Good morning, my name is Crystal and I will be your conference operator today. At this time I would like to welcome everyone to the AerCap quarterly earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions) Thank you. Mr. Wortel, you may begin your conference.

Thank you very much. Good morning, everyone. With me today are Klaus Heinemann, the CEO, and Keith Helming, the CFO. Before we begin, as always, I want to remind you that some statements made during this conference call that are not historical facts may be forward-looking statements. Forward-looking statements involve risks and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. In addition, this conference call contains time sensitive information that reflects management's best judgment only as of the date of the live call. AerCap does not undertake any ongoing obligation, other than that imposed by law, to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after this call. Further information concerning issues that could materially affect performance related to forward-looking statements can be found in AerCap's earnings release dated August 7, 2008. A copy of the earnings release and conference call presentation are available on our website at www.aercap.com. This call is open to the public and is being webcast simultaneously at aercap.com and will be archived for replay. I will now turn the call over to Klaus Heinemann.

Thanks very much, Peter, and good morning to everybody and welcome to the second quarter 2008 earnings call. I am very happy to report that despite the state of the industry, AerCap has managed to virtually double, both on an adjusted and unadjusted basis, the earnings from the same quarter last year, which I believe is quite an achievement for AerCap and its franchise. The success has come despite the weakness that we are seeing in the global aviation industry, driven by rising fuel costs and obviously by follow-on slower economic growth in many economies. However, one of the many recent misconceptions about the industry that I have seen is that demand has fallen on a global basis dramatically across all areas, which it has not. Passenger traffic growth in May was approximately 9%, for example, in Latin America, 6% for all international travel and 5% for both Europe and Asia. The statistics on a year-to-date basis are also compatible to this type of growth pattern. So what we are observing here is clearly a slowdown of growth, but not negative growth. Two of the largest European LCC carriers, Easyjet and Ryanair, in the month of June both reported substantial increase in their traveler numbers. In the case of Ryanair, that number was a 19% year-over-year increase. Of course we also observed reductions in specific segments of the market, in particular in the domestic U.S. market. But the global picture remains one, as we have anticipated, of reduction and growth, not negative growth. That is the picture to date. Obviously also the high fuel costs, whether based on $120 or $150 a barrel, make it clear that new fuel efficient aircraft are more in demand than they have been and that the necessity to cap capacity in markets where that…

Thanks, Klaus. Good morning, everyone. Let me take you through the highlights of our second quarter 2008 financial performance. Our total net income for second quarter 2008 was $68.6 million. Our net income excluding the non-cash charges relating to the mark-to-market of our caps and share-based compensation was $58.2 million during this period. The mark-to-market of our caps was positive and resulted in a gain this quarter because longer-term interest rates increased during the quarter. Total earnings per share were $0.81 in second quarter 2008, including all items. Earnings per share were $0.68 during this period, excluding the previously referenced charges. Again, the difference is largely driven by the gain recorded as a result of the positive mark-to-market on our caps. The growth in our net spread was strong in the end of the second quarter 2008. Net spreads is the difference between basic lease rents and interest expense, excluding the non-cash charges that I mentioned before. Basic rents increased 2% in second quarter 2008 compared to the same period in 2007, while interest expense, excluding the adjustments, decreased by 32%. And at the same time, our debt balance actually grew by 20%. This resulted in a net spread of $93 million in the second quarter as compared to $75 million last year in the same time period. This increase is driven by the 11% growth in our lease assets plus the benefit we received from using interest rate caps. The longer-term trend for net spread is just as strong. The average amount of net spread per quarter in 2007 was $77 million. This amount grew to $86 million in first quarter 2008 and then $93 million in the second quarter. This growth in net spread is reflective of the growth in our leasing income and is expected to continue…

Actually, Klaus just shortly, this is Peter Wortel. I noticed that in the beginning, the slides did not seem to flip. We just heard that through the email. For anyone who missed some of the slides, the slides can be downloaded from our website. Klaus, please go ahead.

Thanks, Peter and Keith. Well in summary, I think we can show you that under the circumstance of where the market is, this is quite an exceptional performance, and more importantly, there are no surprises in there. Stresses happen where we anticipate them. Gains happen where we anticipate them and, importantly, where we have repossession issues, we resolve them as anticipated. So the platform is working as it should, and the results showed that. With that, I would like to close the presentation and open the Q&A.

