.03.	Election of Directors
SECTION 3.04.	Resignations
SECTION 3.05.	Removal
SECTION 3.06.	Vacancies
SECTION 3.07.	Place of Meeting, Etc.
SECTION 3.08.	Regular Meetings
SECTION 3.09.	Special Meetings
SECTION 3.10.	Quorum and Manner of Acting
SECTION 3.11.	Organization
SECTION 3.12.	Action by Consent
SECTION 3.13.	Compensation
SECTION 3.14.	Committees
SECTION 3.15.	Qualification Requirement for Directors
ARTICLE IV. Officers
SECTION 4.01.	Number
SECTION 4.02.	Election, Term of Office and Qualifications
SECTION 4.03.	Assistants, Agents and Employees, Etc.
SECTION 4.04.	Removal
SECTION 4.05.	Resignations
SECTION 4.06.	Vacancies
SECTION 4.07.	Inability to Act
SECTION 4.08.	The Chairman of the Board
SECTION 4.09.	The President
SECTION 4.10.	The Chief Financial Officer
SECTION 4.11.	The Vice Presidents

i

SECTION 4.12.	The Corporate Secretary
SECTION 4.13.	Compensation
ARTICLE V. Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 5.01.	Execution of Contracts
SECTION 5.02.	Checks, Drafts, Etc.
SECTION 5.03.	Deposits
SECTION 5.04.	General and Special Bank Accounts
ARTICLE VI. Shares and Their Transfer
SECTION 6.01.	Certificates for Stock
SECTION 6.02.	Transfers of Stock
SECTION 6.03.	Regulations
SECTION 6.04.	Lost, Stolen, Destroyed, and Mutilated Certificates
ARTICLE VII. Indemnification
SECTION 7.01.	Indemnification
SECTION 7.02.	Expenses
SECTION 7.03.	Other Rights and Remedies
SECTION 7.04.	Insurance
SECTION 7.05.	Constituent Corporations
ARTICLE VIII. Miscellaneous
SECTION 8.01.	Fiscal Year
SECTION 8.02.	Waiver of Notices
SECTION 8.03.	Seal
SECTION 8.04.	Interested Directors; Quorum
SECTION 8.05.	Amendments
SECTION 8.06.	Representation of Shares in Other Corporations
SECTION 8.07.	Severability
SECTION 8.08.	Pronouns

ii

BYLAWS

OF

WILLIS LEASE FINANCE CORPORATION

(a Delaware corporation)

ARTICLE I.

Offices

SECTION 1.01Registered Office.  The registered office of Willis Lease Finance Corporation (hereinafter called the Corporation) in the State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of Kent, and the name of the registered agent in charge thereof shall be National Registered Agents, Inc.

SECTION 1.02Other Offices.  The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board of Directors (hereinafter called the Board) may from time to time determine or as the business of the Corporation may require.

ARTICLE II.

Meetings of Stockholders

SECTION 2.01Annual Meetings.  Annual meetings of the stockholders of the Corporation for the purpose of electing directors to succeed those whose terms expire and for the transaction of such other proper business as may properly come before such meetings may be held at such time, date and place as the Board shall determine by resolution.

SECTION 2.02Special Meetings.  Special meetings of the stockholders for the transaction of any proper business, unless otherwise prescribed by statute, may be called only in accordance with Article XI of the Corporation’s Certificate of Incorporation as it may be amended from time to time (the “Certificate of Incorporation”).

SECTION 2.03Place of Meetings.  All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meeting and specified in the respective notices or waivers of notice thereof.  In the absence of any such designation, stockholders’ meetings shall be held at the principal executive office of the Corporation.

SECTION 2.04Notice of Meetings.  Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post office address furnished by him to the Corporate Secretary of the Corporation for such purpose or, if he shall not have furnished to the Corporate Secretary his address for such purpose, then at his post office address last known to the Corporate

1

Secretary, or by transmitting a notice thereof to him at such address by telegraph, cable, or wireless.  Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required.  Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called.  Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.

SECTION 2.05Quorum.  Except where otherwise provided by law, the holders of record of a majority of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof.  For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting.  In the absence of a quorum at any meeting or any adjournment thereof, a majority of the shares of stock of the Corporation present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time.  At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called.

SECTION 2.06Voting.

(a)Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy for each share or fractional share of the stock of the Corporation held by him which has voting power upon the matter in question.

(b)Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing or by any other secure means permitted by law, including telephonic and electronic transmission, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after eleven months from its date unless said proxy shall provide for a longer period.  The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy.  At any meeting of the stockholders, all matters, except as otherwise provided in the Certificate of Incorporation or in these Bylaws, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present.  The vote at any meeting of the stockholders on any question need not be by ballot, unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy shall so determine.  On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted.

(c)Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes.  Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock.  Persons whose stock is pledged shall be entitled to

2

vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon.  Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants in common, tenants by entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware.

SECTION 2.07Fixing Date for Determination of Stockholders of Record.  In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.  If no record date is fixed:  (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which notice is given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.  A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.  When a record date is so fixed, only shareholders of record at the close of business on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date.  The Board may close the books of the Corporation against transfers of shares during the whole or any part of a period of not more than sixty (60) days prior to the date of a shareholders’ meeting, the date when the right to any dividend, distribution, or allotment of rights vests, or the effective date of any change, conversion or exchange of shares.

SECTION 2.08List of Stockholders Entitled to Vote.  The Corporate Secretary of the Corporation shall prepare and make, or cause to be prepared and made, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

SECTION 2.09Judges.  If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote.  Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of his ability.  Such judges shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question.  Reports of judges shall be in writing and subscribed and delivered by them to the Corporate Secretary of the Corporation.  The judges need not be stockholders of the Corporation, and any officer of the Corporation may

3

be a judge on any question other than a vote for or against a proposal in which he shall have a material interest.

SECTION 2.10Notice of Stockholder Business and Nominations.

(A)Annual Meetings of Stockholders.

(1)Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of the stockholders (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board or (c) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this Bylaw, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw.

(2)For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely notice thereof in writing, in conformance with the requirements of this Bylaw, to the Corporate Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action.  To be timely, a stockholder’s notice shall be delivered to the Corporate Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not later than the close of business on the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the Corporation.  In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.  Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person, (iv) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the stockholder, and (v) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934 (the “1934 Act”) (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (b) as to any other business that the stockholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting, (ii) the reasons for conducting such business at the meeting, (iii) any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and (iv) any other information which is required to be disclosed in solicitations of proxies on behalf of any such business, and specifically, any such information called for by Items 4 and 5 of Regulation 14A under the 1934 Act regarding such other business, the proponent of such other business and any associates or persons who would be deemed “participants” under Regulation 14A were the proponent soliciting proxies on behalf of such other business.  All such notices shall include (i) a representation that the person sending the notice is a shareholder of record and will remain such through the record date for the meeting, (ii) the name and address, as they appear on the Corporation’s books, of such shareholder, (iii) the class and number of the Corporation’s shares which are owned beneficially and of record by such shareholder, and (iv) a representation that such shareholder intends to appear in person or by proxy at such meeting to make the nomination or move the consideration of other business set forth in the notice.

4

(3)Notwithstanding anything in the second sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that the number of directors to the Board is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board at least 70 days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Corporate Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation.

(B)Special Meetings of Stockholders.  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting.  Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (a) by or at the direction of the Board or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this Bylaw, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Bylaw.  In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (A)(2) of this Bylaw shall be delivered to the Corporate Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting.  In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

(C)General.

(1)Only such persons who are nominated in accordance with the procedures set forth in this Bylaw shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Bylaw.  Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that business or a nomination is not properly before the meeting and, if he should so determine, the defective business shall not be transacted and the defective nomination shall be disregarded.

(2)For purposes of this Bylaw, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3)Notwithstanding the foregoing provisions of this Bylaw, a stockholder shall also comply with all the applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to the matters set forth in this Bylaw.  Nothing in this Bylaw shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the 1934 Act of (ii) of the holders of any series of Preferred Stock to elect directors under specified circumstances.

5

ARTICLE III.

Board of Directors

SECTION 3.01General Powers.  The property, business and affairs of the Corporation shall be managed by the Board.

SECTION 3.02Number and Term of Office.  The authorized number of directors shall be five (5), and such number shall not be changed except by a Bylaw amending this section duly adopted by the Board or duly adopted by the stockholders pursuant to the terms of Article IX of the Certificate of Incorporation.  Directors need not be stockholders.  Each of the directors of the Corporation shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign, die, become disqualified or disabled or shall otherwise be removed in the manner hereinafter provided.

SECTION 3.03Election of Directors.  The directors shall be elected annually by the stockholders of the Corporation and the persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the directors.  The election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for a classified Board.

SECTION 3.04Resignations.  Any director of the Corporation may resign at any time by giving written notice to the Board, the Chairman of the Board, the President or the Corporate Secretary of the Corporation.  Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.05Removal.  Any director or the entire Board may be removed, with cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

SECTION 3.06Vacancies.  Except as otherwise provided in the Certificate of Incorporation and except for a vacancy created by the removal of a director, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or otherwise, may be filled by vote of the majority of the remaining directors, although less than a quorum.  Vacancies created by the removal of a director may be filled only by the affirmative vote of the holders of a majority of the outstanding stock then entitled to vote at an election of directors.  Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign, die, become disqualified or disabled or shall otherwise be removed in the manner herein provided.

SECTION 3.07Place of Meeting, Etc.  The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting.  Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting.

SECTION 3.08Regular Meetings.  A regular annual meeting of the Board shall be held without any further notice immediately after, and at the same place as, the annual

6

meeting of shareholders.  The Board may provide for other regular meetings from time to time by resolution.  If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day that is not a legal holiday.  Except as provided by law, notice of regular meetings need not be given.

SECTION 3.09Special Meetings.  Special meetings of the Board shall be held whenever called by the Chairman of the Board, the President, any Vice President, the Corporate Secretary or any two (2) directors.  Except as otherwise provided by law or by these Bylaws, notice of the time and place of each such special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least five (5) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph or cable or be delivered personally not less than forty-eight (48) hours before the time at which the meeting is to be held.  Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given.  Notice of any meeting of the Board shall not be required to be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting, without protesting prior thereto or at its commencement, the lack of notice to such director.

SECTION 3.10Quorum and Manner of Acting.  Except as otherwise provided in these Bylaws, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present.  In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present.  If a meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the reconvened meeting to the directors who were not present at the time of adjournment.  The directors shall act only as a Board, and the individual directors shall have no power as such.  A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

SECTION 3.11Organization.  Meetings of the Board shall be presided over by the Chairman of the Board, or in his absence by the President, or in his absence by the Chief Administrative Officer, or in his absence by the Chief Financial Officer, or in his absence by a Vice President, or in their absence by a chairman chosen at the meeting.  The Corporate Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting.

SECTION 3.12Action by Consent.  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.  Such action by written consent shall have the same force and effect as a unanimous vote of such directors.

SECTION 3.13Compensation.  The directors shall receive only such compensation for their services as directors as may be allowed by resolution of the Board.  The Board may also provide that the Corporation shall reimburse each such director for any expense incurred by him on account of his attendance at any meetings of the Board or Committees of the Board.  Neither the payment of such compensation nor the reimbursement of such expenses shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor.

7

SECTION 3.14Committees.  The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one (1) or more of the directors of the Corporation and to serve at the pleasure of the Board.  Any such committee, to the extent provided in the resolution of the Board and except as otherwise limited by law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, removing or indemnifying directors or amending these Bylaws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of the stock.  Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

SECTION 3.15.      Qualification Requirement for Directors.  No person shall be qualified to be elected to, or appointed to fill a vacancy on, the Board during the pendency of a Business Combination transaction (as defined in Article XIII of the Certificate of InCorporation) if such person is, or (in the case of a person described in clause (i), (ii) or (iii) below) was within the two years preceding the date of such election or appointment:  (i) an officer, director, employee or affiliate (as such term is defined in Rule 12b-2 of the General Rules and Regulations under the 1934 Act) of a party to such transaction (an “Interested Party”) or of any affiliate of an Interested Party; (ii) an agent subject to the direction of an Interested Party; (iii) a consultant or advisor to an Interested Party; (iv) a person having a material financial interest in the transaction (other than through the ownership of stock or securities of the Corporation); or (v) a person having any business, financial, or familial relationship with any person referred to in clauses (i)-(iv) above that would reasonably be expected to affect such person’s judgment in a manner adverse to the Corporation.  A person shall not be disqualified from election or appointment to the Board by reason of this Section 3.15 solely because such person is a director or officer of the Corporation who receives normal and customary compensation as such and/or is a stockholder or affiliate of the Corporation.

A Business Combination shall be deemed pending for purposes of this Section 3.15 commencing on the date any offer or proposal for such transaction shall be made and until such time as the proposed transaction is abandoned or until such time as: (i) the party proposing such transaction shall have acquired beneficial ownership, as defined above, of 50% or more of the Corporation’s outstanding voting stock; and (ii) 10 business days shall have elapsed thereafter.

ARTICLE IV.

Officers

SECTION 4.01Number.  The officers of the Corporation shall be a Chairman of the Board, a President, a Chief Financial Officer, one or more Vice Presidents (the number thereof and their respective titles to be determined by the Board), and a Corporate Secretary.  In addition, the Board may appoint such other officers as may be deemed expedient

8

for the proper conduct of the business of the Corporation, each of whom shall have such authority and perform such duties as the Board may from time to time determine.

SECTION 4.02Election, Term of Office and Qualifications.  The officers of the Corporation, except such officers as may be appointed in accordance with Section 4.03, shall be chosen annually at the regular meeting of the Board held after the annual meeting of shareholders and shall serve at the pleasure of the Board.  If officers are not chosen at such meeting of the Board, they shall be chosen as soon thereafter as shall be convenient.  Each officer shall hold office until his successor shall have been duly chosen and shall qualify or until his resignation, death, disqualification or removal in the manner hereinafter provided.

SECTION 4.03Assistants, Agents and Employees, Etc.  In addition to the officers specified in Section 4.01, the Board may appoint other assistants, agents and employees as it may deem necessary or advisable, including one or more Assistant Secretaries, and one or more Assistant Financial Officers, each of whom shall hold office for such period, have such authority, and perform such duties as the Board may from time to time determine.  The Board may delegate to any officer of the Corporation or any committee of the Board the power to appoint, remove and prescribe the duties of any such assistants, agents or employees.

