WILLIS LEASE FINANCE CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

OVERVIEW

Forward-Looking Statements. This Annual Report on Form 10-K includes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of
historical fact, including statements regarding prospects or future results of
operations or financial position, made in this Annual Report on Form 10-K are
forward-looking. We use words such as anticipates, believes, expects, future,
intends, and similar expressions to identify forward-looking
statements. Forward-looking statements reflect management's current expectations
and are inherently uncertain. Actual results could differ materially for a
variety of reasons, including, among others: the effects on the airline industry
and the global economy of events such as terrorist activity and the COVID-19
pandemic, changes in oil prices and other disruptions to the world markets;
trends in the airline industry and our ability to capitalize on those trends,
including growth rates of markets and other economic factors; risks associated
with owning and leasing jet engines and aircraft; our ability to successfully
negotiate equipment purchases, sales and leases, to collect outstanding amounts
due and to control costs and expenses; changes in interest rates and
availability of capital, both to us and our customers; our ability to continue
to meet the changing customer demands; regulatory changes affecting airline
operations, aircraft maintenance, accounting standards and taxes; and the market
value of engines and other assets in our portfolio. These risks and
uncertainties, as well as other risks and uncertainties that could cause our
actual results to differ significantly from management's expectations, are
described in greater detail in Item 1A "Risk Factors" of Part I which, along
with the other discussion in this report, describes some, but not all, of the
factors that could cause actual results to differ significantly from
management's expectations.

General. Our core business is acquiring and leasing commercial aircraft and
aircraft engines and related aircraft equipment pursuant to operating leases,
all of which we sometimes collectively refer to as "equipment." As of
December 31, 2022, the majority of our leases were operating leases with the
exception of certain failed sale-leaseback transactions classified as notes
receivable under the guidance provided by ASC 842 and investments in sales-type
leases. As of December 31, 2022, we had 80 lessees in 41 countries. Our
portfolio is continually changing due to acquisitions and sales. As of
December 31, 2022, we had $2,111.9 million of equipment held in our operating
lease portfolio, $81.4 million of notes receivable, $17.7 million of maintenance
rights, and $6.4 million of investments in sales-type leases, which represented
339 engines, 13 aircraft, one marine vessel and other leased parts and
equipment. As of December 31, 2022, we also managed 324 engines, aircraft and
related equipment on behalf of other parties.

  Willis Aero is a wholly-owned and vertically-integrated subsidiary whose
primary focus is the sale of aircraft engine parts and materials through the
acquisition or consignment of aircraft engines. Willis Asset Management is a
wholly-owned and vertically-integrated subsidiary whose primary focus is the
engine management and consulting business.

In 2011 we entered into an agreement with Mitsui & Co., Ltd. to participate in a
joint venture formed as a Dublin-based Irish limited company, WMES, for the
purpose of acquiring and leasing jet engines. Each partner holds a 50% interest
in the joint venture. WMES owns a lease portfolio of 35 engines and five
aircraft with a net book value of $255.5 million at December 31, 2022. Our
investment in the joint venture was $41.0 million as of December 31, 2022.

In 2014 we entered into an agreement with CASC to participate in CASC Willis, a
joint venture based in Shanghai, China. Each partner holds a 50% interest in the
joint venture. CASC Willis acquires and leases jet engines to Chinese airlines
and concentrates on meeting the fast-growing demand for leased commercial
aircraft engines and aviation assets in the People's Republic of China. CASC
Willis owned a lease portfolio of four engines with a net book value of $42.7
million as of December 31, 2022. Our investment in the joint venture was $15.2
million as of December 31, 2022.

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

COVID-19 Impact. In January 2022, the Company lifted travel restrictions and
subsequently reopened its corporate headquarters and other offices for employees
and contractors to work from. The Company has experienced and continues to
experience various degrees of disruption due to the COVID-19 pandemic. Lower
demand for air travel presents significant risks to the Company, resulting in
impacts which have adversely affected the Company's business, results of
operations, and financial condition. The Company is not able to evaluate or
foresee the full extent of these impacts at the current time.

