AASET 2021-1 Trust

Presale:

AASET 2021-1 TrustNovember 2, 2021

(Editor's Note: One or more of the ratings referenced within this article was arrived at by deviating from S&P Global Ratings'published criteria. The criteria deviation entails our assumptions related to our aircraft-on-the-ground assumptions as describedherein.)

Preliminary Ratings

Series Preliminary rating Preliminary amount (mil. $) LTV (%)(i) LTV (%)(ii)Legal final maturitydate

A A (sf) 620.000 75 77 October 2041

B BBB- (sf) 124.157 90 92 October 2041

C B (sf) 73.425 99 101 October 2041

Note: This presale report is based on information as of Nov. 2, 2021. The ratings shown are preliminary. Subsequent information may result inthe assignment of final ratings that differ from the preliminary ratings. Accordingly, the preliminary ratings should not be construed asevidence of final ratings. This report does not constitute a recommendation to buy, hold, or sell securities. (i)Note amount divided by the lowerof the mean and median (LMM value) of three appraisers' half-life base values and half-life current market values. (ii)Note amount divided bythe LMM value, further depreciated until October 2021 based on S&P Global Ratings' depreciation assumption. LTV--Loan-to-value ratio.LMM--Lower of the mean and median.

Transaction Overview

AASET 2021-1 Trust (AASET) is a newly established special-purpose Delaware statutory trust.AASET will issue the class A, B, and C fixed-rate notes (initial notes) under a master indenture anduse the notes' proceeds to acquire all of the series A, B, and C fixed-rate notes (initialaircraft-operating entity [AOE] notes) issued by AASET 2021-1 US Ltd. (U.S.) and AASET 2021-1International Ltd. (Cayman Island entity, Irish tax resident) (together, the AOE issuers). The AOEissuers will each issue series A, B, and C notes under their respective trust indenture. Each of theAOE issuers will guarantee the obligation of the other AOE issuer.

Each of the AOE issuers will pay all of the proceeds it receives from the issuance of its initial seriesA AOE notes and a portion of the proceeds from the issuance of its initial series B and C AOE notesto purchase a portfolio of 34 aircraft by acquisition of companies and trusts that own or have theright to acquire the initial aircraft from certain funds (the SASOF Funds) managed by affiliates ofCarlyle Aviation Partners Ltd. (Carlyle). The AOE issuers expect to acquire the 34 aircraft within270 days after the closing date.

The 34-aircraft portfolio comprises 30 narrowbody aircraft (four A319-100s, six A320-200s, twoA321-200, one 737-700s, and 17 737-800) and four widebody aircraft (three B777-300ER and oneB777-200LRF). The 34 aircraft have a weighted average age of approximately 10.47 years. The

Presale:

AASET 2021-1 TrustNovember 2, 2021

PRIMARY CREDIT ANALYST

Deborah L Newman

New York

+ 1 (212) 438 4451

[email protected]

SECONDARY CONTACTS

Ryan Kuhl

New York

+ 1 (240) 517 6246

[email protected]

Rajesh Subramanian

Toronto

+ 1 (416) 507 3232

[email protected]

ANALYTICAL MANAGER

Ildiko Szilank

New York

+ 1 (212) 438 2614

[email protected]

CORPORATE & GOVERNMENT CREDITANALYST

Betsy R Snyder, CFA

New York

+ 1 (212) 438 7811

[email protected]

www.standardandpoors.com November 2, 2021 1

© S&P Global Ratings. All rights reserved. No reprint or dissemination without S&P Global Ratings' permission. See Terms of Use/Disclaimeron the last page.

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aircraft are on lease to 23 airlines (three of which are subject to bankruptcy/reorganizationproceedings) based in 15 countries, with a weighted average remaining lease term of 5.28 years.We calculate the weighted average age and weighted average maturity as of the economic closingdate and based on the lower of the mean and median (LMM) of the half-life values.

Carlyle Aviation Management Ltd. (CAML), an indirect subsidiary of Carlyle, will act as servicer.

The series A and B notes have an amortization profile of approximately 14 and 13 years to zero,respectively, based on aircraft-specific principal amortization, while the series C notes'amortization profile is a straight line over seven years. The transaction has an expected finalpayment date of seven years after closing, after which the series A and B notes' amortization willbe full turbo after first paying their respective scheduled principal payments.

The series A and B notes benefit from a partial cash sweep beginning in month 49. On eachpayment date, the series C notes will receive supplemental amortization payments at asubordinated level in the payment waterfall. Supplemental amortization amounts paid will beused to offset principal shortfalls on the series C notes, if any, in subsequent periods.

Profile

Expected closing date November 2021.

Economic closing date Sept. 1, 2021.

Master issuer AASET 2021-1 Trust.

AOE issuers AASET 2021-1 International Ltd. (Ireland) and AASET 2021-1 US Ltd. (U.S.).

Collateral The two AOE issuers' series A, B, and C notes, which are in turn backed by 34 aircraft and therelated leases and shares and beneficial interests in entities that directly and indirectly receiveaircraft portfolio lease rental and residual cash flows, among others.

Servicer/sub servicer Carlyle Aviation Management Ltd., which is an affiliate of Carlyle Aviation Partners.

Liquidity facility provider BNP Paribas, acting through its New York Branch.

Managing agent Canyon Financial Services Ltd.

Security trustee, operatingbank, and trustee

UMB Bank N.A.

Structuring agent and leadbookrunner

Goldman Sachs & Co. LLC.

Joint lead bookrunner RBC Capital Markets.

