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What changed in WILLIS LEASE FINANCE CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of WILLIS LEASE FINANCE CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+296 added−259 removedSource: 10-K (2025-03-11) vs 10-K (2024-03-15)

Top changes in WILLIS LEASE FINANCE CORP's 2024 10-K

296 paragraphs added · 259 removed · 213 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

37 edited+7 added−6 removed54 unchanged
Biggest changeAt December 31, 2023, approximately 74% of our on-lease engines, aircraft, and related equipment (all of which we sometimes refer to as “equipment”) by net book value are leased and operated internationally. Substantially all leases relating to this equipment are denominated and payable in United States (“U.S.”) dollars, which is customary in the industry.
Biggest changeSubstantially all leases relating to this equipment are denominated and payable in United States (“U.S.”) dollars, which is customary in the industry. Future leases may provide for payments to be made in other foreign currencies. In 2024, we leased our equipment to lessees domiciled in eight geographic regions or countries.
As of December 31, 2023, most of the engines in our lease portfolio are Stage IV engines and are generally suitable for use on one or more commonly used aircraft. We believe that the aviation industry will be subject to continued regulatory activity. Additionally, increased oversight will continue to originate from the quality assurance departments of airline operators.
As of December 31, 2024, most of the engines in our lease portfolio are Stage IV engines and are generally suitable for use on one or more commonly used aircraft. We believe that the aviation industry will be subject to continued regulatory activity. Additionally, increased oversight will continue to originate from the quality assurance departments of airline operators.
It is common for commercial aircraft operators and MROs to utilize several leasing companies to meet their aircraft engine needs and to minimize reliance on a single leasing company. Our competitors compete with us in many ways, including pricing, technical expertise, lease flexibility, engine availability, supply reliability, customer service, and the quality and condition of engines.
It is common for commercial aircraft operators and MROs to utilize several leasing companies to meet their aircraft engine needs and to minimize reliance on a single leasing company. 7 Table of Contents Our competitors compete with us in many ways, including pricing, technical expertise, lease flexibility, engine availability, supply reliability, customer service, and the quality and condition of engines.
We also carry contingent physical damage and third-party liability insurance as well as product liability insurance at levels determined to be appropriate by the Company. GOVERNMENT REGULATION 7 Table of Contents Our customers are subject to a high degree of regulation in the jurisdictions in which they operate.
We also carry contingent physical damage and third-party liability insurance as well as product liability insurance at levels determined to be appropriate by the Company. GOVERNMENT REGULATION Our customers are subject to a high degree of regulation in the jurisdictions in which they operate.
In addition to our owned portfolio, as of December 31, 2023, we managed a total lease portfolio of 198 engines, aircraft and related equipment for other parties. Willis Aeronautical Services, Inc. (“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 and engines.
In addition to our owned portfolio, as of December 31, 2024, we managed a total lease portfolio of 277 engines, aircraft and related equipment for other parties. Willis Aeronautical Services, Inc. (“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 and engines.
ASSET MANAGEMENT Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 158 engines, excluding WLFC engines, under management as of December 31, 2023. COMPETITION The markets for our products and services are very competitive, and we face competition from a number of sources.
ASSET MANAGEMENT Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 225 engines, excluding WLFC engines, under management as of December 31, 2024. COMPETITION The markets for our products and services are very competitive, and we face competition from a number of sources.
Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 158 engines, excluding WLFC engines, under management as of December 31, 2023. We are a Delaware corporation, incorporated in 1998.
Willis Asset Management Limited (“Willis Asset Management”) is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business. Willis Asset Management had 225 engines, excluding WLFC engines, under management as of December 31, 2024. We are a Delaware corporation, incorporated in 1998.
ENGINE LEASING As of December 31, 2023, the majority of our leases to air carriers, manufacturers and MROs were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable under Accounting Standards Codification (“ASC”) 842 and investments in sales-type leases.
ENGINE LEASING 4 Table of Contents As of December 31, 2024, the majority of our leases to air carriers, manufacturers and MROs were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable under Accounting Standards Codification (“ASC”) 842 and investments in sales-type leases.
This business segment enables our Company to provide end-of-life solutions for the growing supply of surplus aircraft and engines, as well as manage the full life cycle of our lease assets, enhance the returns on our engine portfolio, and create incremental value for our shareholders. As of December 31, 2023, spare parts inventory had a carrying value of $41.0 million.
This business segment enables our Company to provide end-of-life solutions for the growing supply of surplus aircraft and engines, as well as manage the full life cycle of our lease assets, enhance the returns on our engine portfolio, and create incremental value for our shareholders. As of December 31, 2024, spare parts inventory had a carrying value of $72.2 million.
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 $39.8 million as of December 31, 2023.
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 $37.3 million as of December 31, 2024.
Payment terms of our leases are predominately monthly in advance for rent and in arrears for the expenses associated with the use of the engines. As of December 31, 2023 and 2022, 46% and 40%, respectively, of the Company’s leases by net book value were short-term leases. We try to mitigate risk where possible.
Payment terms of our leases are predominantly monthly in advance for rent and in arrears for the expenses associated with the use of the engines. As of December 31, 2024 and 2023, 47% and 46%, respectively, of the Company’s leases by net book value were short-term leases. We try to mitigate risk where possible.
We maintain a website at www.wlfc.global where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are available without charge, as soon as reasonably practicable following the time they are filed with or furnished to the Securities and Exchange Commission (“SEC”).
We maintain a website at www.wlfc.global where our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports are available without charge, as soon as reasonably practicable following the time we electronically file them with, or furnish them to, the Securities and Exchange Commission (“SEC”).
We typically acquire engines from airlines, engine manufacturers or from other lessors. From time to time, we selectively acquire engines prior to a firm commitment to lease or sell the engine, depending on the price of the engine and market demand with the expectation that we can lease or sell such engines in the future.
From time to time, we selectively acquire engines prior to a firm commitment to lease or sell the engine, depending on the price of the engine and market demand with the expectation that we can lease or sell such engines in the future.
A triple-net operating lease requires the lessee to make the full lease payment and pay any other expenses associated with the use of the engines, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes.
We describe our leases as “triple-net” operating leases. A triple-net operating lease requires the lessee to make the full lease payment and pay any other expenses associated with the use of the engines, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes.
FINANCING/SOURCE OF FUNDS We, directly or through our Willis Engine Structured Trust III, IV, V, VI, and VII (“WEST III,” “WEST IV,” “WEST V,” “WEST VI,” and “WEST VII”) asset-backed securitizations typically acquire engines with a combination of equity capital and funds borrowed from financial institutions.
FINANCING/SOURCE OF FUNDS 8 Table of Contents We, directly or through our Willis Engine Structured Trust III, IV, V, VI, and VII (“WEST III,” “WEST IV,” “WEST V,” “WEST VI,” and “WEST VII”) asset-backed securitizations, revolving credit facility, and senior secured warehouse credit facility, typically acquire engines with a combination of equity capital and funds borrowed from financial institutions.
Additionally, for discrete financing purposes, we will enter into bi-lateral and preferred financing arrangements from time to time. EMPLOYEES As of December 31, 2023, we had 363 total employees, of which 361 are full-time employees (excluding consultants), in sales and marketing, technical service, and administration.
Additionally, for discrete financing purposes, we may enter into bi-lateral and preferred financing arrangements from time to time. EMPLOYEES As of December 31, 2024, we had a total of 447 employees, of which 445 are full-time employees (excluding consultants), in sales and marketing, technical service, and administration.
Increased number of aircraft, and therefore engines, in the market We believe that the number of commercial and cargo aircraft, and hence spare engines, will increase. Boeing projects 3.5% annual growth in the global commercial jet fleet, increasing the current fleet to over 48,575 aircraft by 2042.
Increased number of aircraft, and therefore engines, in the market We believe that the number of commercial and cargo aircraft, and hence spare engines, will increase. Boeing projects 3.2% annual growth in the global commercial jet fleet, increasing the current fleet to 50,170 aircraft by 2043.
We manage our interest rate risk through maintaining a balance of fixed and floating rate debt which allows us to limit our exposure to interest rate movements while also allowing us to benefit from low short-term interest rates. The Company generally utilizes our credit facility as a warehouse facility to aggregate purchased assets.
We manage our interest rate risk through maintaining a balance of fixed and floating rate debt which allows us to limit our exposure to interest rate movements while also allowing us to benefit from low short-term interest rates.
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, 2024, we had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases, which represented 354 engines, 16 aircraft, one marine vessel and other leased parts and equipment.
In 2023, we leased our equipment to lessees domiciled in seven geographic regions. 3 Table of Contents Spare Parts Sales Our wholly-owned and vertically-integrated subsidiary Willis Aero primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or from the leasing portfolio.
Spare Parts Sales Our wholly-owned and vertically-integrated subsidiary Willis Aero primarily engages in the sale of aircraft engine parts and materials through the acquisition or consignment of engines from third parties or from the leasing portfolio.
As of December 31, 2023, we had $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases, which represented 337 engines, 12 aircraft, one marine vessel and other leased parts and equipment with 74 lessees in 42 countries.
As of December 31, 2024, we had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases, which represented 354 engines, 16 aircraft, one marine vessel and other leased parts and equipment with 70 lessees in 37 countries.
Operating leases allow commercial aircraft operators greater fleet and financial flexibility due to the relatively small initial capital outlay necessary to obtain use of the aircraft equipment and the availability of short-term and long-term leases to better meet their needs.
Operating leases allow commercial aircraft operators greater fleet and financial flexibility due to the relatively small initial capital outlay necessary to obtain use of the aircraft equipment and the availability of short-term and long-term leases to better meet their needs. Operating lease rates are generally higher than finance lease rates, in part because of the lessor retained residual value risk.
The demand for aftermarket engines for either sale or lease may be affected by a number of variables, including: • general market conditions; • regulatory changes (particularly those imposing environmental, maintenance, and other requirements on the operation of engines); • changes in demand for air travel; • fuel costs; • changes in the supply and cost of aircraft equipment; and • technological developments. 5 Table of Contents The value of a particular used engine or airframe varies greatly depending upon its condition, the maintenance services performed during the lease term and, as applicable, the number of hours or cycles remaining until the next major maintenance interval.
The demand for aftermarket engines for either sale or lease may be affected by a number of variables, including: 5 Table of Contents • general market conditions; • regulatory changes (particularly those imposing environmental, maintenance, and other requirements on the operation of engines); • changes in demand for air travel; • fuel costs; • changes in the supply and cost of aircraft equipment; and • technological developments.
We believe that commercial aircraft operators are increasingly considering their spare engines as significant capital assets, in which operating leases may be more attractive than finance leases or ownership of spare engines. Industry analysts have forecasted that the percentage of leased engines is likely to increase over the next 15 years as engine leasing follows the growth of aircraft leasing.
We believe that commercial aircraft operators are increasingly considering their spare engines as significant capital assets, in which operating or finance leases may be more attractive than the outright ownership of spare engines.
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, Willis Mitsui & Company Engine Support Limited (“WMES”), for the purpose of acquiring and leasing jet engines. Each partner holds a 50% interest in the joint venture.
We provide other engine leasing related services such as engine storage, Part 145 maintenance and aircraft tear down services to our customers as well. 6 Table of Contents 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, Willis Mitsui & Company Engine Support Limited (“WMES”), for the purpose of acquiring and leasing jet engines.
Historically, when the Company aggregates a critical mass of assets through revolver financing, we refinance the assets through the issuance of long-term fixed rate debt through the Asset-Backed Security (“ABS”) and other markets. The maturity profile of the ABS term financings tend to better match the long-life characteristics of our long-life asset base.
The Company generally utilizes our credit facility as a warehouse facility, as well as our senior secured warehouse credit facility, to aggregate purchased assets. Historically, when the Company aggregates a critical mass of assets through revolver and warehouse financing, we refinance the assets through the issuance of long-term fixed rate debt through the Asset-Backed Security (“ABS”) and other markets.