The scope and nature of the impact of COVID-19 on the airline industry, and in
turn the Company's business, continue to evolve and the outcomes are uncertain.
Given the uncertainty in the rapidly changing market and economic conditions
related to COVID-19, we will continue to evaluate the nature and extent of the
impact to the Company's business and financial position. The ultimate extent of
the effects of the COVID-19 pandemic on the Company will depend on future
developments, and such effects could exist for an extended period of time.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Leasing Related Activities. Revenue from leasing of aircraft equipment is
recognized as operating lease revenue on a straight-line basis over the terms of
the applicable lease agreements. Where collection cannot be reasonably assured,
for example, upon a lessee bankruptcy, we do not recognize revenue until cash is
received. We also estimate and charge to income a provision for bad debts based
on our experience in the business and with each specific customer and the level
of past due accounts. The financial condition of our customers may deteriorate
and result in actual losses exceeding the estimated allowances. In addition, any
deterioration in the financial condition of our customers may adversely affect
future lease revenues. As of December 31, 2022, the majority of our leases were
operating leases with the exception of certain failed sale-leaseback
transactions classified as notes receivable under the guidance provided by ASC
842 and investments in sales-type leases. Under these leases, we retain title to
the leased equipment, thereby retaining the potential benefit and assuming the
risk of the residual value of the leased equipment.

We generally depreciate engines on a straight-line basis over 15 years to a 55%
residual value. Aircraft and airframes are generally depreciated on a
straight-line basis over 13 to 20 years to a 15% to 17% residual value. The
marine vessel is depreciated on a straight-line basis over an estimated useful
life of 18 years to a 15% residual value. Other leased parts and equipment are
generally depreciated on a straight-line basis over 14 to 15 years to a 25%
residual value. Major overhauls paid for by us, which improve functionality or
extend the original useful life, are capitalized and depreciated over the
shorter of the estimated period to the next overhaul ("deferral method") or the
remaining useful life of the equipment. We do not accrue for planned major
maintenance. For equipment which is unlikely to be repaired at the end of its
current expected life, and is likely to be disassembled upon lease termination,
we depreciate the equipment over its estimated life to a residual value based on
an estimate of the wholesale value of the parts after disassembly. As of
December 31, 2022, 28 engines having a net book value of $24.2 million were
depreciated under this policy with estimated remaining useful lives ranging from
1 to 101 months.

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

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

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Impairment may be identified by several factors, including, comparison of
estimated sales proceeds or forecasted undiscounted cash flows over the life of
the asset with the asset's book value. If the forecasted undiscounted cash flows
are less than the book value, the asset is written down to its fair value. When
evaluating for impairment, we test at the individual asset level (e.g., engine
or aircraft), as each asset generates its own stream of cash flows, including
lease rents, maintenance reserves and repair costs.

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

•Fair value - we determine fair value by reference to independent appraisals,
quoted market prices (e.g., an offer to purchase) and other factors, including
but not limited to current data from airlines, engine manufacturers and MRO
providers as well as specific market sales and repair cost data.

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

If the forecasted undiscounted cash flows and fair value of our long-lived
assets decrease in the future, we may incur impairment charges. Write-downs of
equipment to their estimated fair values totaled $21.8 million for the year
ended December 31, 2022, primarily reflecting an adjustment of the carrying
value of four impaired engines. Of these write-downs, $20.4 million reflects the
impairment of two engines located in Russia which were determined, due to the
Russia and Ukraine conflict, to be unrecoverable. The remaining write-downs were
in the ordinary course of business. As of December 31, 2022, included within
equipment held for lease and equipment held for sale was $32.4 million in
remaining book value of 16 assets which were previously written down.

Write-downs of equipment to their estimated fair values totaled $7.7 million for
the year ended December 31, 2021 which included write-downs of $3.9 million due
to a management decision to monetize three engines and one airframe either by
sale to a third party or for part-out and $3.8 million for the adjustment of the
carrying value of seven impaired engines.