SECTION 4.04Removal.  Any officer, assistant, agent or employee of the Corporation may be removed, with or without cause, at any time:  (i) in the case of an officer, assistant, agent or employee appointed by the Board, only by resolution of the Board; and (ii) in the case of an officer, assistant, agent or employee, by any officer of the Corporation or committee of the Board upon whom or which such power of removal may be conferred by the Board.

SECTION 4.05Resignations.  Any officer or assistant may resign at any time by giving written notice of his resignation to the Board, the Chairman of the Board, the President or the Corporate Secretary of the Corporation.  Any such resignation shall take effect at the time specified therein, or, if the time be not specified, upon receipt thereof by the Board, the Chairman of the Board, the President or the Corporate Secretary, as the case may be; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 4.06Vacancies.  A vacancy in any office because of death, resignation, removal, disqualification, or other cause, may be filled by the Board for the unexpired portion of the term thereof.

SECTION 4.07Inability to Act.  In the case of absence or inability to act of any officer of the Corporation, the Board may from time to time delegate the powers or duties of such officer to any other officer, or any director or other person whom it may select.

SECTION 4.08The Chairman of the Board.  The Chairman of the Board shall preside at all meetings of the Board.

SECTION 4.09The President.  The President of the Corporation shall be the chief executive officer of the Corporation and, subject to the control of the Board, shall preside at all meetings of shareholders, shall have general and active supervision and management over the business of the Corporation and over its several officers, assistants, agents and employees, shall make reports to the Board and shareholders, and shall perform all such other duties as are incident to such office or are properly required by the Board.

SECTION 4.10The Chief Financial Officer.  The Chief Financial Officer shall have the general care and custody of the funds and securities of the Corporation, and shall

9

deposit all such funds in the name of the Corporation in such banks, trust companies or other depositories as shall be selected by the Board, and shall keep regular books of account.  He shall receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever.  He shall exercise general supervision over expenditures and disbursements made by officers, agents and employees of the Corporation and the preparation of such records and reports in connection therewith as may be necessary or desirable.  He shall, in general, perform all other duties incident to the office of Chief Financial Officer and such other duties as from time to time may be properly assigned to him by the Board or the President.

SECTION 4.11The Vice Presidents.  Each Vice President shall have such powers and perform such duties as the Board or the President may from time to time properly prescribe.  At the request of the President, or in case of the President’s absence or inability to act upon the request of the Board, a Vice President shall perform the duties of the President and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President.

SECTION 4.12The Corporate Secretary.  The Corporate Secretary shall, if present, record the proceedings of all meetings of the Board, of the stockholders, and of all committees of which a secretary shall not have been appointed, in one or more books provided for that purpose; he shall see that all notices are duly given in accordance with these Bylaws and as required by law; and, in general, he shall perform all the duties incident to the office of Corporate Secretary and such other duties as may from time to time be properly assigned to him by the Board or the President.

SECTION 4.13Compensation.  The compensation of the officers of the Corporation shall be fixed from time to time by the Board.  None of such officers shall be prevented from receiving such compensation by reason of the fact that he is also a director of the Corporation.  Nothing contained herein shall preclude any officer from serving the Corporation, or any subsidiary corporation, in any other capacity and receiving proper compensation therefor.

ARTICLE V.

Contracts, Checks, Drafts, Bank Accounts, Etc.

SECTION 5.01Execution of Contracts.  The Board, except as in these Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.

SECTION 5.02Checks, Drafts, Etc.  All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board.

SECTION 5.03Deposits.  All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board.  For the purpose of deposit and for the purpose of collection for the account of the Corporation, the Chairman of the

10

Board, the President, the Chief Financial Officer or any Vice President (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.

SECTION 5.04General and Special Bank Accounts.  The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board.  The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.

ARTICLE VI.

Shares and Their Transfer

SECTION 6.01Certificates for Stock.  Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him.  The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman of the Board or the President or a Vice President, and by the Chief Financial Officer or the Corporate Secretary or an Assistant Secretary.  Any of or all of the signatures on the certificates may be a facsimile.  In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate, shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue.  A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation.  Every certificate surrendered to the Corporation for exchange or transfer shall be canceled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so canceled, except in cases provided for in Section 6.04.

SECTION 6.02Transfers of Stock.  Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Corporate Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon.  The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.  Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so.

SECTION 6.03Regulations.  The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation.  It may appoint,

11

or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them.

SECTION 6.04Lost, Stolen, Destroyed, and Mutilated Certificates.  In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.

ARTICLE VII.

Indemnification

SECTION 7.01Indemnification.  Subject to any limitation which may be contained in the Certificate of Incorporation, the Corporation shall to the full extent permitted by law, including, without limitation, Delaware General Corporation Law § 145, as such Section now exists or shall hereafter be amended, indemnify any person who was, is or is threatened to be made a party, a named defendant or respondent to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, arbitral, administrative, or investigative, any appeal in such action, suit, or proceeding, and any inquiry or investigation that could lead to such an action, suit, or proceeding, because such person is or was a director, officer employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, against judgments, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses (including attorneys’ fees) actually incurred by such person in connection with such action, suit, or proceeding.  The termination of any action, suit or proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that an individual did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

SECTION 7.02Expenses.  Subject to any limitation which may be contained in the Certificate of Incorporation, the Corporation shall, to the full extent permitted by law, including, without limitation, § 145 of the Delaware General Corporation Law, as such Section now exists or shall hereafter be amended, pay or reimburse on a current basis the expenses incurred by any person described in Section 7.01 in connection with any such action, suit, or proceeding in advance of the final disposition thereof, if the Corporation has received (i) a written affirmation by the recipient of his good faith belief that he has met the standard of conduct necessary for indemnification under the Delaware General Corporation Law and (ii) a written undertaking by or on behalf of such director or officer to repay the amount paid or reimbursed if it is ultimately determined that he has not satisfied such standard of conduct or if indemnification is prohibited by law.

SECTION 7.03Other Rights and Remedies.  The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs,

12

executors and administrators of such a person.  The rights provided in this Article VII shall be deemed to be provided by a contract between the Corporation and the individuals who serve in the capacities described in Section 7.01 at any time while these bylaws are in effect, and no repeal or modification of this Article VII by the stockholders shall adversely affect any right of any person otherwise entitled to indemnification by virtue of this Article VII at the time of such repeal or modification.

SECTION 7.04Insurance.  The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article.

SECTION 7.05Constituent Corporations.  For the purposes of this Article, references to “the Corporation” include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation, so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would if such person had served the resulting or surviving corporation in the same capacity.

ARTICLE VIII.

Miscellaneous

SECTION 8.01Fiscal Year.  The fiscal year of the Corporation shall end on the 31st day of December.

SECTION 8.02Waiver of Notices.  Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice.

SECTION 8.03Seal.  The Corporation may have a corporate seal which shall have the name of the Corporation and shall be in such form as may be approved from time to time by the Board.  The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

SECTION 8.04Interested Directors; Quorum.  No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if:  (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his

13

relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders.  Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

SECTION 8.05Amendments.  These Bylaws may be amended only in accordance with Article IX of the Corporation’s Certificate of Incorporation.

SECTION 8.06Representation of Shares in Other Corporations.  Shares of other corporations standing in the name of this Corporation may be voted or represented and all incidents thereto may be exercised on behalf of the Corporation by the Chairman of the Board, the President or any Vice President and the Chief Financial Officer or the Corporate Secretary or an Assistant Secretary.

SECTION 8.07Severability.  Any determination that any provision of these Bylaws is for any reason inapplicable, illegal or ineffective shall not affect or invalidate any other provision of these Bylaws.

SECTION 8.08Pronouns.  All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require.

14

CERTIFICATE OF CORPORATE SECRETARY

The undersigned, being the duly elected Corporate Secretary of Willis Lease Finance Corporation, a Delaware corporation, hereby certifies that the Amended Bylaws to which this Certificate is attached were duly adopted by the Board of Directors of said Corporation on April 18, 2001.

Brian D. Hanson

Corporate Secretary

EX-3.3

Exhibit 3.3

AMENDMENT TO BYLAWS

OF

WILLIS LEASE FINANCE CORPORATION

Section 3.09 of Article III of the Bylaws of Willis Lease Finance Corporation is hereby amended and restated in full as follows:

SECTION 3.09   SPECIAL MEETINGS.  Special meetings of the Board shall be held whenever called by the Chairman of the Board, the President, any Vice President, the Corporate Secretary or any two (2) directors.  Except as otherwise provided by law or by these Bylaws, notice of the time and place of each such special meeting shall be mailed to each director, addressed to him at his residence or usual place of business, at least five (5) days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph, cable, fascimile or e-mail or be delivered personally not less than forty-eight (48) hours before the time at which the meeting is to be held.  Except where otherwise required by law or by these Bylaws, notice of the purpose of a special meeting need not be given.  Notice of any meeting of the Board shall not be required to be given to any director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting, without protesting prior thereto or at its commencement, the lack of notice to such director.

CERTIFICATE OF CORPORATE SECRETARY

The undersigned, being the duly elected Corporate Secretary of Willis Lease Finance Corporation, a Delaware corporation, hereby certifies that the Bylaws to which this Certificate is attached were duly adopted by the Board of Directors of said corporation on November 13, 2001.

Corporate Secretary

EX-10.42

Exhibit 10.42

LOAN AND AIRCRAFT SECURITY AGREEMENT (S/N 3004)

THIS LOAN AND AIRCRAFT SECURITY AGREEMENT (S/N 3004) (together with all Addenda, Riders and Annexes hereto, this “Agreement”) is dated as of October 29, 2004 (the “Closing Date”), by and between WILLIS LEASE FINANCE CORPORATION, a Delaware corporation (“Customer”), and FLEET CAPITAL CORPORATION, a Rhode Island corporation (“Lender”).

In consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to them in Annex A attached hereto and made a part hereof.

SECTION 1.  Terms of Loans.

1.1Tranche 1 Loan.  Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Customer in the principal amount set forth in Annex B attached hereto and made a part hereof and designated as the Tranche 1 Loan (the “Tranche 1 Loan”).  The Customer’s obligation to repay the Loan shall be evidenced by a Promissory Note dated on the Initial Closing Date, payable by Customer to the order of Lender in the original principal amount of the Tranche 1 Loan (as amended, modified, restated, extended and renewed from time to time, the “Tranche 1 Note”).  The Tranche 1 Loan shall bear interest and be repaid by Customer at the times and in the manner set forth in the Tranche 1 Note

1.2           Tranche 2 Loan.  Subject to the terms and conditions of this Agreement, Lender agrees to make a loan to Customer in the principal amount set forth in Annex B hereto and designated as the Tranche 2 Loan (the “Tranche 2 Loan”) on the Requested Advance Date set forth in the applicable Request for Advance (the “Final Closing Date”).  The Customer’s obligation to repay the Tranche 2 Loan shall be evidenced by a promissory note in the same form as the Tranche 1 Note, payable by Customer to the order of Lender in the original principal amount of the Tranche 2 Loan (as amended, modified, restated, extended and renewed from time to time, the “Tranche 2 Note”).  The Tranche 2 Loan shall bear interest and be repaid by Customer at the times and in the manner set forth in the Tranche 2 Note.  Unless sooner terminated pursuant to the provisions of this Agreement, the obligation of Lender to make the Tranche 2 Loan hereunder shall automatically terminate on March  31, 2005, without further action by, or notice of any kind from, Lender.

1.3Prepayment.  The Loans may be prepaid only in the manner and subject to terms and conditions set forth in the Notes and, if applicable, Section 4.7 hereof.

1.4Use of Proceeds.  Customer shall use the proceeds of the Tranche 1 Loan to finance or the cost of the acquisition of the Aircraft, and the proceeds of the Tranche 2 Loan to pay for Lender approved refurbishment and upgrades to the Aircraft.

SECTION 2.  Conditions of Borrowing.  Lender’s obligation to make the Tranche 1 Loan shall be both subject to and conditioned upon the satisfaction of all of the conditions precedent specified with respect thereto in the Closing Terms Addendum attached hereto and made a part hereof.  Lender’s obligation to make the Tranche 2 Loan shall be both subject to and conditioned upon the satisfaction of all of the conditions precedent specified with respect thereto in the Closing Terms Addendum attached hereto and made a part hereof.