(Operator Instructions) Your first question comes from the line of Gary Liebowitz with Wachovia.

Hi.

Hi, Gary.

Klaus, I was wondering, you wrote down the MD-80s because they were coming back from American Airlines. Did you do a complete portfolio analysis and impairment test? Or was it limited just to these specific assets?

Gary, we continuously do impairment tests every quarter, and the reason that these four MD-80s were written down was because we are actually selling these MD-80s as we speak. So the write-down was based on specific purchase price amounts that we knew we were going to generate. So that, as well as the purchase price on A340 engines.

Were there any other assets or asset classes that were close to failing the impairment test? I am thinking specifically of the 737 classics.

No. Based on the fact that these aircraft are on lease and have reasonable lease rates attached to them, these assets are not impaired. Now obviously, if there were defaults on some of these assets and we had to take these back, I mean, there could be then an impairment situation. But as long as these leases stay intact, we are accelerating the depreciation on the older assets and do not expect an impairment if the leases are paid through. But again, as we tried to point out in one of the charts, 95% of our portfolio is in the aircraft that you would like to see us have, and there is limited amount of book value and cost basis in the older aircraft. So as I said, again, we are not immune to impairments but, again, the exposure is limited.

Okay and one other for you Keith. Back in April, you pointed to about $1 billion of financing that you still need to secure to meet your commitments for new aircraft. When does that have to get done, and when might we expect an announcement?

As you recall, I mean, the transactions that we were working on, obviously the TUI transaction was completed. The securitization was completed. We are very far down the process now with the ECAs on $1.3 billion of financing, and we will start using that financing in fourth quarter with the delivery of our A330s and then probably with A320s in first quarter. So as you mentioned, that is about $1 billion of remaining capital needs. We sold down seven slots in 2009, so the actual amount of capital that we would need is actually less than $1 billion now. And to answer your direct question, most of that financing is needed in 2011.

Okay, thanks. I will get back in the queue.

Okay.

Your next question comes from the line of Gary Chase with Lehman Brothers.

Good morning, everybody.

Hey, Gary.

Gary.

If I take a look at the slide that looks at the 100 aircraft that you have got on order, it looks like the activity level's stepping up. This quarter, you wrote 16 lease agreements and six LOIs. Is there a reason that the pace of activity seems to be really accelerating? And what can you tell us about the terms? As you move through the agreements that were signed this quarter, how do they look relative to the ones that were signed last quarter and the quarter prior?

Well first of all, you are correct. This acceleration is taking place, and it is a result of the extreme fuel spike having focused more airlines than before on the necessity to re-fleet, never mind that some of them may not wish to increase capacity. But in many, many cases, the re-fleeting is an absolute necessity for the capacity that they wish to retain, so this is clearly a result of that. And that is why I said, earlier in my prepared remarks, this is entirely as anticipated. The market screams out for fuel efficient aircraft, and this shows. As far as the terms are concerned, you see that we are continuing to make progress with respect to the length of the fixation. On the rental levels, we do not see any further increases, but we do not see declines either, so they sit on a high plateau at the moment.

Okay. And it seems like the conditions in the marketplace are deteriorating a little bit for the older aircraft, and you have said that a number of times. Why then pick up the pace on the sales? Is that still an NPV-positive decision? Is there still enough of the market where that makes sense or…?

Yes. Well I think on the older aircraft, and the four MD-80s are a prime example, we firmly believe that these aircraft only will go in one direction, and therefore we, bluntly, have to stop your losses there. And this is why we dispose of them as soon as they come off lease without exception.

Okay. And then last quarter, you referenced there were, I think, three or four airlines that were on, you called it your watch list or something. Can you just update us on that?

Yes. That situation remains similar. We have one other bankruptcy issue, Gemini, where two of our MD-11 freighters are. We are waiting next week for the 60-day period to expire, and then either there will be an assumption of the lease by Gemini, which is a possibility or alternative. We have pre-marketed these aircraft in other arenas. So we do not anticipate that that will cause us any pain, because the MD-11, unlike the DC-10 as a freighter, remains in very strong demand. And other than that, we have, from time to time, slowness in receivables, which we address with the parties but no other default situations.

Okay. And then I apologize for this, Keith. I just missed it when you said it. The aircraft sales are $151 million, and then it was a $32 million gain specific to the aircraft?

That is correct. That is right. It is on that chart.