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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RESULTS OF OPERATIONS

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Revenue is summarized as follows:

                                               Years Ended December 31,
                                           2022               2021         % Change
                                                (dollars in thousands)
Lease rent revenue                 $     162,571           $ 134,831         20.6  %
Maintenance reserve revenue               83,424              73,961         12.8  %
Spare parts and equipment sales           27,009              17,417         55.1  %
Interest income                            7,579              12,938        (41.4) %
Gain on sale of leased equipment           3,133               5,975        (47.6) %
Gain on sale of financial assets           3,116              10,874        (71.3) %
Asset transition fee                           -               6,256       (100.0) %
Other revenue                             25,095              11,950        110.0  %
Total revenue                      $     311,927           $ 274,202         13.8  %



Lease Rent Revenue. Lease rent revenue consists of rental income from long-term
and short-term engine leases, aircraft leases, and other leased parts and
equipment. Lease rent revenue increased by $27.7 million, or 20.6%, to $162.6
million for the year ended December 31, 2022 from $134.8 million for the year
ended December 31, 2021. The increase is primarily due to an increase in the
number of engines acquired and placed on lease, including an increase in
utilization compared to the prior period. During the year ended December 31,
2022, we purchased equipment (including capitalized costs) totaling $286.4
million, which consisted of 46 engines, one aircraft and other parts and
equipment purchased for our lease portfolio. During the year ended December 31,
2021, we purchased equipment (including capitalized costs) totaling $205.8
million, which primarily consisted of 34 engines, four airframes, one aircraft
and other parts and equipment purchased for our lease portfolio.

One customer accounted for more than 10% of total lease rent revenue during the
years ended December 31, 2022 and 2021.

As of December 31, 2022, the Company had $2,111.9 million of equipment held in
our operating lease portfolio, $81.4 million of notes receivable, $17.7 million
of maintenance rights, and $6.4 million of investments in sales-type leases. As
of December 31, 2021, the Company had $1,991.4 million of equipment held in our
operating lease portfolio, $115.5 million of notes receivable, and $22.5 million
of maintenance rights. Average utilization (based on net book value) was
approximately 82% and 81% for the years ended December 31, 2022 and 2021,
respectively.

Maintenance Reserve Revenue. Maintenance reserve revenue for the year ended
December 31, 2022 increased $9.5 million, or 12.8%, to $83.4 million from $74.0
million for the year ended December 31, 2021. Long-term maintenance revenue was
$36.0 million for the year ended December 31, 2022 compared to $56.3 million for
the year ended December 31, 2021. Engines out on lease with "non-reimbursable"
usage fees generated $47.4 million of short-term maintenance revenues for the
year ended December 31, 2022 compared to $17.7 million for the year ended
December 31, 2021, as a result of recovery in global flight traffic subsequent
to the most significant impacts of the COVID-19 pandemic. As of December 31,
2022, there was $6.3 million of deferred in-substance fixed payment use fees
included in Unearned Revenue.

Spare Parts and Equipment Sales. Spare parts and equipment sales for the year
ended December 31, 2022 increased by $9.6 million, or 55.1%, to $27.0 million
compared to $17.4 million for the year ended December 31, 2021. Spare parts
sales for the year ended December 31, 2022 were $25.9 million compared to $17.4
million for the year ended December 31, 2021. The increase in spare parts sales
was driven by an industry-wide increase in engine and aircraft utilization, and
the demand for parts associated with such increase compared to the prior year
period. There were equipment sales of $1.1 million for the sales of two engines
during the year ended December 31, 2022, compared to no equipment sales during
the year ended December 31, 2021.

Interest Income. Interest income decreased by $5.4 million, to $7.6 million for
the year ended December 31, 2022 from $12.9 million in 2021. The decrease is
primarily the result of a decrease in notes receivable of $34.0 million,
partially offset by an increase in investments in sales-type leases of $6.4
million.

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Gain on Sale of Leased Equipment. During the year ended December 31, 2022, we
sold 25 engines from the lease portfolio for a net gain of $3.1 million. During
the year ended December 31, 2021, we sold 12 engines and one airframe from the
lease portfolio for a net gain of $6.0 million.

Gain on Sale of Financial Assets. During the year ended December 31, 2022, we
sold four notes receivable for a net gain of $3.1 million. There were two notes
receivable sold for a $10.9 million net gain on sale of financial assets during
the year ended December 31, 2021.

Asset Transition Fee. There was no asset transition fee during the year ended
December 31, 2022. Asset transition fee was $6.3 million during the year ended
December 31, 2021 reflecting the settlement received from the close out of an
engine transition program.

Other Revenue. Other revenue increased by $13.1 million, to $25.1 million for
the year ended December 31, 2022 from $12.0 million in 2021. The increase
primarily reflects an increase of $12.2 million in managed service revenues
subsequent to the most significant impacts of the COVID-19 pandemic.

