ILFC in trouble? Some perspective

The short term answer is unclear & the long term answer is likely no, though our friends at Leeham.net add some much needed perspective on the situation. ILFC is owned by a company that has been in the news lately: American International Group (AIG). Because of the difficulty securing financing, ILFC has been advanced nearly a billion dollars by its parent company to pay cash for airplanes. Udvar-Hazy is quick to acknowledge that this is an unsustainable way to purchase airplanes.

Scott Hamilton:

Since nobody seriously believes ILFC will be forced into Chapter 11 bankruptcy, what is the real meaning of its current situation?

It is that ILFC has become a microcosm of what is going on in the financial markets. Access to commercial funding is nearly impossible, and when it is available, it is expensive. Here is a business that is profitable, one that is the largest lessor in the world (by asset value), that is reduced to including language about being a going concern, all because of problems out of its own control at its parent that created a worldwide financial crisis and liquidity concerns for a stellar subsidiary. Selling ILFC is problematic because of the financial crisis.

Yet, the situation, in no uncertain terms, is very serious. ILFC accounts for about 168 outstanding orders (incl. 74 787s and 10 A380s) for both Airbus and Boeing or 2.4% of the total backlog. Losing $16.7 billion in orders isn't devastating on its surface (it does hurt), though if ILFC goes bankrupt, what does that say about the stability of the rest of the industry?

Coincidentally enough, the $1B from AIG is flow-through cash from the $173 billion bailout of the company by the US Government. I think that makes me a fractional owner of a 777.