SECTION 3.  Representations and Warranties.  In order to induce Lender to enter into this Agreement and to make the Loans herein provided for, Customer represents and warrants to Lender that:

(a)Customer (i) is duly qualified to do business in each jurisdiction in which the conduct of its business or the ownership or operation of its assets requires such qualification, including the jurisdiction of the primary hangar location of the Aircraft; (ii) has the necessary authority and power to own and operate the Aircraft and its other assets and to transact the business in which it is engaged; (iii) is a “citizen of the United States” within the meaning of the Federal Aviation Act; and (iv) has full power, authority and legal right to execute and deliver this Agreement, the Note and the other Loan Documents, to perform its obligations hereunder and thereunder, to borrow hereunder and to grant the assignment and security interest created by this Agreement;

(b)Customer’s name as shown in the preamble of this Agreement is Customer’s exact legal name as shown on its Certificate of Incorporation amended as of the Closing Date; Customer has the form of business organization set forth in Annex B hereto and is and will remain duly organized, validly existing and in good standing under the laws of the state of its organization set forth in Annex B hereto, and Customer’s state-issued organizational identification number (if any) and the chief executive office and principal place of business address of Customer are all as set forth on Annex B hereto;

(c)each of the Loans (i) has been duly authorized by all necessary action on the part of Customer consistent with its form of organization, and does not require the approval of or notice to any other party (including any trustees or holders of indebtedness), or any governmental authority; (ii) does not contravene or constitute a default under any Applicable Law, Certificate of Incorporation or organization or by-laws, or any agreement, indenture, or other instrument to which Customer is a party or by which it may be bound;  (iii) does not require approval of, or notice to, any governmental body, authority, or agency in connection with either the execution, delivery or performance by Customer of this Agreement, the Note and the other Loan Documents, or the validity or enforceability of this Agreement, the Note and the other Loan Documents, except for recordation of this Agreement with the FAA, which shall have been duly effected as of the Initial closing Date and the filing of UCC financing statements in the appropriate recording offices, which shall have been duly effected as of the Initial Closing Date; and (iv) will not result in the creation or imposition of any Lien on any of the assets of Customer other than the security interest intended to be created hereby;

(d)this Agreement, the Notes and the other Loan Documents have each been duly authorized, executed and delivered by Customer and constitutes the legal, valid and binding obligation of Customer enforceable in accordance with its terms (including, without limitation, the grant of security interest in this Agreement), except to the extent that the enforcement of remedies may be limited under applicable bankruptcy and insolvency laws, and the equitable discretion of any court of competent jurisdiction;

(e)there are no proceedings pending or, so far as the officers of Customer know, threatened against or affecting Customer or any of its property before any court, administrative officer or administrative agency that could impair Customer’s title to the Aircraft, or that, if decided adversely, could materially affect the financial condition or operations of Customer or its ability to perform its obligations under this Agreement, the Notes and the other Loan Documents, and Customer has no pending claims and has no knowledge of any facts upon which a future claim may be based, against any prior owner, the manufacturer or supplier of the Aircraft, or of any engine or part thereof for breach of warranty or otherwise;

(i)Customer is not in default, and no event or condition exists which after the giving of notice or lapse of time or both would constitute an event of default, under any mortgage, indenture, contract, agreement, judgment or other undertaking to which Customer is a party or which purports to be binding upon Customer or upon any of its assets;

(h)(i) Customer has good title to the Aircraft subject to no Liens except the security interest created hereby in favor of Lender; (ii) Lender has a legal, valid and continuing first priority security interest in the Collateral, free and clear of all other Liens; and (iii) all filings, recordings or other actions necessary or desirable in order to establish, perfect and give first priority to such security interest (including, the filing of this Agreement with the FAA as of the Initial Closing Date) have been duly effected, and all Impositions in connection therewith have been duly paid;

2

(j)all financial statements of Customer, copies of which have been heretofore delivered to Lender, are complete and correct, have been prepared in accordance with GAAP and present fairly the financial position of Customer as at the date thereof and the results of its operations for the period then ended and there has been no material adverse change in the financial condition, business or operations of Customer since the date thereof;

(k)Customer has filed all Federal, state and local income tax returns that are required to be filed and has paid all taxes as shown on said returns and all assessments received by it to the extent that such taxes and assessments have become due, and Customer does not have any knowledge of any actual or proposed deficiency or additional assessment in connection therewith;

SECTION 4.  Covenants.  Customer covenants and agrees that from and after the Initial Closing Date and so long as any of the Obligations are outstanding:

4.1Notices; Financial Information; and Further Assurances.  Customer will, at its sole expense:

(a)  promptly give written notice to Lender of (i) the occurrence of any Event of Default or any event which with notice, with lapse of time and/or with any further condition, event or act would constitute an Event of Default; (ii) the occurrence of any Event of Loss; (iii) the commencement or threat of any material litigation or proceedings affecting Customer or any material litigation or proceedings affecting the Aircraft; and (iv) any dispute between Customer and any governmental regulatory body or other party that involves the Aircraft or that might materially interfere with the normal business operations of Customer;

(b)  furnish to Lender (i) within ninety (90) days of the close of each fiscal year of Customer, Customer’s consolidated (and, if applicable, consolidating) balance sheet, statement of shareholders’ equity, statement of cash flows and statement of operations, all on a comparative basis with the prior fiscal year and prepared in accordance with GAAP, certified by a recognized firm of certified public accountants, (ii) within ninety (90) days of the close of each fiscal quarter of Customer, Customer’s quarterly financial report certified by the chief financial officer of Customer, (iii) all of Customer’s Forms 10-K and 10-Q, if any, filed with the SEC within thirty (30) days after the date on which they are filed (by furnishing these SEC Forms, or making them publicly available in electronic form, Customer shall be deemed to have satisfied the requirements of clauses (b)(i),(ii) or (iii)), and (iv) promptly, such additional financial and other information as Lender may from time to time reasonably request; and

(c)  promptly execute and deliver to Lender such further instruments, UCC and FAA filings and other documents, and take such further action, as Lender may from time to time reasonably request in order to further carry out the intent and purpose of this Agreement and to establish and protect the rights, interests and remedies created, or intended to be created, in favor of Lender hereby.  Customer hereby irrevocably authorizes Lender and any employee, officer or agent thereof, in such jurisdictions where such action is authorized by law, to effect any such recordation or filing without the signature of Customer thereto.  Customer hereby further agrees that (i) Customer shall not change its presently existing legal name or its form or state of organization or incorporation on or at any time after the date of this Agreement without Lender’s prior written consent, (ii) if Customer’s presently existing state organizational identification number changes, or if Customer currently has no such state organizational number but is subsequently issued such a number, on or at any time after the date of this Agreement, Customer shall immediately notify Lender thereof, and (iii) Customer shall not change the presently existing mailing, chief executive office and/or principal place of business address on or at any time after the date of this Agreement without giving Lender thirty (30) days’ prior written notice of the same.  Customer will pay, or reimburse Lender for, any and all fees, taxes, insurance premiums, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation and protection of the Collateral and Lender’s first priority and only security interest therein.

3

4.2General Obligations.  Customer shall: (a) duly observe and conform to all requirements of Applicable Law relating to the conduct of its business and the Aircraft; (b) obtain and keep in full force and effect all rights, franchises, licenses and permits that are necessary to the proper conduct of its business; (c) remain a “citizen of the United States” within the meaning of the Federal Aviation Act; (d) obtain or cause to be obtained as promptly as possible any governmental, administrative or agency approval and make any filing or registration therewith required with respect to the performance of its obligations under this Agreement and the other Loan Documents and the operation of the Aircraft and its business; (e) cause the Aircraft to remain duly registered, in its name, under the Federal Aviation Act; and (f) pay and perform all of its obligations and liabilities when due

4.3Taxes.  Customer will file with all appropriate taxing authorities all Federal, state and local income tax returns that are required to be filed and all registrations, declarations, returns and other documentation with respect to any personal property taxes (or any other taxes in the nature of or imposed in lieu of property taxes) due or to become due with respect to the Aircraft.  Customer will (i) pay on or before the date when due all taxes as shown on said returns and all taxes assessed, billed or otherwise payable with respect to the Aircraft directly to the appropriate taxing authorities; and (ii) pay when due all license and/or registration fees, assessments, governmental charges and sales, use, property, excise, privilege, value added and other taxes (including any related interest or penalties) or other charges or fees now or hereafter imposed by any governmental body or agency upon Customer or the Aircraft with respect to the landing, airport use, manufacturing, ordering, shipment, purchase, ownership, delivery, installation, leasing, chartering, operation, possession, use or other disposition of the Aircraft (the items referred to in (i) and (ii) above being referred to herein collectively, as “Impositions”).

4.4No Disposition of Collateral or Liens; Title and Security Interest.  Customer shall not sell, assign, enter into any Third Party Agreement, convey, mortgage, exchange or otherwise transfer or relinquish possession of or dispose of the Aircraft, any part thereof or any of the other Collateral or attempt or offer to do any of the foregoing.  The foregoing shall not be deemed to prohibit the delivery of possession of the Aircraft, any APU, Engine or Part to another Person for testing, service, repair, maintenance, overhaul or, to the extent permitted hereby, for alteration or modification.  Customer will not create, assume or suffer to exist any Liens on or with respect to the Aircraft, any APU, Engine, Part or any of the other Collateral, or Customer’s interest therein other than Permitted Liens.  Customer will promptly take such action as directed by Lender to duly discharge any such Lien.  Customer will warrant and defend its good and marketable title to the Aircraft and Lender’s first and only perfected security interest in the Collateral, against all claims and demands whatsoever.  Notwithstanding the foregoing, provided that no Event of Default has occurred and is continuing, Customer may enter into a management agreement, with or without charter, (“Management Agreement”), with a qualified aviation management company or charter operator (“Manager”), subject to the satisfaction of the following conditions: (i) the Management Agreement shall provide that it shall terminate, or be canceled, at the option of Lender, upon the occurrence of an Event of Default; (ii) the Management Agreement shall be expressly, and at all times remain, subject and subordinate to this Agreement and the rights of Lender hereunder and in and to the Aircraft; (iii) in no event shall the Management Agreement (including as amended from time to time) contain provisions that are inconsistent with the provisions of this Agreement or cause Customer to breach any of its representations, warranties or agreements under this Agreement; and (iv) Customer shall deliver to Lender a Consent to Management Agreement, in form and substance satisfactory to Lender, duly executed by Customer and Manager (the “Consent”), together with a copy of the executed Management Agreement and a copy of a valid Air Carrier Certificate FAA Form 8430-18, if applicable.  The Management Agreement will not reduce any of the obligations of Customer hereunder or the rights of Lender hereunder, under the Note or under any of the other documents executed and/or delivered in connection herewith, and Customer acknowledges that all of its obligations shall be and remain primary and shall continue in full force and effect as the obligations of a principal and not of a guarantor or surety.  Any delegation of duties hereunder or any assumption of the same shall be effective only as between Customer and Manager.

4

4.5Use of Aircraft; Maintenance; Modifications; Security.

(a)Customer will operate the Aircraft under and in compliance with Part 91 of the FARs.  Except as otherwise expressly permitted in Section 4.4 above,, Customer shall not operate or permit the Aircraft to be operated for air taxi operations or otherwise under Part 135 of the FARs.  The Aircraft at all times will be operated by duly qualified pilots having satisfied all requirements established and specified by the FAA, the Transportation Security Administration, any other applicable governmental authority and the insurance policies required under this Agreement.

(b)Customer will operate the Aircraft in a careful and proper manner in compliance with all Applicable Standards, including, without limitation, its operation, maintenance and security.  The Aircraft shall not be operated, used or located outside the continental United States, except that it may be flown temporarily to any country in the world for any purpose expressly permitted under this Agreement.  Notwithstanding the foregoing, the Aircraft shall not be flown, operated, used or located in, to or over any such country or area (temporarily or otherwise), (i) that is excluded from the insurance required hereunder (or specifically not covered by such insurance), (ii) with which the United States does not maintain favorable diplomatic relations, (iii) in any area of recognized or threatened hostilities, or (iv) in violation of this Agreement or any Applicable Standards, including any U.S. law or United Nations Security Council Directive.  Customer shall implement all security measures required by any governmental authority, or by any insurance policies or that are necessary or appropriate for the proper protection of the Aircraft (whether on the ground or in flight) against theft, vandalism, hijacking, destruction, bombing, terrorism or similar acts.

(c)Customer will, at its own expense, (i) maintain, inspect, service, repair, overhaul and test the Airframe, each Engine, any APU and each Part in accordance with Applicable Standards; (ii) make any alteration or modification to the Aircraft that may at any time be required to comply with Applicable Standards, to cause the Aircraft to remain airworthy or to maintain the Aircraft’s airworthiness certification; (iii) furnish all parts, replacements, mechanisms, devices and servicing required therefor so that the condition and operating efficiency of the applicable Airframe, Engine, APU or Part will at all times be no less than its condition and operating efficiency as and when delivered to Customer, ordinary wear and tear from proper use alone excepted; (iv) promptly replace all Parts that become worn out, lost, stolen, taken, destroyed, damaged beyond repair or permanently rendered or declared unfit for use for any reason whatsoever; (v) maintain (in English) all Records in accordance with Applicable Standards.  All repairs, parts, replacements, mechanisms and devices so furnished shall immediately, without further act, become part of the Aircraft and subject to the security interest created by this Agreement.  All maintenance procedures shall be performed by properly trained, licensed, and certified maintenance sources and maintenance personnel utilizing replacement parts approved by the FAA and the manufacturer of the applicable Airframe, Engine, APU or Part.  Without limiting the foregoing, Customer shall comply with all mandatory service bulletins and airworthiness directives by causing compliance to such bulletins and/or directives to be completed through corrective modification in lieu of operating manual restrictions.

(d)Customer will not make or authorize any improvement, change, addition or alteration to the Aircraft that will impair the originally intended function or use of the Aircraft, diminish the value of the Aircraft as it existed immediately prior thereto, or violate any Applicable Standard; and any Part, mechanism, device or replacement added to the Aircraft in connection therewith shall immediately, without further act, become part of the Aircraft and subject to the security interest created by this Agreement.

4.6Insurance.

(a)Customer agrees to maintain at all times, at its sole cost and expense, with insurers of recognized reputation and responsibility satisfactory to Lender (but in no event having an A.M. Best or comparable agency rating of less than “A-”):

(i)(A) comprehensive aircraft liability insurance against bodily injury or property damage claims including, without limitation, contractual liability, premises damage, public liability, death and property damage liability, public and passenger legal liability coverage in an amount not less than $200,000,000.00

5

for each single occurrence, and (B) personal injury liability in an amount not less than $25,000,000.00 in the aggregate.

(ii)(A) “all-risk” ground, taxiing, and flight hull insurance on an agreed-value basis, covering the Aircraft, provided that such insurance shall at all times be in an amount not less than the aggregate unpaid principal amounts of the Notes (each such amount re-determined as of each anniversary of the date hereof for the next succeeding year throughout the term of this Agreement); and

(iii)war risk and allied perils (including confiscation, appropriation, terrorism and hijacking insurance) in the amounts required in paragraphs (i) and (ii), as applicable, subject to liability war and allied perils risks limit of $50,000,000.00 in the aggregate with respect to non-passengers.