We acquire engines for our leasing portfolio in a number of ways. We enter into sale and lease back transactions with operators of aircraft, original equipment manufacturers of engines, and MROs.
These engines generally may be used on one or more aircraft types and are the most widely used engines in the world, powering Airbus, Boeing, Bombardier, and Embraer aircraft. We acquire engines for our leasing portfolio in a number of ways. We enter into sale and lease back transactions with operators of aircraft, original equipment manufacturers of engines, and MROs.
WMES owned a lease portfolio of 35 engines and four aircraft with a net book value of $232.2 million as of December 31, 2023. Our investment in the joint venture was $40.0 million as of December 31, 2023.
Each partner holds a 50% interest in the joint venture. WMES owned a lease portfolio of 50 engines with a net book value of $328.9 million as of December 31, 2024. Our investment in the joint venture was $44.8 million as of December 31, 2024.
We also evaluate insurance and expropriation risk and evaluate and monitor the political and legal climate of the country in which a particular lessee is located in order to determine our ability to repossess our engines should the need arise. Despite these guidelines, we cannot give assurance that we will not experience collection problems or significant losses in the future.
At December 31, 2024 the Company had $1.4 billion of fixed rate financing. We also evaluate insurance and expropriation risk and evaluate and monitor the political and legal climate of the country in which a particular lessee is located in order to determine our ability to repossess our engines should the need arise.
AIRCRAFT LEASING As of December 31, 2023, our operating lease portfolio included four A319-100 aircraft, four ATR 72-500 aircraft, one A320-200 aircraft, one A320-233 aircraft, one A321-200 aircraft, and one Boeing 737-700 with an aggregate net book value of $136.2 million. 6 Table of Contents Our aircraft leases are “triple-net” leases, and the lessee is responsible for making the full lease payment and paying any other expenses associated with the use of the aircraft, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes.
Our aircraft leases are “triple-net” leases, and the lessee is responsible for making the full lease payment and paying any other expenses associated with the use of the aircraft, such as maintenance, casualty and liability insurance, sales or use taxes and personal property taxes.
Leasing and Related Operations Our strategy is to lease aircraft and aircraft engines and provide related services to a diversified group of commercial aircraft operators and maintenance, repair and overhaul organizations (“MROs”) worldwide. Commercial aircraft operators need engines in addition to those installed on the aircraft that they operate.
We separate our business into two reportable segments, Leasing and Related Operations and Spare Parts Sales. Our business activities by reportable segment are described below. Leasing and Related Operations Our strategy is to lease aircraft and aircraft engines and provide related services to a diversified group of commercial aircraft operators and maintenance, repair and overhaul organizations (“MROs”) worldwide.
Furthermore, the Company also manages interest rate exposure through the purchasing of interest rate swaps which immunizes us from short-term rate movements that would influence the cost of our credit facility borrowings. At December 31, 2023 the Company had $1.5 billion of fixed rate financing.
The maturity profile of the ABS term financings tend to better match the long-life characteristics of our long-life asset base. Furthermore, the Company also manages interest rate exposure through the purchasing of interest rate swaps which immunizes us from short-term rate movements that would influence the cost of our floating rate borrowings.
Spare engines are required to support fleet operation during the highly regulated maintenance cycle of aircraft engines. Furthermore, unscheduled events such as mechanical failure, Federal Aviation Administration (“FAA”) airworthiness directives, or manufacturer-recommended actions for maintenance, repair and overhaul of engines result in the need for spare engines.
Furthermore, unscheduled events such as mechanical failure, Federal Aviation Administration (“FAA”) airworthiness directives, or manufacturer-recommended actions for maintenance, repair and overhaul of engines result in the need for spare engines. Our engine portfolio primarily consists of noise-compliant Stage IV commercial jet engines manufactured by CFMI, General Electric, Pratt & Whitney, Rolls Royce, and International Aero Engines.
See “Risk Factors” below. At the commencement of a lease, we may collect, in advance, a security deposit normally equal to at least one month’s lease payment. The security deposit is returned to the lessee after all lease return conditions have been met.
Despite these guidelines, we cannot give assurance that we will not experience collection problems or significant losses in the future. See Item 1A, “Risk Factors” below. At the commencement of a lease, we may collect, in advance, a security deposit normally equal to at least one month’s lease payment.
In order to facilitate financing and leasing of engines, most of our engines are generally owned through a statutory or common law trust that is wholly-owned by us or our subsidiaries. We usually borrow up to 85% of an engine’s purchase price. Substantially all of our assets secure our related indebtedness.
In May 2024, Willis Warehouse Facility (“WWFL”), a wholly-owned subsidiary of the Company, entered into a secured credit agreement for the new senior secured warehouse credit facility. In order to facilitate financing and leasing of engines, most of our engines are generally owned through a statutory or common law trust that is wholly-owned by us or our subsidiaries.
Total revenues from our Leasing and Related Operations reportable segment was 95.1% and 91.7% of the respective total consolidated revenue for the years ended December 31, 2023 and 2022, respectively.
Total revenues from our Leasing and Related Operations reportable segment was 95.4% and 95.1% of the respective total consolidated revenue for the years ended December 31, 2024 and 2023, respectively. 3 Table of Contents At December 31, 2024, approximately 66.3% of our on-lease engines, aircraft, and related equipment (all of which we sometimes refer to as “equipment”) by net book value are leased and operated internationally.
The SEC also maintains an electronic Internet site that contains our reports, proxies and information statements, and other information that we file or furnish at http://www.sec.gov. We separate our business into two reportable segments, Leasing and Related Operations and Spare Parts Sales. Our business activities by reportable segment are described below.
The SEC also maintains an electronic Internet site that contains our reports, proxies and information statements, and other information that we file or furnish at http://www.sec.gov. References to our and the SEC ’s website do not constitute incorporation by reference of the information contained on those websites and should not be considered part of this document.
Removed
Our engine portfolio primarily consists of noise-compliant Stage IV commercial jet engines manufactured by CFMI, General Electric, Pratt & Whitney, Rolls Royce, and International Aero Engines. These engines generally may be used on one or more aircraft types and are the most widely used engines in the world, powering Airbus, Boeing, Bombardier, and Embraer aircraft.
Added
Commercial aircraft operators need engines in addition to those installed on the aircraft that they operate. Spare engines are required to support fleet operation during the highly regulated maintenance cycle of aircraft engines.
Removed
Future leases may provide for payments to be made in other foreign currencies.
Added
Industry analysts have forecasted that the percentage of leased engines is likely to increase over the next 15 years as engine leasing follows the growth of aircraft leasing.
Removed
Operating lease rates are generally higher than finance lease rates, in part because of the lessor retained residual value risk. 4 Table of Contents We describe our leases as “triple-net” operating leases.
Added
The security deposit is returned to the lessee after all lease return conditions have been met.
Removed
As of December 31, 2023 minimum future rentals under non-cancelable operating leases of these engines, related equipment and aircraft assets were as follows: Year (in thousands) 2024 $ 158,408 2025 78,803 2026 50,926 2027 36,122 2028 6,431 Thereafter 45,031 $ 375,721 As of December 31, 2023, we had 74 lessees of commercial aircraft engines and related equipment, aircraft, and other leased parts and equipment in 42 countries.
Added
The value of a particular used engine or airframe varies greatly depending upon its condition, the maintenance services performed during the lease term and, as applicable, the number of hours or cycles remaining until the next major maintenance interval.
Removed
We provide other engine leasing related services such as engine storage, Part 145 maintenance and aircraft tear down services to our customers as well.
Added
As of December 31, 2024, minimum future payments under non-cancelable operating leases were as follows: Year (in thousands) 2025 $ 174,309 2026 80,143 2027 46,988 2028 19,096 2029 12,059 Thereafter 17,209 $ 349,804 As of December 31, 2024, minimum future payments under non-cancelable notes receivable and investments in sales-type leases were as follows: Year (in thousands) 2025 $ 51,878 2026 24,569 2027 23,543 2028 22,518 2029 48,114 Thereafter 103,781 Total undiscounted lease receivables 274,403 Less: interest (69,168) Total notes receivable and investments in sales-type leases $ 205,235 As of December 31, 2024, we had 70 lessees of commercial aircraft engines and related equipment, aircraft, and other leased parts and equipment in 37 countries.
Removed
Our investment in the joint venture was $18.0 million as of December 31, 2023.
Added
Our investment in the joint venture was $17.9 million as of December 31, 2024. AIRCRAFT LEASING As of December 31, 2024, our operating lease portfolio included six ATR 72-500 aircraft, three Boeing 737-700 aircraft, two A319-100 aircraft, two A320-214 aircraft, one A320-200 aircraft, one A320-232 aircraft, and one A320-233 aircraft, with an aggregate net book value of $161.0 million.
Added
We usually borrow up to 85% of an engine’s purchase price. Substantially all of our assets secure our related indebtedness. We typically acquire engines from airlines, engine manufacturers or from other lessors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSubstantially all of our leases require payments in U.S. dollars but many of our customers operate in other currencies; if foreign currencies devalue against the U.S. dollar, our lessees may be unable to make their payments to us. Substantially all of our current leases require that payments be made in U.S. dollars.
Biggest changeWe also can give no assurance that political instability abroad and changes in the policies of foreign nations will not present expropriation risks in the future that are not covered by insurance. 19 Table of Contents Substantially all of our leases require payments in U.S. dollars but many of our customers operate in other currencies; if foreign currencies devalue against the U.S. dollar, our lessees may be unable to make their payments to us.
Upon termination of a lease, we seek to enter a new lease or to sell or part-out the applicable aviation equipment. We also selectively sell aviation equipment on an opportunistic basis.
Upon termination of a lease, we seek to enter a new lease, sell or part-out the applicable aviation equipment. We also selectively sell aviation equipment on an opportunistic basis.
This may be affected by factors beyond our control, including: • general economic conditions in the countries in which our customers operate, including changes in gross domestic product; • demand for air travel and air cargo shipments; • increased competition; • the availability of government support, which may be in the form of subsidies, loans (including export/import financing), guarantees, equity investments or otherwise; • changes in interest rates and the availability and terms of credit available to commercial aircraft operators including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in fuel hedging contracts and the ability of airlines and MROs to make or refinance principal payments as they come due; • geopolitical and other events, including those arising from war, concerns about security, terrorism, war, pandemics and similar public health concerns and political instability; • changing political conditions, including risk of rising protectionism and imposition of new trade barriers; • inclement weather and natural disasters; • environmental compliance and other regulatory costs, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations; • potential and actual cyberattacks, including information hacking, viruses and malware; • labor contracts, labor costs and strikes or stoppages at commercial aircraft operators; • operating costs, including the price and availability of fuel, maintenance costs, and insurance costs and coverages; • technological developments; • airport access and air traffic control infrastructure constraints; • industry capacity, utilization and general market conditions; and • market prices for aviation equipment.
This may be affected by factors beyond our control, including: • general economic conditions in the countries in which our customers operate, including changes in gross domestic product; • demand for air travel and air cargo shipments; • increased competition; • the availability of government support, which may be in the form of subsidies, loans (including export/import financing), guarantees, equity investments or otherwise; • changes in interest rates and the availability and terms of credit available to commercial aircraft operators including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in fuel hedging contracts and the ability of airlines and MROs to make or refinance principal payments as they come due; • geopolitical and other events, including those arising from war, concerns about security, terrorism, war, pandemics and similar public health concerns and political instability; • changing political conditions, including risk of rising protectionism and imposition of new trade barriers; • inclement weather and natural disasters; • environmental compliance and other regulatory costs, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations; • potential and actual cyberattacks, including information hacking, viruses and malware; 9 Table of Contents • labor contracts, labor costs and strikes or stoppages at commercial aircraft operators; • operating costs, including the price and availability of fuel, maintenance costs, and insurance costs and coverages; • technological developments; • airport access and air traffic control infrastructure constraints; • industry capacity, utilization and general market conditions; and • market prices for aviation equipment.