Depreciation and Amortization Expense. Depreciation and amortization expense
decreased $2.2 million, or 2.5%, to $88.3 million for the year ended
December 31, 2022 compared to $90.5 million for the year ended December 31,
2021. The decrease reflects certain assets reaching the end of their depreciable
lives as compared to the prior year period.

Cost of Spare Parts and Equipment Sales. Cost of spare parts and equipment sales
increased by $5.9 million, or 39.6%, to $20.8 million for the year ended
December 31, 2022 compared to $14.9 million in the prior year period due to
higher spare parts sales and aged lot write-downs. Cost of equipment sales was
$0.1 million for the year ended December 31, 2022, compared to no cost of
equipment sales for the year ended December 31, 2021.

Write-down of Equipment. Write-downs of equipment to their estimated fair values
totaled $21.8 million for the year ended December 31, 2022, primarily reflecting
an adjustment of the carrying value of four impaired engines. Of these
write-downs, $20.4 million reflects the impairment of two engines located in
Russia which were determined, due to the Russia and Ukraine conflict, to be
unrecoverable. The remaining write-downs were in the ordinary course of
business. Write-downs of equipment totaled $7.7 million for the year ended
December 31, 2021 which included write-downs of $3.9 million due to a management
decision to monetize three engines and one airframe either by sale to a third
party or for part-out and $3.8 million for the adjustment of the carrying value
of seven impaired engines.

General and Administrative Expenses. General and administrative expenses
increased 22.8% to $92.5 million for the year ended December 31, 2022 compared
to $75.4 million in 2021. The increase primarily reflects a $3.8 million
increase in personnel costs, inclusive of a $1.0 million bonus to our Executive
Chairman for his 25 years of prior service to the Company, as well as a $2.2
million reduction to the prior year period personnel costs resulting from the
Coronavirus Aid, Relief, and Economic Security Act employee retention credit.
Additionally, with the lifting of travel bans and the opening of various
markets, travel and related costs increased by $3.8 million as our sales force
reengaged with customers globally. Project costs increased by $3.5 million,
primarily related to an increase in managed service revenues subsequent to the
most significant impacts of the COVID-19 pandemic.

Technical Expense. Technical expenses consist of the non-capitalized cost of
engine repairs, engine thrust rental fees, outsourced technical support
services, sublease engine rental expense, engine storage and freight costs.
These expenses increased 53.7% to $14.4 million for the year ended December 31,
2022, compared to $9.4 million in 2021. The increase is primarily due to an
increase in engine maintenance due to an industry-wide increase in engine and
aircraft utilization and engine hub repairs resulting from a FAA airworthiness
directive, as compared to the prior year period.

Net Finance Costs. Net finance costs decreased to $64.2 million in the year
ended December 31, 2022, from $68.0 million for the year ended December 31,
2021. The decrease was primarily due to a $2.6 million gain on debt
extinguishment associated with the repurchase of six tranches of ABS notes as
well as a reduction in interest expense primarily related to assets that
transitioned in our WEST VI financing, which allowed for restricted cash to pay
down credit facility indebtedness.

Income Taxes. Income tax expense for the year ended December 31, 2022 decreased
to $4.4 million from $5.8 million for the comparable period in 2021. The
effective tax rate for the years ended December 31, 2022 and December 31, 2021
was 44.5% and 63.3%, respectively. The decrease in the effective tax rate was
predominantly due to a state tax benefit recognized in 2022.
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FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2022, the Company had $89.0 million of cash, cash equivalents
and restricted cash. At December 31, 2022, $10.7 million in cash and cash
equivalents and restricted cash were held in foreign subsidiaries. Other than
$6.2 million held at a subsidiary in China, for which the tax impact of the
planned repatriation has been accrued, we do not intend to repatriate the funds
held in other foreign subsidiaries to the U.S. In the event that we decide to
repatriate these funds held at the other foreign subsidiaries to the U.S., we
would be required to accrue and pay taxes upon the repatriation.

We generate significant cash flow from our core business as evidenced by our net
cash provided by operating activities which was $144.4 million in 2022. Beyond
cash provided through operations, we generally fund the growth of our business
through a combination of equity and corporate borrowings secured by our
equipment lease portfolio. Cash of approximately $284.0 million and $513.7
million in the years ended December 31, 2022 and 2021, respectively, was derived
from this borrowing activity. In these same time periods $228.8 million and
$417.0 million, respectively, was used to pay down related debt.