(b)Any policies of insurance carried in accordance with this Section 4.6 and any policies taken out in substitution or replacement of any such policies shall (i) be endorsed to name Lender as an additional insured as its interests may appear (but without responsibility for premiums), (ii) provide, with respect to insurance carried in accordance with Section 4.6(a)(ii) or with respect to the hull coverage pursuant to (a)(iii) above, that any amount payable thereunder shall be paid directly to Lender as sole loss payee and not to Lender and Customer jointly, (iii) provide for thirty (30) days’ (seven (7) days’, or such other notice period as specified in the insurance policy from time to time, in the case of war, hijacking and allied perils) insurance prior written notice by such insurer of cancellation, or material change (iv) include a severability of interest clause providing that such policy shall operate in the same manner as if there were a separate policy covering each insured, (v) waive any right of set-off against Lender, and any rights of subrogation against Lender, (vi) provide that in respect of the interests of Lender in such policies, that the insurance shall not be invalidated by any action or inaction of Customer or any other Person operating or in possession of the Aircraft, regardless of any breach or violation of any warranties, declarations or conditions contained in such policies by or binding upon Customer or any other Person operating or in possession of the Aircraft, and (vii) be primary, not subject to any co-insurance clause and shall be without right of contribution from any other insurance carried by Lender.  Notwithstanding clause (ii) of the preceding sentence, so long as no Default has occurred and is continuing, and no Default, Event of Default or Event of Loss with respect to the Aircraft has occurred, any amount payable to Lender pursuant to clause (ii) above shall be paid if (A) $100,000.00, or more, in the aggregate, to Lender and Customer, jointly, as their interests may appear, and released by Lender to Customer or other appropriate Persons in payment of the costs actually incurred with respect to repairs made to the Aircraft so as to restore it to the operating condition required by this Agreement, or shall be disbursed by Lender as otherwise required by this Agreement, or (B) less than $100,000.00 in the aggregate, to Customer (and such amounts shall be applied by Customer to pay the costs of such repairs).

(c)All of the coverages required herein shall be in full force and effect worldwide throughout any geographical areas to, in or over which the Aircraft is operated.  All hull insurance proceeds payable under the requisite policies shall be payable in U.S. Dollars.

(d)Annually on or before the anniversary of the policy expiration date, Customer shall furnish to Lender evidence of insurance coverage in form and substance satisfactory to Lender evidencing that Customer has obtained the insurance coverages required herein for a twelve (12) month or greater period commencing from and after such anniversary date.  In the event Customer shall fail to maintain insurance as herein provided, Lender may, at its option, provide such insurance, and Customer shall, upon demand, reimburse Lender for the cost thereof, together with interest at the default rate of interest provided for in the Notes from the date of payment through the date of reimbursement.

4.7Event of Loss; Loaner Engines

(a)Upon the occurrence of any Event of Loss with respect to the Airframe and/or the Aircraft, Customer shall notify Lender of any such Event of Loss within five (5) days of the date thereof.  Customer shall pay, on the earlier of (i) sixty (60) days after the occurrence of such Event of Loss or (ii) receipt of insurance proceeds, the following amounts: (a) the aggregate unpaid principal amounts of the Notes, (b) interest accrued thereon to the date of prepayment, and (c) the prepayment fee set forth in the Note and any

6

and all other amounts then due hereunder or under the other Loan Documents.  Upon indefeasible payment in full of such amounts and so long as no Event of Default has occurred and is continuing, the Aircraft shall be released from the security interest of this Agreement, and insurance proceeds received by Lender in excess of such amounts, if any, shall be remitted to Customer.

(b)Upon an Event of Loss with respect to any Engine or APU under circumstances in which there has not occurred an Event of Loss with respect to the Airframe, Customer shall, within sixty (60) days after the occurrence of such Event of Loss, replace such Engine or APU, as applicable, and grant to Lender a first priority security interest in a similar or better engine or auxiliary power unit, as applicable.  Such engine or auxiliary power unit, as applicable, shall be of the same make and model number as the Engine or APU suffering the Event of Loss and shall be free and clear of all Liens and shall have a value, utility and useful life at least equal to, and be in as good an operating condition as, the Engine or APU suffering the Event of Loss, assuming such Engine or APU was in the condition and repair required by the terms hereof immediately prior to the occurrence of such Event of Loss.  Customer, at its own cost and expense, shall furnish Lender with such documents to evidence such conveyance and make such filings as Lender shall request to subject such engine or auxiliary power unit, as applicable, to the lien of this Agreement.  Each such replacement engine or auxiliary power unit, as applicable, shall, after such conveyance be deemed an “Engine” or “APU” (as defined herein), as applicable, and shall be deemed part of the same Aircraft as was the Engine or APU replaced thereby.

(c)In the event any Engine is damaged and is being repaired, or is being inspected or overhauled, Customer, at its option, may temporarily substitute another engine of the same make and model as the Engine being repaired or overhauled (any such substitute engine being hereinafter referred to as a “Loaner Engine”) during the period of such repair or overhaul; provided no Event of Default or Default has occurred and is continuing and (i) installation of the Loaner Engine is performed by a maintenance facility certified by the FAA and manufacturer with respect to an aircraft of this type, (ii) the Loaner Engine is removed, and the repaired or overhauled original Engine is reinstalled on the Airframe promptly upon completion of the repair or overhaul but in no event later than the earlier of one hundred twenty (120) days after removal or the occurrence of an Event of Default, and (iii) the Loaner Engine is free and clear of any Lien that might impair Lender’s rights or interests in the Aircraft and is maintained in accordance herewith

SECTION 5.Security Interest; Power of Attorney; Inspection.

5.1Grant of Security Interest.  As collateral security for the prompt and complete payment and performance as and when due of all of the Obligations and in order to induce Lender to enter into this Agreement and make the Loans to Customer in accordance with the terms hereof, Customer hereby grants to Lender a first priority security interest in and lien on, and collaterally assigns to Lender, all of Customer’s right, title and interest in, to and under all of the following collateral (collectively, the “Collateral”):  (i) the Aircraft, (ii) the Airframe, (iii) each of the Engines, (iv) the Parts, (v) the Records; (vi) all present and future Third Party Agreements; and (vii) all Proceeds of the foregoing.  The foregoing shall not be deemed in any way whatsoever as an agreement by Lender to permit or allow Customer to enter into any Third Party Agreements, and Customer shall only be allowed to enter into any of the foregoing in accordance with the terms of this Agreement.  Notwithstanding anything to the contrary contained herewith or otherwise, Lender does not by virtue of this Agreement or otherwise assume any obligations, liabilities and/or duties of any kind whatsoever of Customer (and/or of any other Person) under, or with respect to, the Collateral, and Lender shall not be responsible in any way whatsoever for the performance of any obligations, liabilities and/or duties of any kind whatsoever by Customer (and/or by any other Person) in connection with, relating to, or arising under, the Collateral.

5.2Lender Appointed as Attorney-in-Fact.  Customer hereby irrevocably constitutes and appoints Lender and any employee, officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority in the place and stead of Customer and in the name of Customer or in its own name, from time to time in Lender’s sole discretion, for the purpose of carrying out the terms of this Agreement, and Customer hereby further irrevocably authorizes Lender and any employee, officer or agent thereof to take any and all appropriate action and to make, execute, deliver, file and/or record any and all instruments or documents (including, without limitation, any FAA filings, UCC financing

7

statements or UCC amendments or any control agreements) that may be necessary or desirable to accomplish the purposes of this Agreement or any of the other Loan Documents.  This appointment is coupled with an interest, is irrevocable and shall terminate only upon payment and performance in full of all of the Obligations.  Without limiting the generality of the foregoing, Customer hereby further agrees that (i) Lender shall have authority, during the continuance of an Event of Default, to endorse Customer’s name on any checks, notes, drafts or any other payments or instrument relating to the Collateral that come into Lender’s possession or control and to settle, adjust, receive payment and make claim or proof of loss and (ii) Customer shall not file or record any corrective or termination statements with respect to any UCC financing statements, amendments or assignments or control agreements filed or recorded by or for the benefit of Lender with respect to any of the Collateral without Lender’s prior written consent.  The powers conferred on Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers.  Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or agents shall be responsible to Customer for any act or failure to act.

5.3Inspection.  Lender or its authorized representatives shall have the right, but not the duty, to inspect the Aircraft, any part thereof and/or the Records, at any reasonable time and from time to time, wherever located, upon reasonable prior notice to Customer; except that no advance notice shall be necessary prior to any inspection conducted, and such inspection may be conducted at any time, after the occurrence of a Default or an Event of Default.  Upon request of Lender, Customer shall promptly provide Lender with notice of the location of the Aircraft and with all Records.  Customer shall be responsible for the cost of any inspection conducted after the occurrence of a Default or an Event of Default and shall pay Lender such amount promptly upon demand.

SECTION 6.  Events of Default.  The term “Event of Default”, wherever used herein, shall mean:

(a)Customer shall fail to pay any Obligation within ten (10) days after the same shall become due and payable (whether at the stated maturity, by acceleration, upon demand or otherwise); or

(b)Customer shall default in the payment or performance of any indebtedness, liability or obligation to Lender or any Affiliate of Lender under any note, security agreement, lease, title retention or conditional sales agreement or any other instrument or agreement; or

(c)Customer shall be in default in any payment on any obligation for borrowed money to any Person other than Lender, the amount of which, whether accelerated or otherwise, is in excess of $2,500,000.00, and any applicable grace period with respect thereto has expired; or

(d)Customer shall fail to keep in full force and effect any of the insurance coverages required under this Agreement, or shall operate the Aircraft at a time when, or at a place in which, such insurance shall not be in effect; or

(e)Customer shall fail to maintain, use or operate the Aircraft in compliance with this Agreement; or

(f)Customer shall (except as expressly permitted by the provisions of this Agreement) sell, assign, charter, lease, timeshare, pool, interchange, convey, mortgage, exchange or otherwise transfer or relinquish possession of or dispose of, or create, assume or suffer to exist any Liens (other than Permitted Liens) on or with respect to, the Aircraft, any part thereof or any of the other Collateral, or Customer’s interest therein, or attempt or offer to do any of the foregoing, or permit the same to occur; or

(g)Customer shall fail to perform or observe any agreement (other than those specifically referred to in this Section 6) required to be performed or observed by it under this Agreement or in any of the other Loan Documents, and such failure shall continue uncured for thirty (30) days after written notice thereof from Lender to Customer (but such notice and cure period will not be applicable unless such breach is curable by practical means within such notice period); or

8

(h)any representation or warranty made by Customer in this Agreement or in any of the other Loan Documents or in any agreement, document or certificate delivered by Customer in connection herewith or pursuant hereto shall prove to have been incorrect, misleading, or inaccurate in any material respect when such representation or warranty was made or given (or, if a continuing representation or warranty, at any time); or

(i)Customer shall (i) generally fail to pay its debts as they became due, admit its inability to pay its debts or obligations generally as they fall due, or shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws or other insolvency laws, or an answer admitting the material allegations of such a petition filed against Customer in any such proceeding; or (ii) by voluntary petition, answer or consent, seek relief under the provisions of any other bankruptcy or other insolvency or similar law providing for the reorganization or liquidation of corporations, or providing for an assignment for the benefit of creditors, or providing for an agreement, composition, extension or adjustment with its creditors; or

(j)a petition against Customer in a proceeding under applicable bankruptcy laws or other insolvency laws, as now or hereafter in effect, shall be filed and shall not be withdrawn or dismissed within sixty (60) days thereafter, or if, under the provisions of any law providing for reorganization or liquidation of corporations that may apply to Customer, any court of competent jurisdiction shall assume jurisdiction, custody or control of Customer or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of sixty (60) days after the filing date; or

(k)any judgment, attachment or garnishment against Customer with respect to aggregate claims in excess of $2,500,000.00 shall remain unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period of thirty (30) days; or

(l)the occurrence of any of the following events without Lender’s prior written consent: (A) Customer enters into any transaction of merger, consolidation or reorganization, (unless Customer is the surviving entity and has the same or better financial condition as it had at the inception of this Agreement); (B) Customer ceases to do business as a going concern, liquidates, or dissolves, or sells, transfers or otherwise disposes of all or substantially all of its assets or property; (C) Customer becomes the subject of, or engages in, a leveraged buy-out; (D) Customer changes the form of organization of its business; (E) if Customer is privately owned as of the Closing Date, there is any substantial change in the ownership or control of the capital stock or membership interests of Customer such that the holder(s) that own or control fifty percent (50%) or more of such equity interests as of the Initial Closing Date no longer do so; or (F) if Customer is publicly held as of the Initial Closing Date, any change so that Customer is no longer subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or no longer registered under Section 12 of the Securities Act of 1933, as amended; or

SECTION 7.  Remedies.

7.1Termination of Commitment.  If an Event of Default specified in Sections 6 (i) or (j) above shall occur, then, and in any such event, the Obligations (including, without limitation, the aggregate unpaid principal amounts of the Notes, together with all accrued but unpaid interest thereon, any prepayment fees and all other amounts due and payable under or with respect to the Loan Documents) shall become immediately due and payable without any notice or other action by Lender.  If any other Event of Default shall occur, then, and in any such event, Lender, in its sole discretion, may declare the Obligations to be forthwith due and payable, whereupon the Obligations (including, without limitation, the aggregate unpaid principal amounts of the Notes, together with all accrued but unpaid interest thereon, any prepayment fees and all other amounts due and payable under or with respect to the Loan Documents), shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the other Loan Documents to the contrary notwithstanding.  During the continuance of any Event of Default hereunder, Lender shall have the right to pursue and enforce any of its rights and remedies under this Section 7.

9

7.2Additional Remedies.  If an Event of Default occurs, in addition to all other rights and remedies granted to it in this Agreement and in the other Loan Documents, Lender may exercise all rights and remedies of a secured party under the UCC or under any other Applicable Law.  Without limiting the generality of the foregoing, Customer agrees that upon the occurrence of an Event of Default, Lender, without demand or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Customer or any other Person (all and each of which demands and/or notices are hereby expressly waived), in its sole discretion, may exercise any one or more of the following remedies: (i) proceed at law or in equity, to enforce specifically Customer’s performance or to recover damages; (ii) terminate the right of any third party to use of the Aircraft; (iii) enter the premises where the Aircraft is located and take immediate possession of and remove (or disable in place) the Aircraft (and/or the APU, any Engines and Parts then unattached to the Aircraft) by self-help, summary proceedings or otherwise without liability; (iv) use Customer’s premises for storage without liability; (v) sell, lease, assign or otherwise dispose of the Aircraft (or any Engine, APU or Part) or any of the other Collateral, whether or not in Lender’s possession, in one or more parcels, at public or private sale or sales, at such prices as Lender may deem best, or keep the Aircraft idle; (vi) apply any deposit, other cash collateral or any proceeds of any Collateral to reduce any amounts due to Lender; and (vii)  collect, receive, appropriate and realize upon the Collateral, or any part thereof.  Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale, or sales to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in Customer, which right or equity of redemption is hereby expressly released.  Customer further agrees, at Lender’s request, to assemble the Collateral, make it available to Lender at such places as Lender shall reasonably select, whether at Customer’s premises or elsewhere.  Lender shall apply the net proceeds of any such realization (after deducting all reasonable costs and expenses of every kind incurred in connection therewith) to the payment in whole or in part of the Obligations, in such order and manner as Lender may elect.  To the extent permitted by applicable law, Customer waives all claims, damages and demands against Lender arising out of the repossession, retention, sale or other disposition of the Collateral.  Customer agrees that Lender need not give more than ten (10) days’ notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters.  Customer shall be liable for any deficiency if the proceeds of any sale or disposition of the Collateral are insufficient to pay all amounts to which Lender is entitled hereunder.