While we typically experience some level of delinquency under our leases, default levels may increase over time, particularly as our portfolio of engines and aircraft ages and if economic conditions deteriorate. Various airlines have filed for bankruptcy in the U.S. and in foreign jurisdictions, with some seeking to restructure their operations and others ceasing operations entirely.
While we typically experience some level of delinquency under our leases, default levels may increase over time, particularly as our portfolio of engines and aircraft ages or if economic conditions deteriorate. Various airlines have filed for bankruptcy in the U.S. and in foreign jurisdictions, with some seeking to restructure their operations and others ceasing operations entirely.
Under most of our engine and aircraft leases, the lessee makes monthly maintenance reserve payments to us based on the asset’s usage and management’s estimate of maintenance costs. A certain level of maintenance reserve payments on the WEST III, WEST IV, WEST V, WEST VI, and WEST VII engines are held in related engine reserve restricted cash accounts.
Under most of our engine and aircraft leases, the lessee makes monthly maintenance reserve payments to us based on the asset’s usage and management’s estimate of maintenance costs. A certain level of maintenance reserve payments on the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL engines are held in related engine reserve restricted cash accounts.
Any of these events may adversely affect the value of the engine or aircraft, unless and until remedied, and reduce our revenues and increase our expenses. If aviation equipment is damaged during a lease and we are unable to recover from the lessee or though insurance, we may incur a loss.
Any of these events may adversely affect the value of the engine or aircraft, unless and until remedied, and reduce our revenues and increase our expenses. If aviation equipment is damaged during a lease and we are unable to recover our damages from the lessee or though insurance, we may incur a loss.
If we are removed from such role with those facilities, our expenses would increase as our consolidated VIE’s WEST III, WEST IV, WEST V, WEST VI, and WEST VII would have to hire an outside provider to replace the servicer and administrative agent functions, and we would be materially and adversely affected.
If we are removed from such role with those facilities, our expenses would increase as our consolidated VIE’s WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL would have to hire an outside provider to replace the servicer and administrative agent functions, and we would be materially and adversely affected.
Risks Related to Our Small Size and Corporate Structure Intense competition in our industry, particularly with major companies with substantially greater financial, personnel, marketing and other resources, could cause our revenues and business to suffer. The engine and aircraft leasing industry is highly competitive and global.
Risks Related to Our Small Size and Corporate Structure Intense competition in our industry, particularly with major companies with substantially greater financial, personnel, marketing and other resources, could cause our revenues and business to suffer. The engine and aircraft leasing and related services industry is highly competitive and global.
There can be no assurance that we will be in compliance with these covenants in the future or will not otherwise be terminated as servicer or administrative agent for the WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities.
There can be no assurance that we will be in compliance with these covenants in the future or will not otherwise be terminated as servicer and or administrative agent for the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and or WWFL facilities.
A lessee’s failure to meet its maintenance or recordkeeping obligations under a lease could result in: • a grounding of the related engine or aircraft; • a repossession that would likely cause us to incur additional and potentially substantial expenditures in restoring the engine or aircraft to an acceptable maintenance condition; • a need to incur additional costs and devote resources to recreate the records prior to the sale or lease of the engine or aircraft; • loss of lease revenue while we perform refurbishments or repairs and recreate records; and • a lower lease rate and/or shorter lease term under a new lease entered into by us following repossession of the engine or aircraft.
A lessee’s failure to meet its maintenance or recordkeeping obligations under a lease could result in: • grounding of the related engine or aircraft; • repossession that would likely cause us to incur additional and potentially substantial expenditures to restore the engine or aircraft to an acceptable maintenance condition; • a need to incur additional costs and devote resources to recreate the records prior to the sale or lease of the engine or aircraft; • loss of lease revenue while we perform refurbishments or repairs and recreate records; and • a lower lease rate and/or shorter lease term under a new lease entered into by us following repossession of the engine or aircraft.
We are the servicer and administrative agent for the WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities and our cash flows would be materially and adversely affected if we were removed from these positions.
We are the servicer and administrative agent for the WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities and the servicer agent for WWFL, and our cash flows would be materially and adversely affected if we were removed from these positions.
We may be removed as servicer and or administrative agent of our WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities by an affirmative vote of a requisite number of the WEST III, WEST IV, WEST V, WEST VI, and WEST VII note holders.
We may be removed as servicer and or administrative agent of our WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL facilities by an affirmative vote of a requisite number of the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL note holders.
If we are unable to obtain commitments for the remaining deliveries or otherwise satisfy our contractual obligations to the engine manufacturers, we will be subject to several potential risks, including: • forfeiting advance deposits, as well as incurring certain significant costs related to these commitments, such as contractual damages and legal, accounting, and financial advisory expenses; • defaulting on any future lease commitments we may have entered into with respect to these engines, which could result in monetary damages and strained relationships with lessees; • failing to realize the benefits of purchasing and leasing the engines; and • risking harm to our business reputation, which would make it more difficult to purchase and lease engines in the future on agreeable terms, if at all.
If we are unable to obtain commitments for the remaining deliveries or otherwise satisfy our contractual obligations to the engine manufacturers, we will be subject to several potential risks, including: • forfeiting advance deposits, as well as incurring certain significant costs related to these commitments, such as contractual damages and legal, accounting, and financial advisory expenses; 16 Table of Contents • defaulting on any future lease commitments we may have entered into with respect to these engines, which could result in monetary damages and strained relationships with lessees; • failing to realize the benefits of purchasing and leasing the engines; and • risking harm to our business reputation, which would make it more difficult to purchase and lease engines in the future on agreeable terms, if at all.
Any acquisition or expansion involves various risks, which may include some or all of the following: • incurring or assuming additional debt; • diversion of management’s time and attention from ongoing business operations; • future charges to earnings related to the possible impairment of goodwill and the write down of other intangible assets; • risks of unknown or contingent liabilities; • difficulties in the assimilation of operations, services, products and personnel; • unanticipated costs and delays; • risks that the acquired business does not perform consistently with our growth and profitability expectations; • risks that growth will strain our infrastructure, staff, internal controls, and management, which may require additional personnel, time, and expenditures; and • potential loss of key employees and customers.
Any acquisition or expansion involves various risks, which may include some or all of the following: • incurring or assuming additional debt; 21 Table of Contents • diversion of management’s time and attention from ongoing business operations; • future charges to earnings related to the possible impairment of goodwill and the write down of other intangible assets; • risks of unknown or contingent liabilities; • difficulties in the assimilation of operations, services, products and personnel; • unanticipated costs and delays; • risks that the acquired business does not perform consistently with our growth and profitability expectations; • risks that growth will strain our infrastructure, staff, internal controls, and management, which may require additional personnel, time, and expenditures; and • potential loss of key employees and customers.
Due to WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, and WEST VII’s bankruptcy remote structures, that interest is subject to the prior payments of WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, and WEST VII’s debt and other obligations.
Due to WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, WEST VII’s, and WWFL’s bankruptcy remote structures, that interest is subject to the prior payments of WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, WEST VII’s, and WWFL’s debt and other obligations.
We are the servicer and administrative agent with respect to engines in the WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities.
We are the servicer and administrative agent with respect to engines in the WEST III, WEST IV, WEST V, WEST VI, and WEST VII facilities and the servicer agent with respect to engines in WWFL.
Therefore, our rights and the rights of our creditors to participate in any distribution of the assets of WEST III, WEST IV, WEST V, WEST VI, and WEST VII upon liquidation, reorganization, dissolution or winding up will be subject to the prior claims of WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, and WEST VII’s creditors.
Therefore, our rights and the rights of our creditors to participate in any distribution of the assets of WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL upon liquidation, reorganization, dissolution or winding up will be subject to the prior claims of WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, WEST VII’s, and WWFL’s creditors.
As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials in connection with obtaining or retaining business or securing business advantage.
As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials in connection with obtaining or retaining business or securing any improper business advantage.
From time to time, we seek to reduce our interest rate volatility and uncertainty through hedging with interest rate derivative contracts with respect to a portion of our debt. Our lease margins, as well as our earnings and cash flows may be adversely affected by increases in interest rates.
From time to time, we seek to reduce our interest rate volatility and uncertainty through hedging with interest rate derivative contracts with respect to a portion of our debt. Our lease margins, earnings and cash flows may be adversely affected by increases in interest rates.
These fluctuations may also be caused by: 9 Table of Contents • the timing and number of purchases and sales of engines or aircraft; • the timing and amount of maintenance reserve revenues recorded resulting from the termination of long-term leases, for which significant amounts of maintenance reserves may have accumulated; • the termination or announced termination of production of particular aircraft and engine types; • the retirement or announced retirement of particular aircraft models by aircraft operators; • the operating history of any particular engine, aircraft or engine or aircraft model; • the length of our operating leases; and • the timing of necessary overhauls of engines and aircraft.
These fluctuations may also be caused by: • the timing and number of purchases and sales of engines or aircraft; • the timing and amount of maintenance reserve revenues recorded resulting from the termination of long-term leases, for which significant amounts of maintenance reserves may have accumulated; • the termination or announced termination of production of particular aircraft and engine types; • the retirement or announced retirement of particular aircraft models by aircraft operators; • the operating history of any particular engine, aircraft or engine or aircraft model; • the length of our operating leases; and • the timing of necessary overhauls of engines and aircraft.
Environmental regulation Governmental regulations of noise and emissions levels may be applicable where the related airframe is registered and where the aircraft is operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with Stage III noise requirements.
Governmental regulations of noise and emissions levels may be applicable where the related airframe is registered and where the aircraft is operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with Stage III noise requirements.
Changes to trade policy, tariff, sanction and import/export regulations may have a material adverse effect on our business, financial condition and results of operations. Changes in U.S. or international, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories or countries where we currently conduct our business, could adversely affect our business.
Changes to trade policy, tariff, sanction and import/export regulations may have a material adverse effect on our business, financial condition and results of operations. 20 Table of Contents Changes in U.S. or international, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories or countries where we currently conduct our business, could adversely affect our business.
The trading price of our common stock may fluctuate due to many factors, including but not limited to the following: • risks relating to our business described in this Annual Report; • sales or purchases of our securities by a few stockholders or even a single significant stockholder; • general economic conditions; • changes in accounting mandated under GAAP; • quarterly variations in our operating results; • our financial condition, performance and prospects; • changes in financial estimates by us; • the level, direction and volatility of interest rates and expectations of changes in rates; 17 Table of Contents • the market for securities similar to our common stock; • changes in our capital structure, including additional issuances by us of debt or equity securities; and • failure to maintain effective internal controls over financial reporting.
The trading price of our common stock may fluctuate due to many factors, including but not limited to the following: • risks relating to our business described in this Annual Report; • sales or purchases of our securities by a few stockholders or even a single significant stockholder; • general economic conditions; • changes in accounting mandated under GAAP; • quarterly variations in our operating results; • our financial condition, performance and prospects; • changes in dividends on our common stock; • changes in financial estimates by us; • the level, direction and volatility of interest rates and expectations of changes in rates; • the market for securities similar to our common stock; • changes in our capital structure, including additional issuances by us of debt or equity securities; and • failure to maintain effective internal controls over financial reporting.
We believe engine values tend to be relatively stable so long as there is sufficient demand for the host aircraft, and the demand for aircraft depend on numerous factors, including age, technology, and customer preference.
We believe engine values tend to be relatively stable so long as there is sufficient demand for the host aircraft. The demand for aircraft depends on numerous factors, including age, technology, and customer preference.