Our credit facility is our primary source of capital to grow our business. We
also access the ABS and other markets to establish term fixed rate debt
financing to better match our long-lived assets. The Company's credit facility
matures in 2024 and we have historically rolled that facility prior to its
expiration. The ABS market continues to be open for issuers like the Company.
Refer to Note 6 of the consolidated financial statements for a detailed
discussion of the Company's debt obligations.

The impact of the COVID-19 pandemic on the global business environment has
caused and could result in additional customer bankruptcies, early lease
returns, payment defaults, or future rental concessions which could reduce rent
or defer customer payments, negatively impacting our financial results.

Preferred Stock Dividends

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

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

The Company's Series A-1 Preferred Stock and Series A-2 Preferred Stock accrue
quarterly dividends at the rate per annum of 6.5% per share. During each of the
years ended December 31, 2022 and 2021, the Company paid total dividends of $3.3
million on the Series A-1 and Series A-2 Preferred Stock, respectively.

Cash Flows Discussion

Cash flows provided by operating activities were $144.4 million and $90.7
million in the years ended December 31, 2022 and 2021, respectively.

Cash flows from operations are driven significantly by payments made under our
lease agreements, which comprise lease revenue, security deposits and
maintenance reserves, and are offset by interest expense and general and
administrative costs. Cash received as maintenance reserve payments for some of
our engines on lease are partially restricted by our debt arrangements. The
lease revenue stream, in the short term, is at fixed rates while a portion of
our debt is at variable rates. If interest rates increase, it is unlikely we
could increase lease rates in the short term and this would cause a reduction in
our earnings and operating cash flows. Revenue and maintenance reserves are also
affected by the amount of equipment off lease. Approximately 80% and 82%, by
book value, of our assets were on-lease as of December 31, 2022 and 2021,
respectively. The average utilization rate for the years ended December 31, 2022
and 2021 was approximately 82% and 81%, respectively. If there is an increase in
off-lease rates or deterioration in lease rates that are not offset by
reductions in interest rates, there will be a negative impact on earnings and
cash flows from operations.

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Cash flows used in investing activities were $194.4 million for the year ended
December 31, 2022 and primarily reflected $15.3 million related to a lease
entered into during 2022 which was classified as a note receivable under ASC 842
and $286.4 million for the purchase of equipment held for operating lease
(including capitalized costs and prepaid deposits made during the year), partly
offset by $69.2 million in proceeds from sales of equipment (net of selling
expenses) and $40.7 million in proceeds from the sale of notes receivable (net
of selling expenses). Cash flows used in investing activities were $148.0
million for the year ended December 31, 2021 and primarily reflected $44.4
million related to leases entered into during 2021 which were classified as
notes receivable under ASC 842 and $205.8 million for the purchase of equipment
held for operating lease (including capitalized costs and prepaid deposits made
during the year), partly offset by $37.6 million in proceeds from sales of
equipment (net of selling expenses) and $58.4 million in proceeds from the sale
of notes receivable (net of selling expense).

Cash flows provided by financing activities for the year ended December 31, 2022
were $43.3 million and primarily reflected $284.0 million in proceeds from the
issuance of debt obligations, partly offset by $228.8 million in principal
payments and $5.2 million in share repurchases. Cash flows provided by financing
activities for the year ended December 31, 2021 were $74.1 million and primarily
reflected $513.7 million in proceeds from the issuance of debt obligations,
partly offset by $417.0 million in principal payments, $10.1 million in share
repurchases, and $4.6 million in debt issuance costs.

Debt Obligations and Covenant Compliance

At December 31, 2022, debt obligations consists of loans totaling $1,847.3
million, net of unamortized debt issuance costs, payable with interest rates
varying between approximately 3.1% and 7.4%. Substantially all of our assets are
pledged to secure our obligations to creditors. For further information on our
debt instruments, see Note 6 "Debt Obligations" in Part II, Item 8 of this Form
10-K.

In June 2021, the Company entered into Amendment No. 2 to the Amended Credit
Agreement, which updates the provisions relating to the future discontinuance of
LIBOR and sets forth the mechanics for establishing the Secured Overnight
Financing Rate ("SOFR") as a benchmark replacement rate.