7.3No Waiver: Cumulative Remedies.  No right or remedy is exclusive.  Each may be used successively and cumulatively and in addition to any other right or remedy referred to above or otherwise available to Lender at law or in equity, including, such rights and/or remedies as are provided for in the UCC, but in no event shall Lender be entitled to recover any amount in excess of the maximum amount recoverable under applicable law with respect to any Event of Default.  No express or implied waiver by Lender of any Default or Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Default or Event of Default.  The failure or delay of Lender in exercising any rights granted it hereunder upon the occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or reoccurrence of any such contingencies or similar contingencies, and any single or partial exercise of any particular right by Lender shall not exhaust the same or constitute a waiver of any other right provided for or otherwise referred to herein.  After the occurrence of any Default or Event of Default, the acceptance by Lender of any installment of principal and/or interest or of any other sum owing hereunder or under the other Loan Documents shall not constitute a waiver of such Default or Event of Default, regardless of Lender’s knowledge or lack of knowledge thereof at the time of acceptance of any such payment and shall not constitute a reinstatement of this Agreement if Lender has sent Customer a notice of default, unless Lender shall have agreed in writing to reinstate this Agreement and waive the Default or Event of Default.  To the extent permitted by Applicable Law, Customer waives any rights now or hereafter conferred by statute or otherwise that limit or modify any of Lender’s rights or remedies under this Agreement.

10

SECTION 8.Miscellaneous.

8.1Notices.  All communications and notices provided for herein shall be in writing and shall be deemed to have been duly given or made (i) upon hand delivery, or (ii) upon delivery by an overnight delivery service, or (iii) two (2) Business Days after being deposited in the U.S. mail, return receipt requested, first class postage prepaid, and addressed to Lender or Customer at their respective addresses set forth under their signatures hereto or such other address as either party may hereafter designate by written notice to the other, or (iv) when sent by telecopy (with customary confirmation of receipt of such telecopy) on the Business Day when sent or upon the next Business Day if sent on other than a Business Day.

8.2Expenses and Fees; Indemnity; Performance of Customer’s Obligations.

(a)Customer shall pay to Lender upon demand all fees, costs and expenses incurred by or on behalf of Lender at any time in connection with (i) the negotiation, preparation, execution, delivery and enforcement of this Agreement and the other Loan Documents and the collection of the Obligations, (ii) the creation, preservation and protection of the Collateral and Lender’s first priority and only security interest therein, or (iii) Customer’s exercise of any right granted under, or any amendment or other modification to any of, the Loan Documents.  Such fees, costs and expenses shall include, without limitation, appraisal and inspection fees, the fees and expenses of FAA Counsel and of Lender’s counsel, consultants and brokers, UCC, FAA and other applicable title and lien searches, and costs and expenses relating to recovery, repossession, storage, insurance, transportation, repair, refurbishment, advertising, sale and other disposition of the Aircraft.  Customer shall also pay all fees (including license, filing and registration fees), taxes, assessments and other charges of whatever kind or nature that may be payable or determined to be payable in connection with the execution, delivery, recording or performance of this Agreement or any of the other Loan Documents or any modification thereof.

(b)Customer hereby further agrees, whether or not the transactions contemplated by this Agreement shall be consummated, to pay, indemnify, and hold Lender and its affiliates and all of the Lender’s and such affiliates’ respective directors, shareholders, officers, employees, agents, predecessors, attorneys-in-fact, lawyers, successors and assigns (Lender, its affiliates and all of such other parties and entities sometimes hereinafter collectively, the “Indemnified Parties”) harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, out-of pocket costs, expenses or disbursements of any kind or nature whatsoever arising with respect to or in connection with the ownership, lease, possession, use, sale or other disposition of the Aircraft or the execution, delivery, enforcement, performance or administration of this Agreement and the Note (the foregoing being referred to as the “indemnified liabilities”), provided, that Customer shall have no obligations thereunder with respect to indemnified liabilities arising from the gross negligence or willful misconduct of Lender.

(c)If Customer fails to perform or comply with any of its agreements contained herein or in the other Loan Documents, including, without limitation, its obligations to keep the Aircraft free of Liens, comply with Applicable Standards, or obtain the requisite insurance coverages, Lender shall have the right, but shall not be obligated, to effect such performance or compliance, with such agreement.  Any expenses of Lender incurred in connection with effecting such performance or compliance, together with interest thereon at the default rate of interest provided for in the Notes from the date incurred until reimbursed, shall be payable by Customer to Lender promptly on demand and until such payment shall constitute part of the Obligations secured hereby.  Any such action shall not be a cure or waiver of any Default or Event of Default hereunder.

8.3Entire Agreement; Modifications.  This Agreement and the other Loan Documents constitute the entire understanding and agreement of the parties hereto with respect to the matters contained herein and shall completely and fully supersede all other prior agreements (including any proposal letter, commitment letter, and/or term sheet), both written and oral, between Lender and Customer relating to the Obligations.  Neither Lender nor Customer shall hereafter have any rights under such prior agreements but shall look solely to this Agreement and the other Loan Documents for the definition and determination of all of their respective rights, liabilities and responsibilities relating to the Obligations.  Neither this Agreement, nor any terms hereof, may be changed, waived, discharged or

11

terminated orally, but only by an instrument in writing signed by the party against which enforcement of a change, waiver, discharge or termination is sought.

8.4Construction of this Agreement and Related Matters.  All representations and warranties made in this Agreement and in the other Loan Documents shall survive the execution and delivery of this Agreement and the making of the Loan hereunder.  Customer’s obligations contained in Section 8.2 hereof shall survive the payment and performance of the Obligations and the termination of this Agreement.  This Agreement may be executed by the parties hereto on any number of separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.  The headings of the Sections hereof are for convenience only, are not part of this Agreement and shall not be deemed to affect the meaning or construction of any of the provisions hereof.  Time is of the essence in the payment and performance of all of Customer’s obligations under this Agreement.  Any provision of this Agreement that may be determined to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective in such jurisdiction to the extent thereof without invalidating the remaining provisions of this Agreement, which shall remain in full force and effect.

8.5Lender’s Assignment.  Lender, may at any time, with notice to Customer, grant a security interest in, sell, assign or otherwise transfer (an “Assignment”) all or any part of its interest in this Agreement and the other Loan Documents or any amount due or to become due hereunder or thereunder, and Customer shall perform all of its obligations under the Loan Documents, to the extent so transferred, for the benefit of the beneficiary of such Assignment (such beneficiary, including any successors and assigns, an “Assignee”).  Upon receipt of Lender’s notice of an Assignment, Customer may, within ten (10) Business Days after receipt of such notice, elect to refinance the Loans with another financial institution.  If Customer so elects, such refinancing must be consummated within sixty (60) days after receipt of Lender’s notice of an Assignment.  Customer hereby waives any right to assert, and agrees not to assert, against any Assignee any abatement, reduction, defense, setoff, recoupment, claim or counterclaim that Customer may have against Lender.  Upon the express assumption by such Assignee of Lender’s obligations hereunder, Lender shall be relieved of any such assumed obligations.  If so directed in writing, Customer shall pay all amounts due or to become due under the Loan Documents directly to the Assignee or any other party designated in writing by Lender.  Customer acknowledges and agrees that Lender’s right to enter into an Assignment is essential to Lender and, accordingly, waives any restrictions under Applicable Law with respect to an Assignment and any related remedies.  Upon the request of Lender or any Assignee, Customer also agrees (a) to promptly execute and deliver to Lender or to such Assignee an acknowledgment of assignment in form and substance satisfactory to the requesting party, an insurance certificate naming Assignee as additional insured and loss payee and otherwise evidencing the insurance coverages required hereby and such other documents and assurances reasonably requested by Lender or Assignee, and (b) to comply with the reasonable requirements of any such Assignee in order to perfect such Assignee’s security interest and lien on the Collateral.

8.6Jurisdiction.  Customer hereby irrevocably consents and agrees that any legal action, suit or proceeding arising out of or in any way in connection with this Agreement or any of the other Loan Documents may be instituted or brought in the courts of the State of New York or in the United States Courts for the Southern District of New York, as Lender may elect or in any other state or Federal court as Lender shall deem appropriate, and by execution and delivery of this Agreement, Customer hereby irrevocably accepts and submits to, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of any such court, and to all proceedings in such courts.  Customer irrevocably consents to service of any summons and/or legal process by first class, certified United States air mail, postage prepaid, to Customer at the address set forth below their signatures hereto, such method of service to constitute, in every respect, sufficient and effective service of process in any such legal action or proceeding.  Nothing in this Agreement or in any of the other Loan Documents shall affect the right to service of process in any other manner permitted by law or limit the right of Lender to bring actions, suits or proceedings in the courts of any other jurisdiction.  Customer further agrees that final judgment against it in any such legal action, suit or proceeding shall be conclusive and may be enforced in any other jurisdiction, within or outside the United States of America, by suit on the judgment, a

12

certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of the liability.

8.7Governing Law; Binding Effect.  This Agreement shall be construed and enforced in accordance with, and the rights of both parties shall be governed by, the internal laws of the State of New York (without regard to the conflict of laws principles of such state, except as to the effect of Title 14, Section 5-1401 of the New York General Obligations Law), including all matters of construction, validity, and performance.  This Agreement shall be binding upon and inure to the benefit of Customer and Lender and their respective successors and assigns, except that Customer may not assign or transfer its rights hereunder or any interest herein.

8.8Jury Waiver.  CUSTOMER HEREBY KNOWINGLY AND FREELY WAIVES ITS RIGHTS TO A JURY TRIAL IN ANY ACTION, SUIT OR PROCEEDING RELATING TO, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS.

[SIGNATURES ON NEXT PAGE]

13

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first above written.

FLEET CAPITAL CORPORATION			WILLIS LEASE FINANCE CORPORATION
By:	/s/ Deborah M. Hayes		By:	/s/ Monica J. Burke
Name:		Deborah M. Hayes	Name:		Monica J. Burke
					Executive Vice President
Title:		Vice President	Title:		Chief Financial Officer
Notice Address:			Notice Address:
One Financial Plaza, 5th Floor			2320 Marinship Way, Suite 300
Providence, Rhode Island  02903			Sausalito, CA 94965
Attention: Director of Aircraft Operations			Attn: General Counsel
Telephone:  800-238-3737			Telephone:415-331-5281
Facsimile:   401-278-7941			Facsimile: 415-331-5167

14

ANNEX A

DEFINITIONS

The following terms shall have the following meanings for all purposes of this Agreement:

Acceptance Certificate shall mean Annex C hereto, which shall be executed and delivered to Lender as of the Initial Closing Date.

Affiliate shall mean, with respect to either Lender or Customer, as applicable, any affiliated Person controlling, controlled by or under common control with such party, and for this purpose, ‘control’ means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any such Person, whether through the legal or beneficial ownership of voting securities, by contract or otherwise.

Aircraft shall mean (i) the Airframe, (ii) the Engines, (iii) any APU, and (iv) the Records, and all accessories, additions, accessions, alterations, modifications, Parts, repairs and attachments now or hereafter affixed thereto or used in connection therewith, and all replacements, substitutions and exchanges (including trade-ins) for any of the foregoing.

Airframe shall mean (i) the Aircraft described in Annex C hereto and shall not include the Engines or any APU, and (ii) any and all Parts from time to time incorporated in, installed on or attached to the Aircraft and any and all Parts removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after removal from the Aircraft.

Applicable Law shall mean all applicable laws, statutes, treaties, conventions, judgments, decrees, injunctions, writs and orders of any court, governmental agency or authority and rules, regulations, orders, directives, licenses and permits of any governmental body, instrumentality, agency or authority as amended and revised, and any judicial or administrative interpretation, of any of the same, including the airworthiness certificate issued with respect to the Aircraft, all FARs, airworthiness directives, and/or any of the same relating to noise, the environment, national security, public safety, exports or imports or contraband.

Applicable Standards shall mean (i) Applicable Law, (ii) the requirements of the insurance policies required hereunder, and (iii), with respect to the Airframe or any Engine, APU or Part, all compliance requirements set forth in or under (A) all maintenance manuals initially furnished with respect thereto, including any subsequent amendments or supplements to such manuals issued by the manufacturer or supplier thereof from time to time, (B) all mandatory servicebulletins issued, supplied, or available by or through the applicable manufacturer with respect thereto, (C) all applicable airworthiness directives issued by the FAA or similar regulatory agency having jurisdictional authority, (D) all conditions to the enforcement of any warranties pertaining thereto, (E) Customer’s FAA approved maintenance program with respect to the Airframe, the Engines, any APU or Part.

APU shall mean (i) any auxiliary power unit described in Annex C hereto and installed on the Airframe as of the Initial Closing Date, whether or not hereafter installed on the Airframe or any other airframe from time to time; (ii) any auxiliary power unit that may from time to time be substituted, pursuant to the applicable terms of this Agreement, for an APU; and (iii) any and all Parts incorporated in or installed on or attached to such auxiliary power unit or any and all Parts removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after such removal.

Business Day shall mean any day other than a Saturday, Sunday or other day on which banks located in Providence, Rhode Island or San Francisco, California are closed or are authorized to close.

Collateral shall have the meaning set forth in Section 5.1 hereof.

15

Default shall mean an event or circumstance that, after the giving of notice or lapse of time, or both, would become an Event of Default.