Any of these risks could have a material adverse impact on our financial condition and results of operations. We carry the risk of maintenance for our leased assets. Our maintenance reserves may be inadequate or lessees may default on their obligations to perform maintenance, which could increase our expenses.
Any of these risks could have a material adverse impact on our financial condition and results of operations. 14 Table of Contents We carry the risk of maintenance for our leased assets. Our maintenance reserves may be inadequate or lessees may default on their obligations to perform maintenance, which could increase our expenses.
Our bylaws also limit the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 21 Table of Contents
Our bylaws also limit the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 23 Table of Contents
Such vote could happen upon the occurrence of certain specified events as outlined in the WEST III, WEST IV, WEST V, WEST VI, and WEST VII servicing and administrative agency agreements.
Such vote could happen upon the occurrence of certain specified events as outlined in the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL servicing and or administrative agency agreements.
If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially and adversely affected. RISKS RELATING TO OUR BUSINESS 8 Table of Contents Risks Related to Our Operations We are affected by the risks faced by commercial aircraft operators and MROs because they are our customers.
If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially and adversely affected. RISKS RELATING TO OUR BUSINESS Risks Related to Our Operations We are affected by the risks faced by commercial aircraft operators and MROs because they are our customers.
We and our customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft. Licenses and consents We and our customers operate in a highly regulated industry. A number of our leases require specific governmental or regulatory licenses, consents or approvals.
We and our customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft. Licenses and consents 10 Table of Contents We and our customers operate in a highly regulated industry. A number of our leases require specific governmental or regulatory licenses, consents or approvals.
As of December 31, 2023, engines on-lease with lease terms of 12 months or less and engines off-lease constituted approximately 57% of our assets. These engines may frequently need to be remarketed, which could drive up our operating costs associated with such equipment. Such higher operating costs could have a material, adverse impact on our results of operations and profitability.
As of December 31, 2024, engines on-lease with lease terms of 12 months or less and engines off-lease constituted approximately 75% of our assets. These engines may frequently need to be remarketed, which could drive up our operating costs associated with such equipment. Such higher operating costs could have a material, adverse impact on our results of operations and profitability.
As of December 31, 2023, 67 of our leases comprising approximately 24% of the net book value of our on-lease assets do not provide for any monthly maintenance reserve payments to be made by lessees, and we can give no assurance that future leases of our engines or aircraft will require maintenance reserves.
As of December 31, 2024, 65 of our leases comprising approximately 24% of the net book value of our on-lease assets do not provide for any monthly maintenance reserve payments to be made by lessees, and we can give no assurance that future leases of our engines or aircraft will require maintenance reserves.
Our customers face intense competition and some carriers are in troubled financial condition. As a general matter, commercial aircraft operators with weak capital structures are more likely than well-capitalized operators to seek operating leases, and, at any point in time, investors should expect a varying number of lessees and sub-lessees to experience payment difficulties.
Our customers face intense competition and some carriers are in troubled financial condition. As a general matter, commercial aircraft operators with weak capital structures are more likely than well-capitalized operators to seek operating leases, and, at any time, investors should expect some lessees and sub-lessees to experience payment difficulties.
Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs, and liabilities. In turn, this could adversely affect our business strategy, operating results, and financial condition. We have been subject to cybersecurity incidents in the past and may be again in the future.
Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs, and liabilities. In turn, this could adversely affect our business strategy, operating results, and financial condition. 13 Table of Contents We have been subject to cybersecurity incidents in the past and may be again in the future.
We cannot give assurance that we will be able to compete effectively or that competitive pressures will not adversely affect us. 19 Table of Contents There is no organized market for the spare engines or the aircraft we purchase. Typically, we purchase engines and aircraft from commercial aircraft operators, engine manufacturers, MROs and other suppliers.
We cannot give assurance that we will be able to compete effectively or that competitive pressures will not adversely affect us. There is no organized market for the spare engines or the aircraft we purchase. Typically, we purchase engines and aircraft from commercial aircraft operators, engine manufacturers, MROs and other suppliers.
If they do not, we may, in the future, find it necessary to pay the claims secured by such liens to repossess such assets. 18 Table of Contents In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not be able to exercise our ownership rights over the engine.
If they do not, we may, in the future, find it necessary to pay the claims secured by such liens to repossess such assets. In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not be able to exercise our ownership rights over the engine.
We operate as a supplier of engines, aircraft and related parts (“aviation equipment”) to commercial aircraft operators and MROs and are indirectly impacted by all the risks facing commercial aircraft operators and MROs today.
We operate as a supplier of engines, aircraft and related parts (“aviation equipment”) to commercial aircraft operators and MROs and are indirectly impacted by many of the risks facing commercial aircraft operators and MROs.
Any insurance coverage deficiency or default by lessees under their indemnification or insurance obligations may reduce our recovery of losses upon an event of loss or subject the Company to exposures that result in monetary losses for which recovery is unavailable .
Any insurance coverage deficiency or default by lessees under their indemnification or insurance obligations may reduce our recovery of losses upon an event of loss or subject the Company to monetary losses for which recovery is unavailable .
Substantially all of our assets are pledged to secure our obligations to creditors. Our revolving credit banks have a lien on all of our assets, including our residual interests in WEST III, WEST IV, WEST V, WEST VI, and WEST VII.
Substantially all of our assets are pledged to secure our obligations to creditors. Our revolving credit and senior secured warehouse credit banks have a lien on all of our assets, including our residual interests in WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL.
Our leases make the lessees primarily responsible for maintaining the engines or aircraft, keeping related records and complying with governmental directives and manufacturer requirements. Over time, certain lessees have experienced, and may experience in the future, difficulties in meeting their maintenance and recordkeeping obligations as specified by the terms of our leases.
Pursuant to our leases, the lessees are primarily responsible for maintaining the engines or aircraft, keeping related records and complying with governmental directives and manufacturer requirements. Certain lessees have experienced, and may experience in the future, difficulties meeting their maintenance and recordkeeping obligations as specified by the terms of our leases.
As of December 31, 2023, we were in compliance with the financial covenants set forth in the WEST III, WEST IV, WEST V, WEST VI, and WEST VII servicing and administrative agency agreements.
As of December 31, 2024, we were in compliance with the financial covenants set forth in the WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL servicing and or administrative agency agreements.
Charles F. Willis, IV is the founder of WLFC, has served as a Director since our establishment in 1985, served as Chief Executive Officer from 1985 until April 2022, served as President until July 2011, and has served as Chairman of the Board of Directors from 1996 until April 2022, when he became Executive Chairman. Mr.
Willis, IV, who is the founder of WLFC and currently serves as our Executive Chairman, has served as a Director since our establishment in 1985, served as Chief Executive Officer from 1985 until April 2022, served as President until July 2011, and has served as Chairman of the Board of Directors from 1996 until April 2022, when he became Executive Chairman.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Position, Liquidity and Capital Resources.” Inflation may adversely affect us by increasing costs beyond what we can recover through price increases. Recently, inflation has increased throughout the U.S. economy.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Position, Liquidity and Capital Resources.” Inflation may adversely affect us by increasing costs beyond what we can recover through price increases. In prior years, inflation rates have increased throughout the U.S. economy.
The ability of each lessee to perform its obligations under the relevant lease and the demand of companies to purchase aviation equipment will depend primarily on the lessee’s (or in the case of parts and materials, the purchaser’s) financial condition and cash flow.
The ability of each of our lessees to perform their obligations under the relevant lease and the demand to purchase aviation equipment will depend primarily on the lessee’s (or in the case of parts and materials, the purchaser’s) financial condition and cash flow.
As of December 31, 2023, we had an aggregate of approximately $10.5 million in lease rent and $8.9 million in maintenance reserve payments more than 30 days past due as compared to $7.4 million in lease rent and $5.9 million in maintenance reserve payments more than 30 days past due as of December 31, 2022.
As of December 31, 2024, we had an aggregate of approximately $3.9 million in lease rent and $3.6 million in maintenance reserve payments more than 30 days past due, compared to $10.5 million in lease rent and $8.9 million in maintenance reserve payments more than 30 days past due as of December 31, 2023.
Our ability to recover engines installed on airframes may depend on the cooperation of the airframe owner. Risks Related to Our Orders of New Engines We have committed to purchase new engines in 2024 with an aggregate value of up to $138.8 million.
Our ability to recover engines installed on airframes may depend on the cooperation of the airframe owner. Risks Related to Our Orders of New Engines We have committed to purchase new engines in 2025 with an aggregate value of up to $107.6 million.
If there are future changes in GAAP with regard to how we and our customers must account for leases, it could change the way we and our customers conduct our businesses and, therefore, could have a potential adverse effect on our business.
If there are future changes in GAAP with regard to how we and our customers must account for leases, it could change the way we and our customers conduct our businesses and, therefore, could have a potential adverse effect on our business. We may not be adequately covered by insurance.
Inflation can adversely affect us by increasing the costs of labor and other costs as well as by reducing demand for air travel. In addition, inflation is often accompanied by higher interest rates, which could reduce the fair value of our outstanding debt obligations.
Increased inflation rates can adversely affect us by increasing our costs of labor, goods, and other operating costs and may reduce demand for air travel. In addition, inflation is often accompanied by higher interest rates, which could reduce the fair value of our outstanding debt obligations.
Willis effectively controls the Company and has the power to contest the outcome of substantially all matters submitted to our stockholders for approval, including the election of the Company's board of directors. In addition, future sales by Mr.
Willis effectively controls the Company and has the power to contest the outcome of substantially all matters submitted to our stockholders for approval, including the election of the Company's board of directors.
If such operators were to go into liquidation or similar proceedings, the resulting over-supply of engines and aircraft from these operators could have an adverse effect on the demand for the affected engine and aircraft types and the value of such aviation equipment.
If such operators were to file for protection under bankruptcy laws or commence liquidation or similar proceedings, the resulting over-supply of engines and aircraft from these operators could have an adverse effect on the demand for the affected engine and aircraft types and the value of such aviation equipment.
We are exposed to potential liability claims if the use of our aircraft, engines or parts is alleged to have caused bodily injury or property damage.
Our aircraft, engines or parts could cause bodily injury or property damage, exposing us to liability claims. 12 Table of Contents We are exposed to potential liability claims if the use of our aircraft, engines or parts is alleged to have caused bodily injury or property damage.
We do a significant amount of business that would be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions).
A significant portion of our business could be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions).
Certain provisions of law, our amended certificate of incorporation, bylaws and amended rights agreement could make the following more difficult: (1) an acquisition of us by means of a tender offer, a proxy contest or otherwise, and (2) the removal of incumbent officers and directors.
Provisions in Delaware law and our charter and bylaws might prevent or delay a change of control. 22 Table of Contents Certain provisions of law, our amended certificate of incorporation, bylaws and amended rights agreement could make the following more difficult: (1) an acquisition of us by means of a tender offer, a proxy contest or otherwise, and (2) the removal of incumbent officers and directors.
Our operations may also be affected by political or economic instability in the areas we have customers. We may not be able to enforce our rights as a creditor if a lessee files for bankruptcy outside of the U.S. When a debtor seeks protection under the United States Bankruptcy Code (“Bankruptcy Code”), creditors are automatically stayed from enforcing their rights.
We may not be able to enforce our rights as a creditor if a lessee files for bankruptcy outside of the U.S. When a debtor seeks protection under the United States Bankruptcy Code (“Bankruptcy Code”), creditors are automatically stayed from enforcing their rights.
The one-month term SOFR and the one-month London Inter-Bank Offered Rate (“LIBOR”) was approximately 5.38% and 4.39% on December 31, 2023 and 2022, respectively. An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability. A significant portion of our outstanding debt bears interest at floating rates.
One-month term SOFR was approximately 4.37% and 5.38% on December 31, 2024 and 2023, respectively. 17 Table of Contents An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability. A significant portion of our outstanding debt bears interest at floating rates.