In May 2021, WLFC and its direct, wholly-owned subsidiary WEST VI, closed its
offering of $336.7 million aggregate principal amount of fixed rate notes. The
WEST VI Notes were issued in three series, with the Series A Notes issued in an
aggregate principal amount of $278.6 million, the Series B Notes issued in an
aggregate principal amount of $38.7 million and the Series C Notes issued in an
aggregate principal amount of $19.4 million. The WEST VI Notes are secured by,
among other things, WEST VI's direct and indirect ownership interests in a
portfolio of aircraft engines and an airframe.

The Series A Notes have a fixed coupon of 3.104%, an expected maturity of
approximately eight years and a final maturity date in May 2046, the Series B
Notes have a fixed coupon of 5.438%, an expected maturity of approximately eight
years and a final maturity date in May 2046 and the Series C Notes have a fixed
coupon of 7.385%, an expected maturity of approximately eight years and a final
maturity date in May 2046. The Series A Notes were issued at a price of
99.99481% of par, the Series B Notes were issued at a price of 99.99996% of par
and the Series C Notes were issued at a price of 99.99869% of par. Principal on
the WEST VI Notes is payable monthly to the extent of available cash in
accordance with a priority of payments included in the indenture.

In May 2021, WLFC repaid an existing note payable with a balance of $5.8 million
that was secured by two engines.

In December 2022, the Company recognized a $2.6 million gain on debt
extinguishment associated with the repurchase of six tranches of ABS notes with
a balance of $12.2 million.

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

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Virtually all of our debt requires ongoing compliance with the covenants of each
financing, including debt/equity ratios, minimum tangible net worth and minimum
interest coverage ratios, and other eligibility criteria including customer and
geographic concentration restrictions. The Company also has certain negative
financial covenants such as liens, advances, change in business, sales of
assets, dividends and stock repurchases. These covenants are tested either
monthly or quarterly, and the Company was in full compliance with all financial
covenant requirements at December 31, 2022.

At December 31, 2022, we were in compliance with the covenants specified in the
revolving credit facility, including the Interest Coverage Ratio requirement of
at least 2.25 to 1.00, and the Total Leverage Ratio requirement to remain below
4.00 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is
the ratio of earnings before interest, taxes, depreciation and amortization
(EBITDA) and other one-time charges to consolidated interest expense. The Total
Leverage Ratio, as defined in the credit facility, is the ratio of total
indebtedness to tangible net worth. At December 31, 2022, we were in compliance
with the covenants specified in the WEST III, WEST IV, WEST V and WEST VI
indentures, servicing and other debt related agreements.

Contractual Obligations and Commitments

Repayments of our gross debt obligations primarily consist of scheduled
installments due under term loans and are funded by the use of unrestricted cash
reserves and from cash flows from ongoing operations. The table below summarizes
our contractual commitments at December 31, 2022:

                                                                              Payment due by period (in thousands)
                                                              Less than                                                  More than
                                            Total               1 Year            1-3 Years           3-5 Years           5 Years
Debt obligations                        $ 1,862,089          $  88,090      

$ 848,001 $ 450,230 $ 475,768
Interest payments under
debt obligations

                            259,211             86,816              102,421             56,000             13,974
Operating lease obligations                  11,350              3,268                5,909              1,319                854
Purchase obligations                        428,137             98,233              237,134             92,770                  -
Total                                   $ 2,560,787          $ 276,407          $ 1,193,465          $ 600,319          $ 490,596



From time to time we enter into contractual commitments to purchase engines
directly from original equipment manufacturers. We are currently committed to
purchasing nine additional new LEAP-1B engines for $145.3 million and 18
additional new LEAP-1A engines for $282.8 million by 2026. Our purchase
agreements generally contain terms that allow the Company to defer or cancel
purchase commitments in certain situations. These deferrals or conversions would
not result in penalties or increased costs other than any potential increase due
to the normal year-over-year change in engine list prices, which is akin to
ordinary inflation. The Company continues to expect demand for LEAP-1B engines
to increase as the 737 Max continues to be re-certified and aircraft (and their
installed engines) that have been parked and in storage for more than one year
begin the technical process of returning to service.