Okay, great. Thanks, guys.

Yes.

(Operator Instructions) There are no further questions at this time.

Okay. Well thank you very much, everybody. For those of you having their lunch, we will see you later on at the St. Regis. Other than that, talk to you the next quarter.

Well actually…

One more.

There is one more question coming.

Sorry?

There is a question coming.

Okay.

Operator, can you put the next question up?

Yes, sir. Your next question comes from the line of John Stilmar with FRB Capital Markets. John Stilmar - Friedman, Billings, Ramsey & Co.: Hi, guys. I do not know what my problem with my phone was, here previously. Can you talk a bit about pockets, or pockets of demand, for different types of aircraft? Obviously, the classics are the ones that are of most… what is called a valuation concern. And given the exposure to your portfolio, or even the part of the portfolio that I think, Keith you said, that 12% of the narrow-body and sort of the modern aircraft was older than eight years. Should we be thinking about those as classics? And then secondly, how should we be thinking about pockets of demand relative to market values, because, Klaus, I think you talked about those potentially being down as much as 30%?

Yes, okay. First of all, no, age itself does not make a classic. If you look, for example, some of the older aircraft in our portfolio, the older A320s, an old A320 is only very marginally less fuel-efficient than a brand new A320. It is basically still state-of-the-art equipment, so it is distinctly different from a 737 classic. It is even more distinctly different from an MD-80. So you are really talking about the MD-80s. You are talking about the classics. Within the classics itself, you will have to distinguish between the 300s, the 400s and the 500s. The 300s and the 500s, which are not our portfolio aircraft, are more impaired than the 400 aircraft. And then you have to look at the location of the aircraft. An aircraft that is in the U.S. may be less attractive than an aircraft that operates already in the European arena for follow-on users. The reason for that being that there are certain technical modifications you have to make to the aircraft to make it licensable for flying in Europe, which are not worthwhile to invest it from a U.S.-bound aircraft, but that you do not have on the European aircraft. We watch that very carefully, and the market is very differentiating between these three aircraft types, the 500, 300 and 400 and where they are coming from. But on the older A320s, we do not see any weakness in the market. Quite to the contrary, the announcement of the freighter conversion program, there is rising interest in it because it is associated with a substantial life extension of the aircraft that will be commissioned and licensed by Airbus, which will increase the life expectation of this aircraft by around about ten years. So on the A320 side; it is not an issue, the same, by the way, is true for all the A330s. Not confined to the classics and the MD-80s. John Stilmar - Friedman, Billings, Ramsey & Co.: Okay. And in terms of geographic, are you seeing any shifts in demand for some of those aircraft, but...?

Yes. It is interesting if you look where our six Skybus aircraft went, none of them were placed back in the U.S. Two of them went to Eastern Europe. Two of them went to the Middle East. One went to the Caribbean, and one went to North Africa. Interesting point here, all of them went to existing clients of ours. Some of those that I talked to during the road show and in one-on-ones, I always said part of the franchise value is that it is easier, especially in difficult times, to place an aircraft with an existing client than with a client who does not know you. That holds entirely true in a situation like this, and it is possibly one of the reasons why we were so quick at putting them back into revenue services. John Stilmar - Friedman, Billings, Ramsey & Co.: Okay. And then the next question, can you talk a little bit more about your desire, especially at this point in time in the cycle, to start expanding your exposure to the cargo market?

Yes. The cargo market shows an age profile of its fleet that makes the passenger market look young, right? So there is a replacement need that is recognized by all parties as substantial. Where some people have issues is if the anticipated growth rate in this industry, the long-term growth rate, will be where, for example, Boeing in a recent research puts it, and that is in 5% above. There are some people who are saying, well, that may be less, because some of that are complex issues of logistics change and globalization and are difficult to assess. Certainly on the medium-haul freighter, the A320, we believe that replacement alone, even if one assumes zero or even slightly negative growth, will provide ample opportunities for that freighter. John Stilmar - Friedman, Billings, Ramsey & Co.: Great. Thank you, guys, very much for my question.

Sure.