Engine shall mean (i) each of the engines and described in Annex C hereto and installed on the Airframe as of the Initial Closing Date, whether or not hereafter installed on the Airframe or any other airframe from time to time; (ii) any engine that may from time to time be substituted, pursuant to the applicable terms of this Agreement, for an Engine; and (iii) any and all Parts incorporated in or installed on or attached to such engine or any and all Parts removed therefrom so long as Lender shall retain an interest therein in accordance with the applicable terms of this Agreement after such removal.

Event of Default shall have the meaning set forth in Section 6 hereof.

Event of Loss with respect to the Aircraft, the Airframe, any Engine or any APU shall mean any of the following events: (i) loss of such property or the use thereof due to theft, disappearance, destruction, damage beyond repair or rendition of such property permanently unfit for normal use for any reason whatsoever; (ii) any damage to such property that results in an insurance settlement with respect to such property on the basis of a total loss or constructive total loss; (iii) the condemnation, confiscation or seizure of, or requisition of title to or use of, such property by the act of any government (foreign or domestic) or of any state or local authority or any instrumentality or agency of the foregoing (“Requisition of Use”); (iv) as a result of any rule, regulation, order or other action by any government (foreign or domestic) or governmental body (including, without limitation, the FAA or any similar foreign governmental body) having jurisdiction, the use of such property shall have been prohibited, or such property shall have been declared unfit for use, for a period of six (6) consecutive months, unless Customer, prior to the expiration of such six-month period, shall have undertaken and, in the opinion of Lender, shall be diligently carrying forward all steps that are necessary or desirable to permit the normal use of such property by Customer or, in any event, if use shall have been prohibited, or such property shall have been declared unfit for use, for a period of twelve (12) consecutive months; (v) with respect to an Engine or an APU, the removal thereof from the Airframe for a period of six (6) consecutive months or longer, whether or not such Engine or APU is operational; or (vi) an Engine or an APU is returned to the manufacturer thereof, other than for modification in the event of patent infringement or for repair or replacement (any such return being herein referred to as a “Return to Manufacturer”).  The date of such Event of Loss shall be the date of such theft, disappearance, destruction, damage, Requisition of Use, prohibition, unfitness for use for the stated period, removal for the stated period or Return to Manufacturer.

FAA shall mean the United States Federal Aviation Administration and/or the Administrator of the Federal Aviation Administration and the Department of Transportation, or any Person, governmental department, bureau, authority, commission or agency succeeding the functions of any of the foregoing, including, where applicable, the Transportation Security Administration.

FAA Counsel shall mean such counsel as Lender may designate from time to time to assist it with FAA matters.

FARs shall mean the Federal Aviation Regulations, any supplemental Federal Aviation Regulations and all successor regulations thereto.

Federal Aviation Act shall mean Subtitle VII of Title 49 of the United States Code, as amended and recodified.

Final Closing Date shall have the meaning set forth in Section 1.2 hereof.

GAAP shall mean generally accepted accounting principles consistently applied.

Impositions shall have the meaning set forth in Section 4.3 hereof.

16

Liens shall mean all liens, charges, security interests, leaseholds and encumbrances of every nature and description whatever, including, without limitation, and rights of third parties under Third Party Agreements.

Loan Documents shall mean this Agreement, the Tranche 1 Note, the Tranche 2 Note and any other documents, agreements or instruments securing, evidencing or relating to the Obligations.

Loans shall mean the Tranche 1 Loan and the Tranche 2 Loan.

Material Damage shall mean any damage: (a) required to be reported pursuant to any governmental reporting requirement, (b) with respect to which an insurance claim is being made, or (c) requiring that the Aircraft or any Engine be taken out of service for more than one (1) day to repair.

Obligations shall mean: (i) the unpaid principal amount of, and accrued interest on, the Note; and (ii) all other indebtedness, obligations or liabilities of Customer owing to Lender, or to any Affiliate of Lender, of every kind and description, direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising, including, but not limited to, all indebtedness, obligations or liabilities under, arising out of or in connection with this Agreement, the Note or any of the other Loan Documents.

Parts shall mean all appliances, avionics, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (other than complete Engines) that may from time to time be incorporated or installed in or attached to the Airframe, any Engine or any APU, and any and all such appliances, avionics, parts, instruments, appurtenances, accessories, furnishings and other equipment removed therefrom so long as Lender shall retain a security interest therein in accordance with the applicable terms of this Agreement after such removal.

Permitted Liens shall mean (a) the respective rights of others under Third Party Agreements, if any, to the extent expressly provided and permitted by the terms of Section 4.4 of this Agreement, (b) Liens for taxes either not yet due or being contested by Customer in good faith with due diligence and by appropriate proceedings, so long as such proceedings do not involve, in Lender’s sole judgment, any material danger of the sale, foreclosure, transfer, forfeiture or loss of the Collateral, or title thereto, the rights of Lender hereunder or Lender’s interest therein, and for the payment of which taxes adequate reserves shall have been established in accordance with GAAP or other appropriate provisions satisfactory to Lender have been made, and (c) inchoate materialmen’s, mechanic’s, workmen’s, repairmen’s, employee’s, or other like Liens arising in the ordinary course of business of Customer for sums not yet delinquent or being contested in good faith with due diligence and by appropriate proceedings, so long as such proceedings do not involve, in Lender’s sole judgment, any material danger of the sale, foreclosure, transfer, forfeiture or loss of the Collateral, or title thereto, the rights of Lender hereunder or Lender’s interest therein, and for the payment of which sums adequate reserves shall have been established in accordance with GAAP or other appropriate provisions satisfactory to Lender have been made.

Person shall mean any individual, partnership, corporation, limited liability company, trust, association, joint venture, joint stock company, or non-incorporated organization or government or any department or agency thereof, or any other entity of any kind whatsoever.

Proceeds shall have the meaning assigned to it in the UCC, and in any event, shall include, but not be limited to, all goods, accounts, chattel paper, documents, instruments, general intangibles, investment property, deposit accounts, letter of credit rights, investment property, deposit accounts and supporting obligations (to the extent any of the foregoing terms are defined in the UCC, any such foregoing terms shall have the meanings given to the same in the UCC), and all of Customer’s rights in and to any of the foregoing, and any and all rents, payments, charter hire and other amounts of any kind whatsoever due or payable under or in connection with the Aircraft, including, without limitation, (A) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to Customer from time to time with respect to the Aircraft, (B) any and all payments (in any form whatsoever) made or due and payable to Customer from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of the Aircraft by any governmental body, authority, bureau or agency or any other Person (whether or not

17

acting under color of governmental authority), and (C) any and all other rents or profits or other amounts from time to time paid or payable under or in connection with the Aircraft.

Records shall mean any and all logs, manuals, certificates and data and inspection, modification, maintenance, engineering, technical, and overhaul records (whether in written or electronic form) with respect to the Aircraft, including, without limitation, all records (i) required to be maintained by the FAA or any other governmental agency or authority having jurisdiction with respect to the Aircraft or by any manufacturer or supplier of the Aircraft (or any part thereof) with respect to the enforcement of warranties or otherwise, all records (ii) evidencing Customer’s compliance with Applicable Standards.

Request for Advance shall mean, with respect to the Tranche 2 Loan, a Request for Advance executed by Customer, in substantially the form and substance set forth as Exhibit A hereto.

Third Party Agreements shall mean any and all leases, subleases, interchange agreements, charter agreements, pooling agreements, timeshare agreements and any other similar agreements or arrangements of any kind whatsoever relating to the Aircraft or any part thereof.

Tranche 1 Note shall mean that certain Promissory Note dated as of the Initial Closing Date, in the amount of the Tranche 1 Loan as set forth in Annex B attached hereto.

Tranche 2 Note shall mean that certain Promissory Note dated as of the Final Closing Date, having a term which shall be co-terminous with the then remaining term of the Tranche 1 Note, and in the amount of the Tranche 1 Loan as set forth in Annex b attached hereto.

UCC shall mean the applicable Uniform Commercial Code as then in effect in the applicable jurisdiction.

18

ANNEX B

LOAN AMOUNT AND CUSTOMER INFORMATION

Customer’s Chief Executive Offices
And Principal Place of Business:	2320 Marinship Way, Suite 300
	Sausalito, California 94965
Customer’s form of Organization:	corporation
State of Organization:	Delaware
Additional State(s) in which
Customer is qualified:	California
State issued Organizational
Identification Number:	2870540
Federal Taxpayer ID Number:	68-0070656
Principal Amount of the Tranche 1 Loan:	$6,450,000.00
Principal Amount of the Tranche 2 Loan:	Lesser of (i) the actual costs of refurbishment and
	upgrades, or (ii) $550,000.00

19

ANNEX C

CERTIFICATE OF ACCEPTANCE

In accordance with the Loan and Aircraft Security Agreement (S/N 3004) dated as of October     , 2004 (the “Agreement”), between the undersigned Customer and Fleet Capital Corporation (“Lender”), Customer hereby represents and warrants to Lender that on the date hereof:

(1)The representations and warranties of Customer set forth in the Agreement and all Loan Documents delivered in connection therewith were true and correct in all respects when made and are true and correct as of the date hereof, with the same force and effect as if the same had been made on this date.

(2)Customer has satisfied or complied with all conditions precedent and requirements as set forth in the Agreement which are required to be or to have been satisfied or complied with on or prior to the date thereof.

(3)No Default or Event of Default under the Agreement has occurred and is continuing on the date hereof.

(4)Customer has obtained, and there are in full force and effect, such insurance policies with respect to the Aircraft, as such term is defined in the Agreement, as are required to be obtained under the terms of the Agreement.

(5)Customer has furnished no equipment for the Aircraft (other than any equipment of which Customer has expressly informed Lender), and all of the avionics and equipment set forth on Schedule A hereto are on board the Aircraft and are in proper working condition;

(6)the Aircraft (i) has been delivered to Customer, is in Customer’s possession and is, as of the Closing Date, unconditionally, irrevocably and fully accepted by Customer, (ii) has been inspected by Customer to its complete satisfaction and, without limiting the foregoing, (A) has been found to be airworthy and otherwise in good working order, repair and condition and fully equipped to operate as required under Applicable Standards for its purpose, and (B) is in conformity with the requirements of the related purchase agreements and the Applicable Standards; (iii) is currently certified under existing Federal Aviation Administration rules and regulations and is completely airworthy in all respects, and (iv) is and will remain primarily hangered at the location set forth herein;

All capitalized terms used herein that are not otherwise defined herein shall have the meaning given to such terms in this Agreement.

20

AIRCRAFT DESCRIPTION

One (1) 1983 Canadair Ltd.Model CL-600  (Challenger 601-1A) aircraft that consists of the following components:

(a)	Airframe bearing FAA Registration Mark N45PH and manufacturer’s serial number 3004.
(b)	Two (2) General Electric Model CF-34-3A aircraft engines bearing manufacturer’s serial numbers 350110     and 350115 (each of which has 750 or more rated takeoff horsepower or the equivalent of such horsepower).
(c)	One (1) Garrett model GTCP36-100E auxiliary power unit bearing manufacturer’s serial number P243.
(d)	Standard avionics and equipment, all other accessories, additions, modifications and attachments to, and all replacements and substitutions for, any of the foregoing, all as more particularly described on Schedule A attached hereto and made a part hereof.

PRIMARY HANGER LOCATION:	4002 Cirrus Drive
	Medford, OR 79504

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

21

IN WITNESS WHEREOF, Customer has caused this Certificate of Acceptance to be executed by its duly authorized officer as of October     , 2004.

WILLIS LEASE FINANCE CORPORATION

By:

Name:

Title:

22

SCHEDULE A

TO

CERTIFICATE OF ACCEPTANCE

Avionics:

Dual Honeywell 650 F/DIR	Dual Honeywell YG1779 LASEREF IRS’
Sperry EDZ-801 EFIS	Voice Checklist – Heads Up Checklist
Universal MFD-640 Multifunction Display	Baker Master Audio Control System
Honeywell Primus 880 Digital Weather Radio	Dual King KHF950 HF’s
Safeflight Scat System	Dual Sperry AZ-800 Digital Air Data
Safeflight Windshear Warning System	603.4 w/Performance Database A12501
Dual Collins VHF-20C COMM (8.33 Spacing)	F-800 Flight Data Recorder
Single Collins VHF-22B COMM	Fairchild A-100 Cockpit Voice Recorder
Dual Collins VIR-30 NAV (FM Immunity)	Magnastar C-2000 Digital Airborn Telephone
Computer w/VN-800 VNAV	Unilink
Dual GPS-1000 Sensors	Allied Signal CAS-81 TCAS II REV.7
Dual Universal UNS-1B+ FMS; Software Ver.	Allied Signal MK VI GPWS

Interior:

Beige Leather, Fireblocked, 10 PAX interior, Including forward 4-place club, AFT 2 place club opposite a 4-place divan.  Airshow 200 with 10” LCD display.  Brother 6500 FAX/Laser printer.  Galley includes a microwave oven, Hi-temp Nordskorg oven, Mapco coffee pot.  Forward cloak closet, AFT storage closet and AFT baggage.

Exterior:

Matterhorn white with red and black stripes.

TOGETHER WITH ALL OTHER AVIONICS, EQUIPMENT, LOOSE EQUIPMENT INSTALLED AND/OR ONBOARD, ALL ADDITIONS, SUBSTITUTIONS, ACCESSIONS, REPLACEMENTS, PARTS, NOW OR HEREAFTER ACQUIRED, AND ALL RECORDS, MANUALS, LOGBOOKS, MAINTENANCE RECORDS, WHETHER IN WRITTEN OR COMPUTER DATA FORM, NOW OR HEREAFTER CREATED, AND ALL PROCEEDS OF THE FOREGOING, INCLUDING INSURANCE PROCEEDS

23

CLOSING TERMS ADDENDUM (“Closing Terms Addendum”) to Loan and Aircraft Security Agreement (S/N 3004) dated as of October     , 2004 (the “Agreement”), by and between FLEET CAPITAL CORPORATION, as lender (“Lender”), and WILLIS LEASE FINANCE CORPORATION, as Customer (“Customer”).

All capitalized terms not defined in this Closing Terms Addendum are defined in the Agreement.  Execution of the Agreement by Customer and Lender shall be deemed to constitute execution and acceptance of the terms and conditions of this Closing Terms Addendum, and it shall supplement and be a part of the Agreement.