In December 2020, we entered into definitive agreements for the purchase of 25
modern technology aircraft engines. As part of the purchase, we have committed
to certain future overhaul and maintenance services which are anticipated to
range between $77.7 million and $112.0 million by 2030.

$62.9 million of variable interest payments due under debt obligations,
scheduled above, are estimated by applying the interest rates applicable at
December 31, 2022 to the remaining debt, adjusted for the estimated debt
repayments identified in the table above. Actual interest payments made will
vary due to actual changes in the rates for one-month LIBOR.

We believe our equity base, internally generated funds and existing debt
facilities are sufficient to maintain our level of operations through 2023. A
decline in the level of internally generated funds could result if the amount of
equipment off-lease increases, there is a decrease in availability under our
existing debt facilities, or there is a significant step-up in borrowing costs.
Such decline would impair our ability to sustain our level of operations. We
continue to discuss additions to our capital base with our commercial and
investment banks. If we are not able to access additional capital, our ability
to continue to grow our asset base consistent with historical trends will be
impaired and our future growth limited to that which can be funded from
internally generated capital.

MANAGEMENT OF INTEREST RATE EXPOSURE

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At December 31, 2022, $727.0 million of our borrowings were on a variable rate
basis at various interest rates tied to one-month LIBOR. Our equipment leases
are generally structured at fixed rental rates for specified terms. Increases in
interest rates could narrow or result in a negative spread between the rental
revenue we realize under our leases and the interest rate that we pay under our
borrowings. Historically, we have entered into interest rate derivative
instruments to mitigate our exposure to interest rate risk; such investments are
not intended to speculate or trade in derivative products. As of December 31,
2022, we have five interest rate swap agreements. During the first quarter of
2021, the Company entered into four fixed-rate interest swap agreements, each
having notional amounts of $100.0 million, two with remaining terms of 13 months
and two with remaining terms of 37 months as of December 31, 2022. One interest
rate swap agreement was entered into during 2019 which has a notional
outstanding amount of $100.0 million with a remaining term of 18 months as of
December 31, 2022. One interest rate swap agreement which the Company entered
into in 2016 expired in April 2021. The net fair value of the swaps as of
December 31, 2022 was $34.8 million, representing an asset. The net fair value
of the interest rate swaps as of December 31, 2021 was $7.3 million,
representing an asset of $8.0 million and a liability of $0.7 million.

We record derivative instruments at fair value as either an asset or liability.
We have used derivative instruments (primarily interest rate swaps) to manage
the risk of interest rate fluctuation. While substantially all of our derivative
transactions are entered into for the purposes described above, hedge accounting
is only applied when specific criteria have been met and it is practicable to do
so. In order to apply hedge accounting, the transaction must be designated as a
hedge and the hedge relationship must be highly effective. The hedging
instrument's effectiveness is assessed utilizing regression at the inception of
the hedge and either regression or qualitative analysis on at least a quarterly
basis throughout its life. All of the transactions that we have designated as
hedges are accounted for as cash flow hedges. The effective portion of the gain
or loss on a derivative instrument designated as a cash flow hedge is reported
as a component of other comprehensive income and is reclassified into earnings
in the period during which the transaction being hedged affects earnings. The
ineffective portion of these hedges flows through earnings in the current
period. The Company recorded an adjustment to interest expense of $(7.8) million
and $2.4 million during the years ended December 31, 2022 and 2021,
respectively, from derivative investments.

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

RELATED PARTY TRANSACTIONS

Joint Ventures

"Other revenue" on the Consolidated Statements of Income includes management
fees earned of $2.0 million and $2.1 million during the years ended December 31,
2022 and 2021, respectively, related to the servicing of engines for the WMES
lease portfolio.

During 2022, the Company sold two engines to WMES for $12.6 million. During
2021, the Company sold two engines to WMES for $25.0 million.

There were no engine or aircraft sales to CASC Willis during 2022 or 2021.

Other

During 2022, the Company paid approximately $35,000 of expenses payable to
Mikchalk Lake, LLC, an entity in which our Executive Chairman retains an
ownership interest. These expenses were for lodging and other business-related
services. Additionally, during the year ended December 31, 2022, the Company
paid a third-party vendor approximately $0.1 million under an exclusive use
agreement for an aircraft used for business-related purposes. The third-party
vendor leased the aircraft from a company which our Executive Chairman owns.
These transactions were approved by the Board's Independent Directors.

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