Your next question comes from the line of Mark Streeter with JPMorgan. Mark Streeter - JPMorgan Chase & Co: And Keith, just want to jump in here, I am wondering if you could talk just a little bit about trends in the banking market? You have been very successful this year, year-to-date, in tapping into a variety of different banking institutions. But with the capital markets still effectively shut down, are you sensing any trends? We are hearing anecdotally that the European banks, the last couple months, are starting to pull back and pass on a lot of deals that they have been shown regarding aircrafts. And I am wondering if you can comment on maybe what you are hearing in the marketplace, and also maybe give some comments on the export credit agencies and the available of the availability of funding there going forward?

Yes, certainly. Obviously with our second quarter, you saw that we did not really have any difficult time accessing financing, and a lot of the investment and the securitization has come from European banks, but also some Asian banks now have started putting some investments into the aviation industry. So we are seeing a reasonably strong level of interests across the board. Now the European banks have become much more selective in terms of who they are lending to and as to what types of assets they are lending against. So based on what is happening in the industry, that is how they have reacted. And of course, you saw the spreads have increased somewhat, and obviously advance rates have come down as well. But again, the pricing that we got on securitization and the advance rate that we got on securitization still is very attractive relative to the assets we are financing there, and we make a very strong return on equity with that level of financing.

And Mark, if I might come in here, what you see on the European banking market, and we are continuously in very, very close touch with all of them, is a bifurcation. They continue to do business as usual with names that they are comfortable with. Names that they are comfortable with have to have three characteristics. First of all, it is preferable a banking relationship that dates back a little bit, i.e. there is a trust level and a knowledge level about the counter-party that is there. The second one is it needs to be a company that needs to be extremely well capitalized, and the liquidity position needs to be without doubt. If that is there, the European banking market responds in the usual way and sometimes even reasonably aggressively. In all other situations, it is no longer, let us put 20 basis points margin on it, it is much more frequently, if these three boxes are not ticked, the answer is simply no. And I think that is what we are seeing in the market, and that is why both stories are true, the story that you are seeing for some names that try to raise money in the markets and Keith's story. Mark Streeter - JPMorgan Chase & Co: And can you just talk about export credit and any trends there, any developments in terms of regulations or anything that might impact the availability of funding there going forward?

No. These markets are open. The guarantees are there. There is no regulatory change to it other than there is an adjustment to the fee scale, which may, under certain circumstances, be somewhat higher, the guarantee fee, than previously. But overall, it still provides for a significant submarket margin, even inclusive of increased guarantee fees. Mark Streeter - JPMorgan Chase & Co: And then one last question, Klaus, and this one, I think, is for you. I think it is, the folks at Ascend and Airclaims have said that peak to trough for even good aircraft, they anticipate that we could see a 20 percentage type decline, which seems a little bit bearish relative to what you are talking about. I am just wondering if you want to address that view that they have put in writing.

Well again, it is right and wrong. Could there be an across-the-board 20% decline, which is around about the number we saw post 9-11? Yes, but that decline will have a range that goes from 50%, 60% on older inefficient aircraft to zero on, like last time, for example, on the 737-800 engine. So the average for that perspective is, unfortunately, in a way, a meaningless number. It may be correct, but it is still meaningless. Mark Streeter - JPMorgan Chase & Co: Yes. And I think what they are talking about is that the average is even more so, but they have made some comments about even the best aircraft, even the next-gens and good A320s and 737s might see that type of peak to trough decline, which seems a little bit aggressive to me relative to what we have seen in the past, but I was just wondering if you had any comments on that specific view that they have?

That depends on the situation, right? If you have a situation, Mark, where, for example, you suddenly need to place again an aircraft that you thought you had placed in 2009. You might see for that aircraft, if you want to sell it a decline, because it is a distressed sale, even if it is a brand new aircraft, into a market where demand is limited to specific pockets. That does not mean that your 2010 or 2011 delivery is coming under pressure, because that is a non-distressed placement. Quite to the contrary, if you look at the escalation, that is the inflation in the new purchase price of aircraft, it is increasing. It has gone up from around about 2% to around about 4% compound per annum. So aircraft, new from the manufacturer are becoming more expensive. And as I said, if you see discounts to full-base value for modern, fuel-efficient aircraft, it is most probably caused by a distressed placement. Mark Streeter - JPMorgan Chase & Co: Okay, that is helpful. Thanks for your comments.

(Operator Instructions) There are no further questions at this time.

Okay, it looks like this time we are done. Again, thank you very much for everybody for attending the earnings call. And for those of you who will join us for lunch, we will see you in a couple of hours. Thanks, everyone.

This concludes today's conference call. You may now disconnect.