Any of the above factors could have a material adverse effect on us. We are subject to governmental regulation and our failure to comply with these regulations could cause the government to withdraw or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.
We are subject to governmental regulation and our failure to comply with these regulations could cause the government to withdraw or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.
If interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity, and cash flows could be materially and adversely affected. 16 Table of Contents We have risks in managing our portfolio of engines to meet customer needs.
If interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity, and cash flows could be materially and adversely affected.
Willis beneficially owned or had the ability to direct the voting of 3,077,610 shares of our common stock, representing approximately 45% of the issued shares of our common stock. As a result, Mr.
As of December 31, 2024, Mr. Willis beneficially owned or had the ability to direct the voting of 3,018,806 shares of our common stock, representing approximately 42% of the issued shares of our common stock. As a result, Mr.
Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business. 20 Table of Contents We are effectively controlled by one principal stockholder, who has the power to contest the outcome of most matters submitted to the stockholders for approval and to affect our stock prices adversely if he were to sell substantial amounts of his common stock.
Any of the above factors could have a material adverse effect on us. We are effectively controlled by one principal stockholder who has the power to contest the outcome of most matters submitted to the stockholders for approval and to affect our stock prices adversely if he were to sell substantial amounts of his common stock. Charles F.
Each of the WEST finance vehicles have various limitations on how we, as servicer, are allowed to manage the trusts. These restrictions include, but are not limited to, total replacement funds held during a given twelve-month period and lifetime of the trust, below value dispositions as well as limitations on sales subject to part out agreements.
These restrictions include, but are not limited to, total replacement funds held during a given 12-month period and lifetime of the trust, below value dispositions as well as limitations on sales subject to part out agreements.
Continued inflationary pressures could impact our profitabilit y. Risks Related to The Common Stock Trading Price The Company’s common stock trading price may be affected by numerous factors that may impose a financial risk on the Company’s stockholders.
Continued inflationary pressures could impact our profitabilit y and have a material adverse effect on our business, results of operations and financial condition. 18 Table of Contents Risks Related to The Common Stock Trading Price The Company’s common stock trading price may be affected by numerous factors that may impose a financial risk on the Company’s stockholders.
The value of a particular model of engine depends heavily on the types of aircraft on which it may be installed and the supply of available engines.
Risks Related to Our Aviation Assets The value and lease rates of our engines and aircraft could decline. The value of a particular model of engine depends heavily on the types of aircraft on which it may be installed and the supply of available engines.
The relatively long life cycles of aircraft and jet engines can be shortened by world events, government regulation, or customer preferences.
We have risks in managing our portfolio of engines to meet customer needs. The relatively long life cycles of aircraft and jet engines can be shortened by world events, government regulation, or customer preferences.
Any of these events could adversely affect our ability to lease or sell engines or aircraft. Civil aviation regulation Users of engines and aircraft are subject to general civil aviation authorities, including the FAA and the EASA, who regulate the maintenance of engines and issue airworthiness directives.
Civil aviation regulation Users of engines and aircraft are subject to general civil aviation authorities, including the FAA and the EASA, who regulate the maintenance of engines and issue airworthiness directives.
Our U.S. and international operations and warehouse facilities are susceptible to losses and interruptions caused by floods, hurricanes, earthquakes, typhoons, and similar natural disasters, public health emergencies, as well as power outages, telecommunications failures, and similar events.
Our U.S. and international operations and warehouse facilities are susceptible to losses and interruptions caused by floods, hurricanes, earthquakes, wildfires, typhoons, and similar natural disasters, public health emergencies, as well as power outages, telecommunications failures, and similar events. Climate change may exacerbate certain of these threats, including the frequency and severity of weather-related events and other natural disasters.
Our board of directors has authorized the issuance of shares of Series A Preferred Stock and Series A-2 Preferred Stock, by us and to Development Bank of Japan Inc. (“DBJ”), with American Stock Transfer and Trust Company serving as rights agent.
Our board of directors has authorized the issuance of shares of Series A Preferred Stock, by us and to Development Bank of Japan Inc. (“DBJ”), with American Stock Transfer and Trust Company serving as rights agent. The rights agreement could make it more difficult to proceed with and tends to discourage a merger, tender offer or proxy contest.
However, an uninsured or partially insured claim, or a claim for which third-party indemnification is not available, could have a material adverse effect upon us. A loss of an aircraft in which we lease the airframe, an engine or other leased equipment could result in significant monetary claims for which there may not be sufficient insurance coverage.
A loss of an aircraft in which we lease the airframe, an engine or other leased equipment could result in significant monetary claims for which there may not be sufficient insurance coverage.
We may not be adequately covered by insurance. 11 Table of Contents By virtue of holding title to engines and aircraft, parties suffering damage as a result of the malfunction of an engine or aircraft may assert that lessors are strictly liable for the resulting losses.
By virtue of holding title to engines and aircraft, parties suffering damage as a result of the malfunction of an engine or aircraft may assert that lessors are strictly liable for the resulting losses. Such liability may be asserted even where the lessor is not directly controlling the operation of the relevant aircraft.
The introduction of new models of engines and aircraft and the potential resulting overcapacity in supply, could adversely affect the residual values and the lease rates for our engines and aircraft, our ability to lease or sell our engines and aircraft on favorable terms, or at all, or result in us recording future impairment charges.
This next generation of engines and aircraft is expected to deliver improved fuel consumption and reduced noise and emissions with lower operating costs compared to current-technology aircraft. 15 Table of Contents The introduction of new models of engines and aircraft and the potential resulting overcapacity in supply, could adversely affect the residual values and the lease rates for our engines and aircraft, our ability to lease or sell our engines and aircraft on favorable terms, or at all, or result in us recording future impairment charges.
The agreements governing our debt, including the issuance of notes by WEST III, WEST IV, WEST V, WEST VI, and WEST VII also include restrictive financial covenants. A breach of those and other covenants could, unless waived or amended by our creditors, result in a cross-default to other indebtedness and an acceleration of all or substantially all of our debt.
A breach of those and other covenants could, unless waived or amended by our creditors, result in a cross-default to other indebtedness and an acceleration of all or substantially all of our debt.
For example, leases of aircraft subject us to greater maintenance risks because the maintenance fees we charge may not cover aircraft maintenance costs that may be higher than anticipated. In addition, we face greater credit risk from lessees in this business as the assets that we lease to them tend to have higher net book values than individual engines.
In addition, we face greater credit risk from lessees in this line of business as the assets that we lease to them tend to have higher net book values than individual engines.
Moreover, we may face increased costs as we continue to evolve our cyber defenses in order to contend with changing risks, and possible increased costs of complying with cybersecurity laws and regulations.
Moreover, we may face increased costs as we continue to evolve our cyber defenses in order to contend with changing risks, and possible increased costs of complying with cybersecurity laws and regulations. These costs and losses associated with these risks are difficult to predict and quantify, but could have a significant adverse effect on our operating results.
These regulations could limit the economic life of our engines and aircraft or reduce their value, could limit our ability to lease or sell the non-compliant engines or aircraft or, if modifications are permitted, require us to make significant additional investments in the engines or aircraft to make them compliant. 10 Table of Contents The U.S. and other jurisdictions are imposing more stringent limits on the emission of nitrogen oxide, carbon monoxide, and carbon dioxide emissions from engines, consistent with ICAO standards.
These regulations could limit the economic life of our engines and aircraft or reduce their value, could limit our ability to lease or sell the non-compliant engines or aircraft or, if modifications are permitted, require us to make significant additional investments in the engines or aircraft to make them compliant.
Accordingly, violations could adversely affect, among other things, our reputation, business, financial condition, results of operations, and cash flows. Our aircraft, engines or parts could cause bodily injury or property damage, exposing us to liability claims.
Accordingly, violations could adversely affect, among other things, our reputation, business, financial condition, results of operations, and cash flows.
The Company has not yet determined whether the incident is reasonably likely to materially adversely impact the Company’s financial condition or results of operations. Due to the evolving nature and increased sophistication of these cybersecurity threats, the potential impact of any future incident cannot be predicted with certainty.
Due to the evolving nature and increased sophistication of these cybersecurity threats, the potential impact of any future incident cannot be predicted with certainty.
As a result, our inability to obtain sufficient capital to finance these acquisitions would constrain our ability to grow our portfolio and to increase our revenues. 15 Table of Contents Our business is capital intensive and highly leveraged.
Risks Related to Our Capital Structure Our future growth and profitability will depend on our ability to acquire aviation equipment and make other strategic investments. As a result, our inability to obtain sufficient capital to finance these acquisitions would constrain our ability to grow our portfolio and to increase our revenues. Our business is capital intensive and highly leveraged.
Our primary competitors include AerCap Holdings N.V., Shannon Engine Support Ltd., Pratt & Whitney, Rolls-Royce Partners Finance, Engine Lease Finance Corporation, and FTAI Aviation LTD. Our primary competitors generally have significantly greater financial, personnel and other resources, as well as a physical presence in more locations, than we do.
Our primary competitors generally have significantly greater financial, personnel and other resources, as well as a physical presence in more locations, than we do.
Furthermore, we can provide no assurance that lessees will meet their obligations to make maintenance reserve payments or perform required scheduled maintenance or, to the extent that maintenance reserve payments are insufficient, to cover the cost of refurbishments or repairs. 13 Table of Contents Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft and our ability to lease the engines and aircraft in a timely manner following termination of the leases.
Furthermore, we can provide no assurance that lessees will meet their obligations to make maintenance reserve payments or perform required scheduled maintenance or, to the extent that maintenance reserve payments are insufficient, to cover the cost of refurbishments or repairs.
Our inability to collect receivables or to repossess engines, aircraft or other leased equipment in the event of a default by a lessee could have a material adverse effect on us. 14 Table of Contents We may not correctly assess the credit risk of each lessee or may not be in a position to charge risk-adjusted lease rates, and lessees may not be able to continue to perform their financial and other obligations under our leases in the future.
We may not correctly assess the credit risk of each lessee or may not be in a position to charge risk-adjusted lease rates, and lessees may be unable to meet their financial and other obligations under our leases in the future.
We are also subject to risks of foreign laws that affect the timing and access to courts and may limit our remedies when collecting lease payments and recovering assets.
Such international leases present risks to us because certain foreign laws, regulations, and judicial procedures may not be as protective of lessor rights as those which apply in the U.S. We are also subject to risks of foreign laws that affect the timing and access to courts and may limit our remedies when collecting lease payments and recovering assets.
Consequently, our business, financial condition, results of operations and cash flows would be adversely affected. Provisions in Delaware law and our charter and bylaws might prevent or delay a change of control.
Consequently, our business, financial condition, results of operations and cash flows would be adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCYBERSECURITY The Company has policies, controls, and procedures in place for assessing, identifying, and managing material risks from cybersecurity threats, including, but not limited to: • Reviewing financial reporting systems and subsystems to ensure that access is limited to approved users; • Reviewing data recorded, processed, and reported to ensure that the data remains complete, accurate, and valid; • Conducting regular network and endpoint monitoring and vulnerability assessments to improve our information systems; • Reviewing system changes of financial reporting significance to ensure that they have been authorized and appropriately tested before being moved to production; • Monitoring and identifying cybersecurity threats in connection with the use of third-party providers; • Responding to and remediating any incident of damage or interruption to our information technology systems, including cyberattacks, internally and through the use of third-party providers as necessary; • Carrying information security risk insurance that provides protection against potential losses arising from a cybersecurity incident; and • Requiring regular cybersecurity training programs for employees, management, and directors.