Conditions Precedent to the Tranche 1 Loan:

1.On or prior to the Initial Closing Date and at least one full Business Day prior to closing, Lender shall have received all of the following, in form and substance satisfactory to Lender:

(a)the Agreement, the Acceptance Certificate executed and dated as of the Initial Closing Date, the Tranche 1 Note and Pay Proceeds Letter #1 for the Tranche 1 Loan duly executed by Customer;

(b)[INTENTIONALLY OMITTED]

(c)if required by Lender, an opinion of counsel for Customer addressed to Lender as to such matters incident to the Loan as Lender may reasonably require;

(d)Certificate(s) of good standing for Customer from its state(s) of organization and the state(s) where the primary hangar location of the Aircraft and Customer’s chief executive offices and principal place of business are located;

(e)a certificate for Customer executed by Customer’s secretary or other authorized representative certifying: (i) that the execution, delivery and performance of the Agreement and the other Loan Documents and the entry by Customer into the transactions contemplated hereby and thereby have been duly authorized, (ii) the name(s) of the Person(s) authorized to execute and deliver such documents on behalf of Customer together with specimen signature(s) of such Person(s); and (iii) Customer’s charter and by-laws, operating agreement and other organizational documents, as applicable;

(f)evidence as to the insurance coverage required under the Agreement, including, but not limited to, a certificate of insurance, copies of endorsements (including a Lender endorsement), and, if requested by Lender, copies of applicable policies and written confirmation from the insurance underwriter or broker that the insurance coverage provided is in compliance with the requirements of Section 4.6 of the Agreement;

(g)a complete copy of the pre-buy inspection report on the Aircraft and an appraisal satisfactory to Lender with respect to the Aircraft prepared by an appraiser acceptable to Lender;

(h)copies of: (i) any purchase agreements entered into by Customer in connection with the acquisition of the Aircraft, (ii) the warranty bill of sale conveying title to the Aircraft from seller or vendor to Customer; (iii) if required by Lender, invoices for the purchase of the Aircraft, and (iv) such other documents relating to the purchase or conveyance of title as Lender may request;

(i)copies of the executed FAA Aircraft Registration Application (AC Form 8050-1), FAA Bill of Sale (AC Form 8050-2), and FAA Standard Airworthiness Certificate (AC Form 8100-2) for the Aircraft; and

24

such other documents, certificates and opinions, and evidence of such other matters, as Lender, Lender’s counsel or FAA Counsel, may reasonably request in order to effect the terms of this Agreement and/or to protect Lender’s security interest in the Collateral.

2.If the Aircraft is not then owned by Customer, Lender shall have received evidence on the Initial Closing Date that the Aircraft shall have been duly delivered to and accepted by Customer and that the entire purchase price of the Aircraft has been fully paid.

3.On or prior to the Initial Closing Date, Lender shall have received evidence that FAA Counsel has received in escrow: (i) if the Aircraft is not then owned by Customer, the executed FAA Aircraft Bill of Sale (AC Form 8050-2) in the name of Customer and the executed FAA Aircraft Registration Application (AC Form 8050-1) in the name of Customer (except for the pink copy, which shall be available to be placed on the Aircraft upon acceptance thereof); (ii) executed releases in form and substance satisfactory to FAA Counsel of any Liens on the Aircraft; (iii) such other documents as are necessary, in the opinion of Lender’s counsel and/or FAA Counsel to vest good title to the Aircraft in the name of Customer and to perfect Lender’s first priority security interest in the Aircraft; and (iv) the executed original of the Agreement, all the foregoing being in proper form for filing with the FAA.

4.On the Initial Closing Date, Lender shall have received assurances from FAA Counsel satisfactory to Lender, in form and substance satisfactory to Lender, that (i) the Aircraft (including the Airframe and Engines) is free and clear of all other Liens of record with the FAA, (ii) title to the Airframe is vested in Customer or that, upon filing of the FAA Aircraft Bill of Sale (AC Form 8050-2) in the name of Customer, title to the Airframe will be vested in Customer, (iii)  Lender, upon filing of the Agreement with the FAA, will have a valid and perfected security interest in the Aircraft (including the Airframe and the Engines), and (iv) the filing of the Agreement with the FAA has been effected.

Conditions Precedent to the Tranche 2 Loan:

On or prior to the Final Closing Date and at least one full business Day prior to the closing, Lender shall have received all of the following, in form and substance satisfactory to Lender:

(a)Request for Advance, the Tranche 2 Note, and Pay Proceeds Letter #2 executed by customer

(b)copies of all vendor work orders and invoices for the refurbishment and upgrades and, if customer has previously paid such invoices, evidence of such payment

(c)revised evidence of insurance coverage, confirming that the amount of hull coverage has been increased by an amount not less than the amount of the Tranche 2 Note

such other documents, certificates and opinions, and evidence of such other matters, as Lender or Lender’s counsel, may reasonably request in order to effect the terms of this Agreement and/or to protect Lender’s security interest in the Collateral

25

EXHIBIT A

REQUEST FOR ADVANCE

TO:Fleet Capital Corporation

One Financial Plaza, 5^th Floor

Providence, Rhode Island 02903

Reference is hereby made to the Loan and Aircraft Security Agreement (S/N 3004) dated as of October     , 2004 (as amended, restated or supplemented from time to time, the “Agreement”), between Willis Lease Finance Corporation (“Customer”), and Fleet Capital Corporation (“Lender”).  Capitalized terms not otherwise defined herein are used herein as defined in the Agreement.

1.Customer hereby requests that Lender fund the Tranche 2 Loan in the amount of $               on                     , 200   , which is a Business Day that is at least three (3) Business Days after the date this Request for Advance is delivered to Lender (the “Requested Advance Date”).

2.In connection with such funding, Customer hereby represents and warrants to Lender as follows:

(a)all of the work described on the Work Order(s) (copies of which have been provided to Lender) with respect to the refurbishment and/or upgrades to the Aircraft has been completed to Customer’s satisfaction, and has been irrevocably accepted by Customer;

(b)[Customer has paid all amounts due under vendor invoices for the work performed and has provided evidence to Lender of such payment;]

(c)no material adverse change in the financial condition of Customer has occurred since the date of the last financial statements of Customer delivered to Lender; and

(d)all of the applicable conditions precedent to this funding under Section 2 of the Agreement have been satisfied.

Please wire transfer the proceeds of the funding requested hereby in accordance with the Pay Proceeds Letter #2.

The Customer has caused this Request for Advance to be executed and delivered by its duly authorized representative this                             day of                                      ,

Willis Finance Lease Corporation

By:

Name:

Title:

26

EX-10.43

Exhibit 10.43

SECOND AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT

Dated as of December 9, 2004

among

WILLIS LEASE FINANCE CORPORATION,
as Borrower,

CERTAIN BANKING INSTITUTIONS NAMED HEREIN,

NATIONAL CITY BANK,
as Administrative Agent,

and

FORTIS BANK (NEDERLAND) N.V.,
as Structuring Agent and Security Agent,

Vedder, Price, Kaufman & Kammholz
Chicago, Illinois

SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December 9, 2004 (this “Amendment”), is entered into by and among WILLIS LEASE FINANCE CORPORATION, a Delaware corporation (the “Borrower”), the banking institutions signatories hereto and named in Exhibit A attached hereto and such other institutions that hereafter become a “Bank” pursuant to Section 11.4 of the Agreement (as defined below) (collectively the “Banks” and individually a “Bank”), NATIONAL CITY BANK, as Administrative Agent and FORTIS BANK (NEDERLAND) N.V., as Security Agent and Structuring Agent.

RECITALS

WHEREAS, the Borrower, the Administrative Agent, the Structuring Agent, and the Security Agent (in their respective capacities as Agents and as Banks) and the Banks have entered into that certain Amended and Restated Credit Agreement dated as of June 29, 2004 (the “Original Agreement”), as amended by the First Amendment to Amended and Restated Credit Agreement dated as of September 24, 2004 (the “First Amendment”; the Original Agreement as amended by the First Amendment is referred to as the “Agreement”) pursuant to which the Banks have agreed to make available to the Borrower a revolving credit facility used for the purchase or refinance of Engines and Equipment;

WHEREAS, Kaupthing Bank has agreed to commit the amount of Ten Million Dollars (US$10,000,000) towards the Aggregate Revolving Loan Commitment, as set forth herein;

WHEREAS, the amount of the Aggregate Revolving Loan Commitment will be increased to One Hundred Forty Eight Million Five Hundred Thousand Dollars (US$148,500,000);

WHEREAS, all of the Banks have approved such increase; and

WHEREAS, CDC Finance – CDC IXIS, a corporation organized and existing under the laws of the Republic of France (“CDC IXIS”), desires to assign its Revolving Loan Commitment.

NOW, THEREFORE, in consideration of the premises and promises hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows:

AGREEMENT

Section 1.Definitions.  Terms not defined herein shall have the meanings ascribed thereto in the Agreement.

Section 2.Exhibits.  Exhibit A to the Agreement is hereby deleted in its entirety and replaced with Exhibit A attached hereto.

Section 3.Assignment.  The Borrower and the Structuring Agent hereby consent for the purposes of Section 11.4 of the Agreement (and as previously described in Section 2 of the

First Amendment) to CDC IXIS’s assignment of its Revolving Loan Commitment in the amount of US$10,000,000 to IXIS Corporate & Investment Bank, a company incorporated in France whose registered office is at 47 Quai d’Austerlitz, 75648 Paris Cedex 13, France, effective as of the date hereof.

Section 4.Ratification.  Except as amended hereby, the Agreement, as heretofore supplemented, amended, assigned and modified shall continue and shall remain in full force and effect and is hereby ratified in all respects.  From and after the date hereof, any and all references to the “Agreement” shall be deemed to refer to the Agreement as amended hereby.

Section 5.Governing Law; Severability; Construction of Amendment.  THIS AMENDMENT SHALL BE GOVERNED BY AND BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CALIFORNIA OR FEDERAL PRINCIPLES OF CONFLICTS OF LAWS.  To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.  Otherwise, any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, without invalidating any of the remaining provisions hereof, and any such prohibition or unenforceability in any one or more jurisdictions shall not invalidate or render unenforceable such provisions in other jurisdictions.

Section 6.Counterparts; Effectiveness.  This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Amendment shall become effective when the Administrative Agent shall have received signed counterparts or notice by fax of the signature page that the counterpart has been signed and is being delivered to it or by facsimile that such counterparts have been signed by all the parties hereto or thereto.

Section 7.Headings.  All section headings contained herein are for convenience of reference only and are not intended to define or limit the scope of any provision of this Amendment.

Section 8.Representations and Warranties.  The Borrower hereby represents and warrants to each of the other parties hereto that (i) this Amendment has been duly authorized, executed and delivered by it and (ii) this Amendment constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.

*    *    *

2

IN WITNESS WHEREOF, the parties hereto have each caused this Amendment to be duly executed by their duly authorized representatives as of the date first above written.

WILLIS LEASE FINANCE CORPORATION
By	/s/ Monica J. Burke
		Name:	Monica J. Burke
		Title:	Executive Vice President Chief Financial Officer

Notices to:

2320 Marinship Way

Suite 300

Sausalito, CA  94965

Fax No. (415) 331-5167

Attention:  General Counsel

Email: tnord@willislease.com

3

NATIONAL CITY BANK,
as Administrative Agent
By	/s/ Christos Kytzidis
	Name:	Christos Kytzidis
	Title:	Vice President

Notices To:

Christos Kytzidis

Vice President

National City Bank

One South Broad

14th Floor, Locator 01-5997

Philadelphia, PA 19107

Telephone:  267-256-4092

Facsimile:  267-256-4001

Email:  chris.kytzidis@nationalcity.com

With a copy to:

Scott Lankford

Sr. Loan Administrator

National City Bank

1900 East Ninth Street

Cleveland, Ohio 44114

4

NATIONAL CITY BANK
By		/s/ Christos Kytzidis
	Name:		Christos Kytzidis
	Title:		Vice President

Notices To:

Christos Kytzidis

Vice President

National City Bank

One South Broad

14th Floor, Locator 01-5997

Philadelphia, PA 19107

Telephone:  267-256-4092

Facsimile:  267-256-4001

Email:  chris.kytzidis@nationalcity.com

With a copy to:

Scott Lankford

Sr. Loan Administrator

National City Bank

1900 East Ninth Street

Cleveland, Ohio 44114

5

FORTIS BANK (NEDERLAND) N.V.,
as Structuring Agent
By		/s/ P.R.G. Zaman /s/ M.P.A. Zondag
	Name:		P.R.G. Zaman
	Title:
	Name:		M.P.A. Zondag
	Title:

Notices To:

Fortis Bank (Nederland) N.V.

Coolsingel 93

3012 AE Rotterdam

The Netherlands

Attention:  Maarten H. Schipper

Telephone:  31 10 401 9522

Facsimile:  31 10 401 9529

With a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

Attention:  Lynne A. Gochanour

222 North LaSalle Street

Suite 2600

Chicago, Illinois  60601

Telephone:  312-609-7500
Facsimile:  312-609-5005

6

FORTIS BANK (NEDERLAND) N.V.,
as Security Agent
By		/s/ P.R.G. Zaman /s/ M.P.A. Zondag
	Name:		P.R.G. Zaman
	Title:
	Name:		M.P.A. Zondag
	Title:

Notices To:

Fortis Bank (Nederland) N.V.

Coolsingel 93

3012 AE Rotterdam

The Netherlands

Attention:  Maarten H. Schipper

Telephone:  31 10 401 9522

Facsimile:  31 10 401 9529

With a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

Attention:  Lynne A. Gochanour

222 North LaSalle Street

Suite 2600

Chicago, Illinois  60601

Telephone:  312-609-7500

Facsimile:  312-609-5005

7

FORTIS BANK (NEDERLAND) N.V.,
By	/s/ P.R.G. Zaman /s/ M.P.A. Zondag
	Name:	P.R.G. Zaman
	Title:
	Name:	M.P.A. Zondag
	Title:

Notices To:

Fortis Bank (Nederland) N.V.

