Aircraft and Aircraft Engines Held for Lease

6 Months Ended

Jun. 30, 2011

Aircraft and Aircraft Engines Held for Lease [Abstract]

Aircraft and Aircraft Engines Held for Lease

2.     Aircraft and Aircraft Engines Held for Lease

At June 30, 2011 and December 31, 2010, the Company's aircraft and aircraft engines, which were on lease or held for lease, consisted of the following.   

	June 30, 2011					December 31, 2010
	Number		% of net			Number		% of net
Model	owned		book value			owned		book value
Fokker 100		7		30	%		7		30	%
Bombardier Dash-8-300		8		24	%		8		23	%
Fokker 50		14		19	%		14		19	%
General Electric CF34-8E5 engine		3		8	%		3		8	%
Bombardier Dash-8-Q400		1		7	%		1		7	%
Saab 340B		6		7	%		6		6	%
deHavilland DHC-8-100		2		4	%		2		4	%
deHavilland DHC-6		1		1	%		3		1	%
Saab 340A		1		-			2		2	%

Net book value at June 30, 2011 excludes the Company's Saab 340A aircraft, which is subject to a finance lease.

During the six months ended June 30, 2011 and 2010, the Company did not purchase any aircraft. During the six months ended June 30, 2011, the Company paid $356,200 for equipment that will be installed on several aircraft and for acquisition costs related to an aircraft purchased in December 2010.  During the six months ended June 30, 2010, the Company paid $322,300 for equipment that was installed on several aircraft and for acquisition costs related to aircraft engines purchased in December 2009.

During the six months ended June 30, 2011, the Company sold two of its deHavilland DHC-6 aircraft to the lessee and recorded a gain of approximately $1,053,000. The Company also recorded a gain on insurance proceeds of approximately $318,000 in connection with the disposal of an asset that was subject to a finance lease.

At June 30, 2011, eight of the Company's aircraft, comprised of three Fokker 50, three Fokker 100, one Bombardier Dash-8-Q400 and one Saab 340B aircraft, were off lease.   As discussed in note 7, one of the Fokker 50 aircraft and the Bombardier Dash-8-Q400 aircraft were subsequently leased and delivered to new customers for terms of 48 months and 38 months, respectively.  The Company has a signed term sheet and deposits for the other two Fokker 50 aircraft and is seeking re-lease opportunities for the Fokker 100 and Saab 340B aircraft.

In January 2011, the Company determined that the leases for its two Saab 340A aircraft should be treated as finance leases.  The Company recorded a receivable of approximately $2,883,000 for the present value of the rents due under the leases and a related reduction in aircraft net book value. One of the aircraft sustained significant damage and was declared a total loss during the second quarter of 2011.  The Company recorded a receivable for the $1,700,000 of insurance proceeds, which satisfied the remaining balance of the finance lease and resulted in a gain of approximately $318,000.  The insurance proceeds will be used to repay a portion of the Company's senior debt.

In February 2011, the Company amended its deferral agreement with one customer to extend the due date to May 31, 2011.  The Company also agreed to pay $284,800 to a maintenance vendor on behalf of the customer in connection with maintenance that is being performed on one of the Company's aircraft.  Under the agreement, the customer was required to reimburse the Company for the vendor payment no later than May 31, 2011. The customer is currently behind in its obligations to the Company. At June 30, 2011, the Company recorded an allowance for doubtful accounts in the amount of $1,842,700, for the amounts owed in excess of the security deposits held by the Company, and recorded related reductions in operating lease revenue, maintenance reserves revenue and refundable maintenance reserves of $470,500, $602,900 and $12,300, respectively, and an increase in maintenance expense of $757,000.  The airline recently changed ownership and the new owner is attempting to put together a workout plan to resolve the arrearages.  The Company is currently negotiating with the airline regarding terms of such a workout.

In April 2011, the Company delivered a Fokker 50 aircraft to a regional carrier in Asia, the lease for which had been signed in February 2011.

In April 2011, the Company signed a term sheet with a customer in Estonia for five-year leases of the Company's three Fokker 100 aircraft that were returned in 2010.  The transaction was not consummated, and the Company is continuing to seek re-lease opportunities for the aircraft.

In May 2011, the Company agreed to a 30-month lease extension for a Dash-8-300 aircraft, the lease for which was to expire in May.

In June 2011, the Company delivered a Fokker 50 to a customer in Asia for a term of 49 months.