Biggest changeCYBERSECURITY RISK MANAGEMENT AND STRATEGY The Company has policies, controls, and procedures in place for assessing, identifying, and managing material risks from cybersecurity threats, including, but not limited to: • Reviewing financial reporting systems and subsystems to ensure that access is limited to approved users; • Reviewing data recorded, processed, and reported to ensure that the data remains complete, accurate, and valid; • Conducting regular network and endpoint monitoring and vulnerability assessments to improve our information systems; • Reviewing system changes of financial reporting significance to ensure that they have been authorized and appropriately tested before being moved to production; • Monitoring and identifying cybersecurity threats in connection with the use of third-party providers; • Responding to and remediating any incident of damage or interruption to our information technology systems, including cyberattacks, internally and through the use of third-party providers as necessary; • Carrying information security risk insurance that provides protection against potential losses arising from a cybersecurity incident; and • Requiring regular cybersecurity training programs for employees, management, and directors.
These approaches vary in maturity across our business, and we work to continually improve them. The Company’s Board of Directors and management have discussions to stay vigilant and engaged as it relates to cyber exposures, risk management strategy, monitoring, and cyber-incident response and recovery plans.
These approaches vary in maturity across our business, and we work to continually improve them. GOVERNANCE The Company’s Board of Directors and management have discussions to stay vigilant and engaged as it relates to cyber exposures, risk management strategy, monitoring, and cyber-incident response and recovery plans.
Additionally, as the dynamic cybersecurity environment is continuously evolving, management has periodic meetings with our cybersecurity insurance providers to reevaluate the Company’s cybersecurity risks and related information technology resiliency. The Board of Directors shall be informed of any material information technology breaches that the Company has experienced in a timely manner. 22 Table of Contents
Additionally, as the dynamic cybersecurity environment is continuously evolving, management has periodic meetings with our cybersecurity insurance providers to reevaluate the Company’s cybersecurity risks and related information technology resiliency. The Board of Directors shall be informed of any material information technology breaches that the Company has experienced in a timely manner. 24 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company’s Leasing and Related Operations segment conducts business in all of the properties above except for Pompano Beach. The Spare Parts segment primarily conducts business in the Coconut Creek and Pompano Beach, Florida facilities. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
Biggest changeWe also lease facilities for sales and operations in Larkspur, California; Shanghai, China; Singapore; Blagnac, France; and Gandhinagar, India. The Company’s Leasing and Related Operations segment conducts business in all of the properties above except for Pompano Beach. The Spare Parts segment primarily conducts business in the Coconut Creek and Pompano Beach, Florida facilities. ITEM 3. LEGAL PROCEEDINGS None.
ITEM 2. PROPERTIES Our principal offices are located in Coconut Creek, Florida where we own 56,000 square feet of office and warehouse space. We also own 130,000 square feet of office and warehouse space in Bridgend, Wales, UK. We lease 60,000 square feet of hangar and office space in Darlington, UK.
ITEM 2. PROPERTIES Our principal offices are located in Coconut Creek, Florida where we own 60,000 square feet of office and warehouse space. We also own 130,000 square feet of office and warehouse space in Bridgend, Wales, UK. We lease 60,000 square feet of hangar and office space in Darlington, UK.
We lease 45,000 square feet of warehouse space in Pompano Beach, Florida. We sub-lease 1,615 square feet of office and warehouse space for our operations in San Diego, California. We lease 4,166 square feet of office space in Dublin, Ireland. We also lease facilities for sales and operations in Larkspur, California; Shanghai, China; Singapore; Blagnac, France; and Gandhinagar, India.
We lease 45,000 square feet of warehouse space in Pompano Beach, Florida. We sub-lease 1,615 square feet of office and warehouse space for our operations in San Diego, California. We lease 4,166 square feet of office space in Dublin, Ireland and 1,348 square feet of office space in London, UK.
Added
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDuring 2022, the Company repurchased 154,215 shares of common stock for approximately $5.2 million under the plan, at a weighted average price of $33.98 per share. At December 31, 2023, approximately $39.6 million was available to purchase shares under the plan. As of December 31, 2023, the total number of common shares issued was approximately 6.8 million. ITEM 6.
Biggest changeAt December 31, 2024, approximately $39.6 million was available to purchase shares under the plan. As of December 31, 2024, the total number of shares of common stock issued was approximately 7.2 million. ITEM 6. [RESERVED]
In October 2022, the Board of Directors approved the renewal of the existing common stock repurchase plan which allows for repurchases of up to $60.0 million of the Company’s common stock, extending the plan through December 31, 2024. Repurchased shares are immediately retired. During 2023, no shares were repurchased.
In December 2024, the Board of Directors approved the renewal of the existing common stock repurchase plan which allows for repurchases of up to $60.0 million of the Company’s common stock, extending the plan through December 31, 2026. Repurchased shares are immediately retired. During 2024 and 2023, no shares were repurchased.
The Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share through October 15, 2023 and accrue quarterly dividends at the rate per annum of 8.5% per share thereafter. The Company’s Series A-2 Preferred Stock accrue quarterly dividends at the rate per annum of 6.5% per share.
The Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share through October 15, 2023 and accrued at the rate per annum of 8.5% per share thereafter through September 26, 2024. The Series A-2 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share.
The following table outlines our Equity Compensation Plan Information: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Plans Not Approved by Shareholders: None n/a n/a n/a Plans Approved by Shareholders: Employee Stock Purchase Plan — n/a 103,706 2023 Stock Incentive Plan — n/a 2,052,796 Total — n/a 2,156,502 23 Table of Contents The 2023 Incentive Stock Plan (the “2023 Plan”) amended and restated the prior 2021 Incentive Stock Plan.
The following table outlines our Equity Compensation Plan Information: Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Plans Not Approved by Shareholders: None n/a n/a n/a Plans Approved by Shareholders: Employee Stock Purchase Plan — n/a 93,863 2023 Stock Incentive Plan — n/a 1,592,342 Total — n/a 1,686,205 25 Table of Contents The 2023 Incentive Stock Plan (the “2023 Plan”) amended and restated the prior 2021 Incentive Stock Plan.
As of December 31, 2023, the Company had granted 1,591,800 RSAs under the 2023 Plan and has 2,052,796 shares available for future issuance. The fair value of the restricted stock awards equaled the stock price at the grant date.
As of December 31, 2024, the Company had granted 2,052,254 RSAs under the 2023 Plan and prior plans and has 1,592,342 shares available for future issuance. The fair value of the restricted stock awards equaled the stock price at the grant date.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our Common Stock is listed on the Nasdaq Global Market under the symbol WLFC. As of March 4, 2024, there were 2,809 shareholders of record of our Common Stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our Common Stock is listed on the Nasdaq Global Market under the symbol WLFC. As of March 3, 2025, there were 5,567 shareholders of record of our Common Stock. We paid $10.7 million in dividends to our common shareholders during the year ended December 31, 2024.
The Series A-1 and Series A-2 Preferred Stock have a $20.00 liquidation preference per share.
The Series A Preferred Stock has a redemption price of $20.00 per share plus dividends accrued but not paid.
Removed
We have not made any dividend payments to our common shareholders since our inception as all available cash has been utilized for the business. We have no intention of paying dividends on our common stock in the foreseeable future.
Added
The declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including our business, financial condition and results of operations and other factors deemed relevant by our Board of Directors from time to time.
Removed
In addition, certain of our debt facilities contain negative covenants which, in certain situations, prohibit us from paying any dividends or making distributions of any kind with respect to our common stock.
Added
In September 2024, the Company entered into a Series A Preferred Stock Purchase Agreement with DBJ, which refinanced the Company’s Series A-1 and Series A-2 Preferred Stock into one $65.0 million Series A Preferred Stock series (the “Series A Preferred Stock”), which accrues quarterly dividends at the rate per annum of 8.35% per share.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

71 edited+41 added−22 removed35 unchanged
Biggest changeCash flows used in investing activities were $194.4 million for the year ended December 31, 2022 and primarily reflected $286.4 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $15.3 million related to leases entered into during 2022 which were classified as notes receivable under ASC 842, 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 expense).
Biggest changeIf 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. 31 Table of Contents Cash flows used in investing activities were $764.9 million for the year ended December 31, 2024 and primarily reflected $830.5 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $101.8 million related to leases entered into during 2024 which were classified as notes receivable under ASC 842, partly offset by $171.2 million in proceeds from sales of equipment (net of selling expenses).
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.
The Interest Coverage Ratio, as defined in the credit facility, is the ratio of earnings before interest, taxes, depreciation and amortization 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.
Under WEST III, WEST IV, WEST V, WEST VI, and WEST VII, cash is collected in restricted accounts, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.
Under WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL, cash is collected in restricted accounts, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company.
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, 2023, 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.
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, 2024, 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.
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.
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 practical to do so.
Cash flows used in financing activities for the year ended December 31, 2023 were $57.9 million and primarily reflected $665.5 million in principal payments and $9.4 million in new debt issuance costs, partly offset by $625.7 million in proceeds from the issuance of debt obligations.
Cash flows used in financing activities for the year ended December 31, 2023 were $57.9 million and primarily reflected $665.5 million in principal payments and $9.4 million in new debt issuance costs, partly offset by $625.7 million in proceeds from the issuance of debt obligation.
Actual interest payments made will vary due to actual changes in the rates for one-month term SOFR. We believe our equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations through 2024.
Actual interest payments made will vary due to actual changes in the rates for one-month term SOFR. We believe our equity base, internally generated funds and existing debt facilities are sufficient to maintain our level of operations through 2025.
As of December 31, 2023, 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, 2024, 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.
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 ABS market continues to be open for issuers like the Company. Refer to Note 5 of the consolidated financial statements for a detailed discussion of the Company’s debt obligations.
RELATED PARTY TRANSACTIONS Joint Ventures “Other revenue” on the Consolidated Statements of Income includes management fees earned of $2.4 million and $2.0 million during the years ended December 31, 2023 and 2022, respectively, related to the servicing of engines for the WMES lease portfolio.
RELATED PARTY TRANSACTIONS Joint Ventures “Other revenue” on the Consolidated Statements of Income includes management fees earned of $4.8 million and $2.4 million during the years ended December 31, 2024 and 2023, respectively, related to the servicing of engines for the WMES lease portfolio.
As of December 31, 2023, we also managed 198 engines, aircraft and related equipment on behalf of other parties. 24 Table of Contents 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.
As of December 31, 2024, we also managed 277 engines, aircraft and related equipment on behalf of other parties. 26 Table of Contents 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.
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 $625.7 million and $284.0 million in the years ended December 31, 2023 and 2022, respectively, was derived from this borrowing activity.
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 $1.3 billion and $625.7 million in the years ended December 31, 2024 and 2023, respectively, was derived from this borrowing activity.
The ineffective portion of these hedges flows through earnings in the current period. The Company recorded an adjustment to interest expense of $(23.4) million and $(7.8) million during the years ended December 31, 2023 and 2022, respectively, from derivative investments.
The ineffective portion of these hedges flows through earnings in the current period. The Company recorded an adjustment to interest expense of $(12.0) million and $(23.4) million during the years ended December 31, 2024 and 2023, respectively, from derivative investments.
As part of the purchase, we have committed to certain future overhaul and maintenance services which are anticipated to range between $74.5 million and $102.3 million by 2030. $38.4 million of variable interest payments due under debt obligations, scheduled above, are estimated by applying the interest rates applicable at December 31, 2023 to the remaining debt, adjusted for the estimated debt repayments identified in the table above.
As part of the purchase, we have committed to certain future overhaul and maintenance services which are anticipated to range between $93.3 million and $121.4 million by 2030. $297.1 million of variable interest payments due under debt obligations, scheduled above, are estimated by applying the interest rates applicable at December 31, 2024 to the remaining debt, adjusted for the estimated debt repayments identified in the table above.
CASC Willis owned a lease portfolio of four engines with a net book value of $39.8 million as of December 31, 2023. Our investment in the joint venture was $18.0 million as of December 31, 2023. We actively manage our portfolio and structure our leases to maximize the residual values of our leased assets.