Coolsingel 93

3012 AE Rotterdam

The Netherlands

Attention:  Maarten H. Schipper

Telephone:  31 10 401 9522

Facsimile:  31 10 401 9529

With a copy to:

Vedder, Price, Kaufman & Kammholz, P.C.

Attention:  Lynne A. Gochanour

222 North LaSalle Street

Suite 2600

Chicago, Illinois  60601

Telephone:  312-609-7500

Facsimile:  312-609-5005

8

CALIFORNIA BANK AND TRUST
By		/s/ J. Michael Sullivan
	Name:		J. Michael Sullivan
	Title:		Vice President

Notices To:

J. Michael Sullivan

Vice President

California Bank & Trust

South Bay Corporate Banking Office

1690 South El Camino Real

San Mateo, CA  94402

Telephone:  650-294-2026

Facsimile:  650-294-2029

Email: sullivanm@calbt.com

With a copy to:

Loan Administrator

California Bank & Trust

San Francisco Corporate Banking Office

465 California Street, 1st Floor

San Francisco, CA  94104

Telephone:  415-875-1441

Facsimile:  415-875-1457

9

CITY NATIONAL BANK
By	/s/ Nanci Brusati Dias
	Name:	Nanci Brusati Dias
	Title:	Senior Vice President

Notices To:

Nanci Brusati-Dias, Senior Vice President

City National Bank – San Francisco CBC

150 California Street, 12th Floor

San Francisco, CA  94111

Telephone:  415-576-2801

Facsimile:  415-576-3961

Email: nanci.dias@cnb.com

10

WELLS FARGO BANK, NATIONAL ASSOCIATION
By	/s/ Peter Hsu
	Name:	Peter Hsu
	Title:	Vice President

Notices To:

Wells Fargo Bank, National Association

200 B Street, Suite 300

Santa Rosa, CA  95401

Telephone:  707-584-3142

Facsimile:  707-584-3235

Email:  peter.r.hsu@wellsfargo.com

11

HSH NORDBANK
By	/s/ Jack Campbell
	Name:	Jack Campbell
	Title:	Senior Vice President
		Head of Transportation Americas
By	/s/ Hari Raghavan
	Name:		Hari Raghavan
	Title:		Vice President
			Transportation

Notices To:

HSH Nordbank

590 Madison Avenue

New York, NY  10022-2540

Telephone:  212-407-6000

Facsimile:  212-407-6033

Email:	hari.raghavan@hsh-nordbank.com
	and eric.dollman@hsh-nordbank.com

12

STATE BANK OF INDIA ( LOS ANGELES AGENCY)
By	/s/ Sunil K Kowshal
	Name:	Sunil K Kowshal
	Title:	VP & Manager

Notices To:

State Bank of India

Los Angeles Agency

707 Wilshire Boulevard, Suite 1995

Los Angeles, California  90017

Telephone:  213-623-7250

Facsimile:  213-622-2069

Email:	ravi@sbical.com
	sbilaa@yahoo.com

13

STATE BANK OF INDIA (CALIFORNIA)
By	/s/ Soundara Kumar
	Name:	Soundara Kumar
	Title:	Chief Executive Officer

Notices To:

State Bank of India (California)

707 Wilshire Boulevard, Suite 1995

Los Angeles, California  90017

Telephone:  213-623-7250

Facsimile:  213-622-2069

Email:	ravi@sbical.com
	sbilaa@yahoo.com

14

IXIS CORPORATE & INVESTMENT BANK (as successor in interest to CDC Finance – CDC IXIS)
By	/s/ Henri Malick
	Name:  Henri MALICK
	Title:    Managing Director for Financing Activities

Notices To:

Jean-Michel Chatel

Bank Offices Loans and Structured Finance Manager

IXIS CORPORATE & INVESTMENT

BANK

26-28 Rue Neuve Tolbiac

75658 Paris Cedex 13

France

Telephone:  +33 1 58 55 60 71

Facsimile:  +33 1 58 55 60 82

Email:  jmchatel@ixis-cib.com

15

KAUPTHING BANK
By	/s/ Bjarki H Diego
	Name:	Bjarki H Diego
	Title:	Managing Director
		Corporate Banking
By	/s/ Byörk Thorarinsdottir
	Name:		Byörk Thorarinsdottir
	Title:		Deputy Managing Director
			Corporate Banking

Notices To:

Asthildur Otharsdottir

Kaupthing Bunadarbanki hf.

Corporate Banking

Borgartuni 19 – IS 105 Reykjavik – Iceland

Telephone:  (+354) 444 6544

Facsimile:    (+354) 444 6589

Email:    amo@kbbanki.is

16

EXHIBIT A

BANKS’ REVOLVING LOAN COMMITMENTS AND PERCENTAGES

	Revolving Loan Commitment		Revolving Loan Commitment Percentage		Closing Fee
Fortis Bank (Agent)	30,000,000		20.2020	%	0.004	120,000
National City Bank (Agent)	30,000,000		20.2020	%	0.004	110,000
California Bank & Trust	20,000,000		13.4680	%	0.004	80,000
Wells Fargo Bank	15,500,000		10.4377	%	0.004	62,000
HSH Nordbank	15,000,000		10.1010	%	0.0025	37,500
City National Bank	10,000,000		6.7340	%	0.0025	25,000
CDC Finance – CDC IXIS	10,000,000		6.7340	%	0.0025	25,000
Kaupthing Bank	10,000,000		6.7340	%	0.0025	25,000
State Bank of India – Los Angeles Agency	5,000,000		3.3670	%	0.0025	12,500
State Bank of India (California)	3,000,000		2.0202	%	0.0025	7,500
TOTAL	$	148,500,000	100	%		$	504,500

1

EX-10.44

Exhibit 10.44

AMENDMENT No. 1 TO LOAN AND AIRCRAFT SECURITY AGREEMENT

This Amendment No. 1 is dated as of December 9, 2004 and amends the Loan and Aircraft Security Agreement (S/N 3004) dated as of October 29, 2004, as amended (the “Loan”), entered into by and between Fleet Capital Corporation, as lender, (“Lender”) and Willis Lease finance Corporation, a Delaware corporation, as customer, (“Customer”).

RECITALS

A.Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Loan.

B.Lender and Customer entered into that certain Loan dated as of October 29, 2004, which document was recorded with the Federal Aviation Administration (“FAA”) on November 30, 2004 and assigned conveyance number M005128 regarding a certain Canadair Ltd. Model CL-600 (Challenger 601-1A) aircraft bearing U.S. Registration Mark N45PH and manufacturer’s serial number 3004 (the “Aircraft”);

C.Pursuant to the Loan, Customer is required to operate the Aircraft in accordance with Part 91 of the FARs and to maintain operational control at all times, and is prohibited from operating the Aircraft for air taxi operations or otherwise under Part 135 of the FARs;

D.Customer has notified Lender of its intention to enter into an Aircraft Management and Charter Agreement with TWC Aviation, Inc. (“TWC”) and has requested that Lender give its consent to the Aircraft Management and Charter Agreement and amend the Loan to allow for operation under Part 135 of the FARs, including consent for operational control by TWC during both Part 91 and Part 135 operations; and

E.Lender has given its consent to Customer’s request and has agreed to amend the Loan.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.Subsection 4.4 is hereby deleted in its entirety, and the following new Subsection 4.4 is inserted in substitution:

4.4No Disposition of Collateral or Liens; Title and Security Interest.  Customer shall not sell, assign, enter into any Third Party Agreement, convey, mortgage, exchange or otherwise transfer or relinquish possession of or dispose of the Aircraft, any part thereof or any of the other Collateral or attempt or offer to do any of the foregoing except that, provided that no Event of Default has occurred and is continuing, Customer may enter into an aircraft management and charter agreement (“Management Agreement”), with TWC or other qualified aviation management and charter operator (“Manager”), pursuant to which the Aircraft may be operated under Part 135 of the FARs, subject to the satisfaction of the following conditions: (i) the Management Agreement shall provide that it shall terminate, or be canceled, at the option of Lender, upon the occurrence of an Event of Default; (ii) the Management Agreement shall be expressly, and at all times remain, subject and subordinate to this Agreement and the rights of Lender hereunder and in and to the Aircraft; (iii) in no event shall the Management Agreement (including as amended from time to time) contain provisions that are inconsistent with the provisions of this Agreement or cause Customer to

breach any of its representations, warranties or agreements under this Agreement; and (iv) Customer shall deliver to Lender a Consent to Management Agreement, in form and substance satisfactory to Lender, duly executed by Customer and Manager (the “Consent”), together with a copy of the executed Management Agreement and a copy of a valid Air Carrier Certificate FAA Form 8430-18, if applicable. The Management Agreement will not reduce any of the obligations of Customer hereunder or the rights of Lender hereunder, under the Note or under any of the other documents executed and/or delivered in connection herewith, and Customer acknowledges that all of its obligations shall be and remain primary and shall continue in full force and effect as the obligations of a principal and not of a guarantor or surety. Any delegation of duties hereunder or any assumption of the same shall be effective only as between Customer and Manager.

The foregoing shall not be deemed to prohibit the delivery of possession of the Aircraft, any APU, Engine or Part to another Person for testing, service, repair, maintenance, overhaul or, to the extent permitted hereby, for alteration or modification.  Customer will not create, assume or suffer to exist any Liens on or with respect to the Aircraft, any APU, Engine, Part or any of the other Collateral, or Customer’s interest therein other than Permitted Liens.  Customer will promptly take such action as directed by Lender to duly discharge any such Lien.  Customer will warrant and defend its good and marketable title to the Aircraft and Lender’s first and only perfected security interest in the Collateral, against all claims and demands whatsoever.

2.Affirmation.  Customer hereby affirms and ratifies its obligations under the Loan and agrees that the Loan is in full force and effect, except as otherwise amended hereby.

3.Representations. Customer hereby represents, warrants and covenants to Lender that (i) this Amendment is enforceable against Customer in accordance with its terms; (ii) Customer’s execution and delivery of this Amendment, the Consent to Aircraft Management (Charter) Agreement and any other documents, agreements and instruments executed or delivered in connection herewith have been, or will be, duly authorized on their parts; and (iii) that no Default or Event of Default presently exists.

4.Miscellaneous.  This Amendment, together with the Loan, constitute the entire agreement between the parties hereto, and supersede all prior or contemporaneous agreements, communications and understandings, both written or oral with respect to the subject matter of this Amendment.  This Amendment may be executed in any number of counterparts and by the parties hereto in separate counterparts.  Only Counterpart No. 1 of this Amendment shall be considered “Chattel Paper” for purposes of the UCC.  THIS AMENDMENT IS GOVERNED BY NEW YORK LAW.

Except as expressly modified or amended by this Amendment, the terms and conditions of the Loan shall remain in full force and effect.

2

IN WITNESS WHEREOF, the parties have executed this Amendment by their respective duly authorized representatives as of the date and year first above written.

FLEET CAPITAL CORPORATION	WILLIS LEASE FINANCE CORPORATION
BY:	BY:
NAME:	NAME:
TITLE:	TITLE:

This is Counterpart No.       of a total of 3 counterparts. Only Counterpart No. 1 shall be considered chattel paper for purposes of the Uniform Commercial Code and a security interest may be perfected only by possession of Counterpart No. 1.

3

EX-11.1

Exhibit 11.1

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

Computation of Earnings Per Share

	Year ended December 31,
	2004		2003		2002
Basic
Net income	$	3,857	$	4,177	$	3,596
Shares:
Average common shares outstanding	8,925		8,840		8,831
Basic earnings per common share	$	0.43	$	0.47	$	0.41
Assuming full dilution
Net income	$	3,857	$	4,177	$	3,596
Shares:
Average common shares outstanding	8,925		8,840		8,831
Potentially dilutive common shares outstanding	351		48		20
Diluted average common shares outstanding	9,276		8,888		8,851
Diluted earnings per common share	$	0.42	$	0.47	$	0.41

Supplemental information:

The difference between average common shares outstanding to calculate basic and assuming full dilution is due to options outstanding under the 1996 Stock Options/Stock Issuance Plan and additionally in 2002, warrants issued in conjunction with the initial public offering.

EX-21.1

Exhibit 21.1

Willis Lease Finance Corporation

List of Subsidiaries

Subsidiary	State or Jurisdiction of Incorporation
T-11 Inc.	California
Willis Engine Funding LLC	Delaware
WLFC (Ireland) Limited	Rep. of Ireland
WLFC-AC1, Inc.	Delaware
WLFC Funding (Ireland) Limited	Rep. of Ireland

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Willis Lease Finance Corporation:

Under date of March 18, 2005, we reported on the consolidated balance sheets of Willis Lease Finance Corporation and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2004, which are included in the Form 10-K.  In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedule II, Valuation Accounts, in Form 10-K.  This financial statement schedule is the responsibility of the Company's management.  Our responsibility is to express an opinion on this financial statement schedule based on our audits.  In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. 

We consent to the incorporation by reference in the registration statements (No. 333-15343, 333-48258, 333-63830, and 333-109140) on Form S-8 of Willis Lease Finance Corporation of our report dated March 18, 2005, with respect to the consolidated balance sheets of Willis Lease Finance Corporation as of December 31, 2004 and 2003, and the related consolidated statements of income, shareholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2004, and the related financial statement schedule, which report appears in the December 31, 2004, annual report on Form 10-K of Willis Lease Finance Corporation.

KPMG LLP

San Francisco, California

March 18, 2005

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Charles F. Willis IV, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) 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 annual report is being prepared;

b)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 such evaluations; and

c)disclosed in this report any change in the registrant’s internal controls that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls 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 controls.

Date:	March 18, 2005	/s/ Charles F. Willis, IV
		Charles F. Willis, IV
		Chief Executive Officer
		President

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Monica J. Burke, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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)) 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 annual report is being prepared;

b)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 such evaluations; and

c)disclosed in this report any change in the registrant’s internal controls that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal controls; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, 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 in the design or operation of internal controls 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 controls.

Date:	March 18, 2005	/s/ Monica J. Burke
		Monica J. Burke
		Chief Financial Officer
		Executive Vice President

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, 2004 fully complies with the requirements of Section 13(a) 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.

Dated: March 18, 2005

/s/ Charles F. Willis IV

President and Chief Executive Officer

/s/ Monica J. Burke

Chief Financial Officer and Executive Vice President