Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

• Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

• Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

• Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

• The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

• The income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts.

• The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

 The following tables set forth our financial assets and liabilities as of December 31, 2011 and June 30, 2012 that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement. 

			Fair Value Measurements at December 31, 2011 Using Fair Value Hierarchy
	Fair Value as of December 31, 2011		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	295,522	$	295,522	$	—	$	—	Market
Restricted cash and cash equivalents	247,452		247,452		—		—		Market
Total	$	542,974	$	542,974	$	—	$	—
Liabilities:
Derivative liabilities	$	141,639	$	—	$	85,410	$	56,229	Income

			Fair Value Measurements at June 30, 2012 Using Fair Value Hierarchy
	Fair Value as of June 30, 2012		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	291,062	$	291,062	$	—	$	—	Market
Restricted cash and cash equivalents	137,803		137,803		—		—		Market
Total	$	428,865	$	428,865	$	—	$	—
Liabilities:
Derivative liabilities	$	67,939	$	—	$	67,939	$	—	Income

Our cash and cash equivalents, along with our restricted cash and cash equivalents balances, consist largely of money market securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. Our interest rate derivatives included in Level 2 consist of United States dollar-denominated interest rate derivatives, and their fair values are determined by applying standard modeling techniques under the income approach to relevant market interest rates (cash rates, futures rates, swap rates) in effect at the period close to determine appropriate reset and discount rates and incorporates an assessment of the risk of non-performance by the interest rate derivative counterparty in valuing derivative assets and an evaluation of the Company’s credit risk in valuing derivative liabilities.

On April 4, 2012, the interest rate derivatives included in Level 3 were terminated when the related hedged debt was repaid with proceeds from the Senior Notes due 2017 and the Senior Notes due 2020 (See Note 5. Securitizations and Term Debt Financings — Unsecured Debt Financings below).

The following tables reflect the activity for the classes of our assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2011 and 2012, respectively:

	Derivative Liabilities
	Three Months Ended June 30,			Six Months Ended June 30,
	2011			2011
Balance at beginning of period	$	(48,764	)	$	(55,181	)
Total gains/(losses), net:
Included in other income (expense)	(119		)	(242		)
Included in interest expense	(45		)	(39		)
Included in other comprehensive income	(5,598		)	936
Balance at end of period	$	(54,526	)	$	(54,526	)

	Derivative Liabilities
	Three Months Ended June 30,			Six Months Ended June 30,
	2012			2012
Balance at beginning of period	$	(50,942	)	$	(56,229	)
Total gains/(losses), net:
Included in other income (expense)	712			599
Included in interest expense	—			73
Included in other comprehensive income	(527		)	4,800
Settlements	50,757			50,757
Balance at end of period	$	—		$	—

For the three and six months endedJune 30, 2011 , we had no transfers into or out of Level 3 and we had no purchases, issuances, sales or settlements of Level 3 items. For the three and six months endedJune 30, 2012, we had no transfers into or out of Level 3; however we did terminate all Level 3 interest rate derivatives.

We measure the fair value of certain assets and liabilities on a non-recurring basis, when US GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft impaired are based on an income approach that uses Level 3 inputs, which include our assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft.

During the second quarter of 2011, we recorded an impairment of $5,200 related to a Boeing Model 737-400 aircraft. The Company recorded $2,267 of maintenance revenue and reversed $878 of lease incentive accruals related to the terminated lease of this aircraft.

During the second quarter of 2012, we impaired two aircraft, one Boeing Model 757-200 aircraft that we sold for less than its net book value and one Boeing Model 767-300ER aircraft which was returned to us following its scheduled lease expiration and which failed its recoverability assessment. For these two aircraft, we recorded impairment charges of $10,111, and we recorded $2,447 of maintenance revenue for the three months endedJune 30, 2012.

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, amounts borrowed under financings and interest rate derivatives. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair values of our securitizations which contain third party credit enhancements are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates of borrowing arrangements that do not contain third party credit enhancements. The fair values of our ECA term financings and bank financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements. The fair value of our Senior Notes is estimated using quoted market prices.

 The carrying amounts and fair values of our financial instruments at December 31, 2011 and June 30, 2012 are as follows:

	December 31, 2011						June 30, 2012
	Carrying  Amount of Asset (Liability)			Fair Value of Asset (Liability)			Carrying  Amount of Asset (Liability)			Fair Value of Asset (Liability)
Securitizations and term debt financings	$	(1,873,652	)	$	(1,681,023	)	$	(1,211,810	)	$	(1,067,231	)
ECA term financings	(536,107		)	(524,373		)	(593,216		)	(609,943		)
Bank financings	(126,000		)	(126,000		)	(119,409		)	(122,917		)
Senior Notes	(450,757		)	(482,625		)	(1,250,700		)	(1,309,738		)

All of our financial instruments are classified as Level 2 with the exception of our Senior Notes, which are classified as Level 1.