CASC Willis owned a lease portfolio of four engines with a net book value of $37.3 million as of December 31, 2024. Our investment in the joint venture was $17.9 million as of December 31, 2024. We actively manage our portfolio and structure our leases to maximize the residual values of our leased assets.
In these same time periods $665.5 million and $228.8 million, respectively, was used to pay down related debt. 28 Table of Contents 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.
In these same time periods $840.0 million and $665.5 million, respectively, was used to pay down related debt. Our credit facility and senior secured warehouse credit facility are 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.
As of December 31, 2023, Willis Aero had $40.3 million in spare parts inventory. Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business.
As of December 31, 2024, we had $72.2 million in spare parts inventory. Willis Asset Management is a wholly-owned and vertically-integrated subsidiary whose primary focus is the engine management and consulting business.
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. Average utilization (based on net book value) was approximately 84% and 82% for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023, the Company had $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases. Average utilization (based on net book value) was approximately 83% and 84% for the years ended December 31, 2024 and 2023, respectively.
During 2023, the Company paid approximately $44,000 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 and were approved by the Board’s Independent Directors.
Other During 2024, the Company paid approximately $0.1 million expense 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 and were approved by the Board’s Independent Directors.
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 $50.6 million, or 31.1%, to $213.1 million for the year ended December 31, 2023 from $162.6 million for the year ended December 31, 2022.
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 $25.1 million, or 11.8%, to $238.2 million for the year ended December 31, 2024 from $213.1 million for the year ended December 31, 2023.
At December 31, 2023, 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 of not greater than 4.50 to 1.00, on or prior to December 31, 2024, and not greater than 4.25 to 1.00 for the quarter ending March 31, 2025 and thereafter.
At December 31, 2024, we were in compliance with the covenants specified in our revolving credit facility, including the Interest Coverage Ratio requirement of at least 2.25 to 1.00, and the Total Leverage Ratio requirement of not greater than 4.50 to 1.00.
As of December 31, 2023, we had 74 lessees in 42 countries. Our portfolio is continually changing due to acquisitions and sales.
As of December 31, 2024, we had 70 lessees in 37 countries. Our portfolio is continually changing due to acquisitions and sales.
As of December 31, 2023, the Company had $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases.
As of December 31, 2024, the Company had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases.
Maintenance Reserve Revenue . Maintenance reserve revenue for the year ended December 31, 2023 increased $50.2 million, or 60.2%, to $133.7 million from $83.4 million for the year ended December 31, 2022. Long-term maintenance revenue was $15.4 million for the year ended December 31, 2023 compared to $36.0 million for the year ended December 31, 2022.
Maintenance Reserve Revenue . Maintenance reserve revenue for the year ended December 31, 2024 increased $80.2 million, or 60.0%, to $213.9 million from $133.7 million for the year ended December 31, 2023. Long-term maintenance revenue was $39.4 million for the year ended December 31, 2024 compared to $15.4 million for the year ended December 31, 2023.
We are currently committed to purchasing nine additional new LEAP-1B engines and 18 additional new LEAP-1A engines for $459.7 million by 2027. Our purchase agreements generally contain terms that allow the Company to defer or cancel purchase commitments in certain situations.
We are currently committed to purchasing six additional new LEAP-1B engines and 15 additional new LEAP-1A engines for an aggregate total of $374.6 million by 2027. Our purchase agreements generally contain terms that allow the Company to defer or cancel purchase commitments in certain situations.
Engines out on lease with “non-reimbursable” usage fees generated $118.3 million of short-term maintenance revenues for the year ended December 31, 2023 compared to $47.4 million for the year ended December 31, 2022.
Engines out on lease with “non-reimbursable” usage fees generated $174.5 million of short-term maintenance revenues for the year ended December 31, 2024 compared to $118.3 million for the year ended December 31, 2023, an increase of $56.2 million or 47.5%.
As of December 31, 2023, we had $2,112.8 million of equipment held in our operating lease portfolio, $92.6 million of notes receivable, $9.2 million of maintenance rights, and $8.8 million of investments in sales-type leases, which represented 337 engines, 12 aircraft, one marine vessel and other leased parts and equipment.
As of December 31, 2024, we had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases, which represented, in aggregate, 354 engines, 16 aircraft, one marine vessel and other leased parts and equipment.
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. 25 Table of Contents 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.
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.
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.
These events may include a decision to part-out or sell an asset, knowledge of specific damage to an asset, or supply/demand events which may impact the Company’s ability to lease an asset in the future.
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 40.3% to $20.2 million for the year ended December 31, 2023, compared to $14.4 million in 2022.
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 decreased by $5.8 million, or 20.7%, to $22.3 million for the year ended December 31, 2024, compared to $28.1 million in 2023.
Write-down of equipment to their estimated fair values totaled $4.4 million for the year ended December 31, 2023, primarily reflecting the write-down of five engines and two airframes.
Write-downs of equipment to their estimated fair values totaled $4.4 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of two airframes and five engines. General and Administrative Expenses .
WEST III, WEST IV, WEST V, WEST VI, and WEST VII are consolidated for financial statement presentation purposes. WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, and WEST VII’s abilities to make distributions and pay dividends to the Company is subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.
WEST III’s, WEST IV’s, WEST V’s, WEST VI’s, WEST VII’s, and WWFL’s abilities to make distributions and pay dividends to the Company are subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital.
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.
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. In December 2020, we entered into definitive agreements for the purchase of 25 Pratt & Whitney aircraft engines.
WMES owns a lease portfolio of 35 engines and four aircraft with a net book value of $232.2 million at December 31, 2023. Our investment in the joint venture was $40.0 million as of December 31, 2023. In 2014 we entered into an agreement with CASC to participate in CASC Willis, a joint venture based in Shanghai, China.
WMES owned a lease portfolio of 50 engines with a net book value of $328.9 million at December 31, 2024. Our investment in the joint venture was $44.8 million as of December 31, 2024. In 2014 we entered into an agreement with CASC to participate in CASC Willis, a joint venture based in Shanghai, China.
During the year ended December 31, 2023, we sold 28 engines, one airframe, and other parts and equipment from the lease portfolio for a net gain of $10.6 million. During the year ended December 31, 2022, we sold 25 engines from the lease portfolio for a net gain of $3.1 million. Gain on Sale of Financial Assets.
During the year ended December 31, 2023, we sold 28 engines, one airframe, and other parts and equipment from the lease portfolio for a net gain of $10.6 million. 29 Table of Contents Maintenance Services Revenue .
As of December 31, 2023, included within equipment held for lease and equipment held for sale was $31.9 million in remaining book value of 15 assets which were previously written down. Write-downs of equipment to their estimated fair values totaled $21.8 million for the year ended December 31, 2022.
As of December 31, 2023, included within equipment held for lease and equipment held for sale was $31.9 million in remaining book value of 15 assets which were previously written down.
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. 26 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 Revenue is summarized as follows: Years Ended December 31, 2023 2022 % Change (dollars in thousands) Lease rent revenue $ 213,138 $ 162,571 31.1 % Maintenance reserve revenue 133,668 83,424 60.2 % Spare parts and equipment sales 20,359 27,009 (24.6) % Interest income 8,721 7,579 15.1 % Gain on sale of leased equipment 10,581 3,133 237.7 % Gain on sale of financial assets — 3,116 (100.0) % Other revenue 32,088 25,095 27.9 % Total revenue $ 418,555 $ 311,927 34.2 % Lease Rent Revenue .
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. 28 Table of Contents RESULTS OF OPERATIONS Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023 Revenue is summarized as follows: Years Ended December 31, 2024 2023 % Change (dollars in thousands) Lease rent revenue $ 238,236 $ 213,138 11.8 % Maintenance reserve revenue 213,908 133,668 60.0 % Spare parts and equipment sales 27,099 20,359 33.1 % Interest revenue 11,683 8,721 34.0 % Gain on sale of leased equipment 45,063 10,581 325.9 % Maintenance services revenue 24,158 24,168 — % Other revenue 9,076 7,920 14.6 % Total revenue $ 569,223 $ 418,555 36.0 % Lease Rent Revenue .
As of December 31, 2023, 24 engines having a net book value of $17.2 million were depreciated under this policy with estimated remaining useful lives ranging from 1 to 83 months. Asset Valuation .
As of December 31, 2024, 14 engines having a net book value of $11.6 million were depreciated under this policy with estimated remaining useful lives up to 34 months. Asset Valuation .
The Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share through October 15, 2023 and accrue quarterly dividends at the rate per annum of 8.5% per share thereafter. The Company’s Series A-2 Preferred Stock accrue quarterly dividends at the rate per annum of 6.5% per share.
The net proceeds after deducting issuance costs were $13.1 million. The Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share through October 15, 2023 and accrued at the rate per annum of 8.5% per share thereafter through September 26, 2024.
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.
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.
The $85.3 million, or 59.1%, increase in operating cash flows was primarily driven by a 31.1% increase in lease rent revenue and a 60.2% increase in maintenance reserve revenue, reflecting growth in the size and utilization of the lease portfolio along with increased levels of usage fees resulting from high levels of travel and supply chain constraints.
The $54.7 million, or 23.8%, increase in operating cash flows was primarily driven by a 60.0% increase in maintenance reserve revenue, reflecting increased levels of usage fees resulting from high levels of travel and supply chain constraints.
As of December 31, 2023, we have five interest rate swap agreements with a total notional value of $500.0 million. During 2021, the Company entered into four fixed-rate interest swap agreements, each having notional amounts of $100.0 million, two with remaining terms of one month and two with remaining terms of 25 months as of December 31, 2023.
During 2021, the Company entered into four fixed-rate interest swap agreements, each having notional amounts of $100.0 million, two of which matured during the year ended December 31, 2024 and two of which had remaining terms of 13 months as of December 31, 2024.
Cost of Spare Parts and Equipment Sales . Cost of spare parts and equipment sales decreased by $5.6 million, or 27.0%, to $15.2 million for the year ended December 31, 2023 compared to $20.8 million in the prior year period, reflecting the decline in spare part sales.
Cost of spare parts and equipment sales increased by $7.6 million, or 50.3%, to $22.9 million for the year ended December 31, 2024 compared to $15.2 million in the prior year period, reflecting the increase in spare parts and equipment sales. Cost of equipment sales were $0.1 million for the year ended December 31, 2024.
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 six months as of December 31, 2023.
One interest rate swap agreement was entered into during 2019, having a notional amount of $100.0 million, which matured during the year ended December 31, 2024.
These covenants are tested either monthly, quarterly, or annually as required, and the Company was in full compliance with all financial covenant requirements at December 31, 2023.
The Company also has certain negative financial covenants such as liens, advances, changes in business, sales of assets, dividends and stock repurchases. Compliance with these covenants is tested either monthly, quarterly, or annually, as required, and the Company was in full compliance with all financial covenant requirements at December 31, 2024.
There were no equipment sales or cost of equipment sales for the year ended December 31, 2023, compared to $0.1 million of cost of equipment sales for the year ended December 31, 2022. Write-down of Equipment.
Equipment sales for the year ended December 31, 2024 were $1.0 million for the sale of one engine. There were no equipment sales for the year ended December 31, 2023. Interest Revenue .
During the years ended December 31, 2023 and 2022, the Company paid total dividends of $3.2 million and $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 $229.7 million and $144.4 million in the years ended December 31, 2023 and 2022, respectively.
Cash Flows Discussion Cash flows provided by operating activities were $284.4 million and $229.7 million in the years ended December 31, 2024 and 2023, respectively.
Changes in accounts receivables and accounts payables year-over-year largely offset as increased business activities impacted both balances. 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 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.
At December 31, 2023, we were in compliance with the covenants specified in the WEST III, WEST IV, WEST V, WEST VI, and WEST VII indentures, servicing and other debt related agreements. 30 Table of Contents 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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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.
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.
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.
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.
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.
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.
The effective tax rate for the years ended December 31, 2023 and December 31, 2022 was 34.8% and 44.5%, respectively. The decrease in the effective tax rate was predominantly due to an increase in pre-book tax income. FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES At December 31, 2023, the Company had $168.0 million of cash, cash equivalents, and restricted cash.
The decrease in the effective tax rate was predominantly due to a decrease in state taxes as a percentage of the overall rate. 30 Table of Contents FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES At December 31, 2024, the Company had $132.5 million of cash, cash equivalents, and restricted cash.
Approximately 84% and 80%, by book value, of our assets were on-lease as of December 31, 2023 and 2022, respectively. The average utilization rate for the years ended December 31, 2023 and 2022 was approximately 84% and 82%, respectively.
The average utilization rate for the years ended December 31, 2024 and 2023 was approximately 83% and 84%, respectively.
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.
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. 33 Table of Contents MANAGEMENT OF INTEREST RATE EXPOSURE At December 31, 2024, $914.9 million of our borrowings were on a variable rate basis at various interest rates tied to one-month term SOFR.
During 2023, WMES sold an engine to the Company for $22.3 million, and the Company sold two engines to WMES for $28.8 million. During 2022, the Company sold two engines to WMES for $12.6 million. During 2022, the Company subleased a WMES engine to a third party, with WMES as the head lessor.
During 2024, the Company sold four engines to WMES for $50.5 million, which resulted in a net gain of $12.7 million for the Company. During 2023, WMES sold one engine to the Company for $22.3 million, and the Company sold two engines to WMES for $28.8 million, which resulted in a net gain of $6.5 million for the Company.
Depreciation and Amortization Expense . Depreciation and amortization expense increased $2.7 million, or 3.0%, to $90.9 million for the year ended December 31, 2023 compared to $88.3 million for the year ended December 31, 2022. The increase primarily reflects the growth in our portfolio subject to depreciation as compared to the prior period.
Depreciation and amortization expense increased $1.5 million, or 1.7%, to $92.5 million for the year ended December 31, 2024 compared to $90.9 million for the year ended December 31, 2023. The increase is primarily due to an increase in the size of our lease portfolio. Cost of Spare Parts and Equipment Sales .
The net fair value of the interest rate swaps as of December 31, 2023 and December 31, 2022 was $16.5 million and $34.8 million, respectively, each representing an asset and reflected within other assets on the Consolidated Balance Sheets. 31 Table of Contents As it relates to the two fixed-rate interest swap agreements with remaining terms of one month as of December 31, 2023, the Company evaluated the probability of the forecasted transactions occurring.
The net fair value of the interest rate swaps as of December 31, 2024 and December 31, 2023 was $11.0 million and $16.5 million, respectively, each representing an asset and reflected within Other assets on the Consolidated Balance Sheets. We record derivative instruments at fair value as either an asset or liability.
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 $229.7 million in 2023.
At December 31, 2024, $7.3 million in cash and cash equivalents and restricted cash were held in foreign subsidiaries. We generate significant cash flow from our core business as evidenced by our net cash provided by operating activities, which was $284.4 million in 2024.
This increase was partially offset by derivative-related receipts of $23.4 million for the year ended December 31, 2023 as compared to $7.8 million for the year ended December 31, 2022. Income Taxes . Income tax expense for the year ended December 31, 2023 increased to $23.3 million from $4.4 million for the comparable period in 2022.
Income tax expense for the year ended December 31, 2024 increased by $20.7 million, or 88.6% to $44.0 million from $23.3 million for the comparable period in 2023. The effective tax rate for the years ended December 31, 2024 and December 31, 2023 was 28.8% and 34.8%, respectively.
The WEST III, WEST IV, WEST V, WEST VI, and WEST VII indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.
The WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts. 32 Table of Contents Virtually all of the Company’s debt requires ongoing compliance with the covenants of each financing, including debt and tangible net worth ratios, minimum interest coverage ratios, and other eligibility criteria including asset type, customer and geographic concentration restrictions.
Other revenue increased by $7.0 million, to $32.1 million for the year ended December 31, 2023 from $25.1 million in 2022. Other revenue consists primarily of management fee income, lease administration fees, third-party consignment commissions earned, service fee revenue, and other discrete revenue items. The increase primarily reflects an increase of $5.6 million in managed service revenues.
Other revenue increased by $1.2 million, or 14.6%, to $9.1 million for the year ended December 31, 2024 from $7.9 million in 2023. Other revenue consists primarily of managed service fee revenue related to the servicing of engines for the WMES lease portfolio.
General and administrative expenses increased 56.5% to $144.8 million for the year ended December 31, 2023 compared to $92.5 million in 2022. The increase primarily reflects a $29.5 million increase in personnel costs, which includes an increase of $18.4 million in bonus compensation.
General and administrative expenses increased by $31.0 million, or 26.8%, to $146.8 million for the year ended December 31, 2024 compared to $115.7 million in 2023. The increase primarily reflects a $35.5 million increase in personnel costs, partially offset by a $3.3 million decrease in other taxes related to international tax treaties.
During the year ended December 31, 2023, we purchased equipment (including capitalized costs) totaling $163.6 million, which consisted of 23 engines and other parts and equipment purchased for our lease portfolio.
During the year ended December 31, 2024, we sold 35 engines, eight airframes, and other parts and equipment from the lease portfolio for a net gain of $45.1 million.
The increase is primarily due to a higher level of engine repair activity and thrust rental fees, which is driven by increased activity in the industry. Net Finance Costs .
The decrease is primarily due to a lower level of engine repair activity as compared to that of the prior period. Net Finance Costs .
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, WEST VI, and WEST VII are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity.
The assets of WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity or WWFL. WEST III, WEST IV, WEST V, WEST VI, WEST VII, and WWFL are consolidated for financial statement presentation purposes.
Spare parts and equipment sales for the year ended December 31, 2023 decreased by $6.7 million, or 24.6%, to $20.4 million compared to $27.0 million for the year ended December 31, 2022. Spare parts sales for the year ended December 31, 2023 were $20.4 million compared to $25.9 million for the year ended December 31, 2022.
Spare parts and equipment sales for the year ended December 31, 2024 increased by $6.7 million, or 33.1%, to $27.1 million compared to $20.4 million for the year ended December 31, 2023. The increase in spare parts sales reflects the demand for surplus material that we are seeing as operators extend the lives of their current generation engine portfolios.
Net finance costs increased to $78.8 million for the year ended December 31, 2023, from $64.2 million for the year ended December 31, 2022, primarily due to an increase in short-term interest rates, which drive borrowing costs in our revolving credit facility.
Net finance costs increased by $26.0 million, or 33.0%, to $104.8 million for the year ended December 31, 2024, from $78.8 million for the year ended December 31, 2023, primarily due to an overall higher level of debt obligations, including increased borrowing costs.
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. 29 Table of Contents Debt Obligations and Covenant Compliance At December 31, 2023, debt obligations totaled $1,802.9 million, net of unamortized debt issuance costs and note discounts, payable with interest rates varying between approximately 3.1% and 8.0%.
Cash flows provided by financing activities for the year ended December 31, 2024 were $445.0 million and primarily reflected $1,305.7 million and $13.1 million in proceeds from the issuance of debt obligations and preferred stock, respectively, partly offset by $840.0 million in principal payments, $11.6 million in new debt issuance costs, and $10.7 million in common stock cash dividends paid.
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.
For further information on our debt instruments, see Note 5 “Debt Obligations” in Part II, Item 8 of this Form 10-K. In October 2024, the Company entered into a new, $1.0 billion, five-year, revolving credit facility with a consortium of lenders, refinancing its $500.0 million credit facility.
The table below summarizes our contractual commitments at December 31, 2023: Payment due by period (in thousands) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt obligations $ 1,827,059 $ 73,206 $ 696,133 $ 433,539 $ 624,181 Interest payments under debt obligations 371,719 100,539 149,157 91,852 30,171 Purchase obligations 459,665 138,813 320,852 — — Operating lease obligations 8,621 3,363 3,619 1,013 626 Total $ 2,667,064 $ 315,921 $ 1,169,761 $ 526,404 $ 654,978 From time to time we enter into contractual commitments to purchase engines directly from original equipment manufacturers.
The table below summarizes our contractual commitments at December 31, 2024: Payment due by period (in thousands) Total Less than 1 Year 1-3 Years 3-5 Years More than 5 Years Debt obligations $ 2,292,726 $ 70,690 $ 462,253 $ 1,704,231 $ 55,552 Interest payments under debt obligations 548,240 132,103 239,030 172,410 4,697 Purchase obligations 374,567 107,609 266,958 — — Operating lease obligations 6,372 3,161 1,924 1,078 209 Total $ 3,221,905 $ 313,563 $ 970,165 $ 1,877,719 $ 60,458 From time to time we enter into contractual commitments to purchase engines directly from original equipment manufacturers.
Removed
Of this write-down, $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.
Added
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report.
Removed
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 that of the prior period.
Added
A discussion of our results of operations for our fiscal year ended December 31, 2023 compared to the year ended December 31, 2022 is included our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 15, 2024 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” OVERVIEW Forward-Looking Statements.
Removed
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. One customer accounted for more than 10% of total lease rent revenue during the years ended December 31, 2023 and 2022.
Added
When a long-lived asset is written down and moved to equipment held for sale from equipment held for lease, it is no longer depreciated. 27 Table of Contents 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.
Removed
This increase is primarily due to an increase in the percentage of engines on short-term leases as well as the increase in utilization on those engines relative to prior period.
Added
Write-downs of equipment to their estimated fair values totaled $11.2 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of one airframe and 11 engines.
Removed
Additionally, as of December 31, 2023 and 2022, there were $28.4 million and $6.3 million, respectively, of deferred in-substance fixed payment use fees included in Unearned Revenue associated with engines on short-term leases. Spare Parts and Equipment Sales .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed3 unchanged
Biggest changeDuring the years ended December 31, 2023 and 2022, 66% and 60% of our total lease rent revenues came from non-U.S. domiciled lessees, respectively. Substantially all of our leases require payment in U.S. dollars. If these lessees’ currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making their lease payments. ITEM 8.
Biggest changeDuring the years ended December 31, 2024 and 2023, 69% and 66% of our total lease rent revenues came from non-U.S. domiciled lessees, respectively. Substantially all of our leases require payment in U.S. dollars. If these lessees’ currency devalues against the U.S. dollar, the lessees could potentially encounter difficulty in making their lease payments. ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is submitted as a separate section of this report beginning on page 42. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is submitted as a separate section of this report beginning on page 44. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
Alternatively, we may price our leases based on market rates so as to keep the fleet on-lease and suffer a decrease in our operating margin due to interest costs that we are unable to pass on to our customers. As of December 31, 2023, $353.0 million of our outstanding debt is variable rate debt.
Alternatively, we may price our leases based on market rates so as to keep the fleet on-lease and suffer a decrease in our operating margin due to interest costs that we are unable to pass on to our customers. As of December 31, 2024, $914.9 million of our outstanding debt is variable rate debt.
We estimate that for every 1% increase or decrease in interest rate, the annual interest expense for our variable rate debt, would increase or decrease $0.5 million, as compared to $2.3 million as of December 31, 2022. 32 Table of Contents We hedge a portion of our borrowings from time to time, effectively fixing the rate of these borrowings.
We estimate that for every 1% increase or decrease in interest rate, the annual interest expense for our variable rate debt, would increase or decrease $4.9 million, as compared to $0.5 million as of December 31, 2023. 34 Table of Contents We hedge a portion of our borrowings from time to time, effectively fixing the rate of these borrowings.

Other WLFC 10-K year-over-year comparisons