Joint bookrunner MUFG, TCG Capital Markets LLC, and BNP Paribas.

Appraisers Morten Beyer & Agnew Inc. (MBA), AVITAS Inc., and Collateral Verifications LLC.

Maintenance evaluator MBA.

Rationale

The preliminary ratings assigned to AASET 2021-1 Trust's series A, B, and C notes reflect thefollowing:

- The likelihood of timely interest on the series A notes (excluding step up interest) on eachpayment date, the timely interest on the series B notes (excluding step up interest) on eachpayment date when the series A notes are no longer outstanding, the ultimate interest on theseries C notes (excluding step up interest), and the ultimate principal payment on the series A,B, and C notes on or prior to the legal final maturity date at their respective rating stress.



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Presale: AASET 2021-1 Trust

- The portfolio comprising a pool of 34 aircraft, including 30 narrowbody aircraft(A319/A320/A321: 25%, 737-700/737-800: 47%) and four widebody aircraft, one of which is afreighter (B777-200/B777-300ER/B77-200LRF: 28%).

- The weighted average age (by LMM of the half-life values) of the aircraft in the portfolio being10.47 years. Currently, all 34 aircraft are on lease, with a weighted average remaining term ofapproximately 5.28 years. Weighted average age and remaining term are calculated as of Sept.1, 2021.

- The existing and future lessees' estimated credit quality and diversification. The 34 aircraft arecurrently leased to 23 airlines in 15 countries.

- Each series' scheduled amortization profile, which has a per aircraft principal amortization ofapproximately 10-14 years for the series A notes and 9-13 years for the series B notes, andstraight line over seven years based on aircraft-specific principal amortization for the series Cnotes.

- The transaction's debt service coverage ratios (DSCRs) and utilization trigger--a failure ofwhich will result in the series A and B notes' turbo amortization. Turbo amortization for theseries A and B notes will also occur if they are outstanding after year seven or if the number ofaircraft in the portfolio is less than eight.

- The cash sweep for the series A and B notes, which provides for a percentage of remainingavailable collections after all payments entitled to priority, to pay principal on the notes. Theseries A cash sweep of 5% of remaining available collections begins on the fourth anniversaryof the closing date and increases to 15% on the fifth anniversary and 25% on the sixthanniversary. The series B cash sweep of 10% of remaining available collections begins on thefourth anniversary of the closing date and increases to 30% on the fifth anniversary and 40% onthe sixth anniversary.

- The series C supplemental amortization, which, from the first payment date up to month 48 ofthe transaction, pays 15% of available collection to principal on the series C notes, and frommonth 49 to month 75, pays 55% of available collections to principal on the series C notes.

- The end-of-lease payment, which will be paid to the series A, B, and C notes according to apercentage equaling each series' then-current LTV ratio.

- The subordination of series C principal and interest to the series A and B principal and interest.

- The revolving credit facility from BNP Paribas, which is available to cover senior expenses,including hedge payments and interest on the series A and B notes. The amount available underthe facility will equal nine months of interest on the series A and B notes.

- MBA maintenance analysis before closing. After closing, the servicer will perform aforward-looking 24-month maintenance analysis at least semiannually, which will be reviewedby MBA Aviation for reasonableness and achievability.

- The maintenance reserve account (approximately $40 million balance at closing), which is usedto cover maintenance costs. The account gets topped up to a senior and a junior requiredamount, which are sized based on a forward-looking schedule of maintenance outflows. Theexcess amounts in the account over the required maintenance amount will be transferred tothe waterfall beginning on the first payment date.

- The security deposit reserve account, which can be used to repay security deposits due andapplied to the waterfall to the extent of shortfalls on senior expenses and series A and Binterest and scheduled principal, to the extent the amount on deposit exceeds the targetamount.



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- The expense reserve account, which will be funded at closing from note proceeds withapproximately $202,000 that is expected to cover the next three months' expenses.

- The series C reserve account, which will be funded at closing from note proceeds ofapproximately $4 million, and which may be used until the 48th payment date, to pay interestand principal on the series C notes. The account is not replenished in the priority of payments.

- The senior indemnification (excluding indemnification amounts to lessees under leases enteredinto before the transaction closing date), which is capped at $10 million and is modelled tooccur in the first 12 months.

- The junior indemnification (uncapped), which is subordinated to the rated series' principalpayment.

- CAML, an affiliate of Carlyle, will act as servicer of the transaction.

- The transaction's legal structure, which is expected to be bankruptcy remote.

Transaction Strengths And Weaknesses

Strengths

The transaction's strengths are as follows:

- The transaction has performance triggers, including aircraft utilization (75%) and DSCRs (1.15xfor cash sweep and 1.20x for cash trap), and a minimum asset test, to speed up the series A andB notes' principal amortization or retain available cash if the trigger tests fail.

- The DSCR triggers are calculated on a three-month look-back basis (as opposed to six monthsin transactions issued before the pandemic). This should help detect early warning signs ofreduced cash flows and de-lever the notes based on the triggers.

- The additional amortization for the series A, B, and C notes, which applies a percentage ofavailable collections after payment of prior ranking amounts in the waterfall, to pay principal onthe respective notes.

- The transaction has a maintenance reserve mechanism that has a forward-looking feature,with an initial deposit of approximately $40 million on the closing date.

- The transaction has a liquidity facility with an available amount equal to nine months ofscheduled interest on the series A and B notes.

- The series C reserve account, which will be funded at closing with $4 million. Amounts in theaccount may be used to cover interest and principal shortfalls on the series C notes until the48th payment date after closing.

- A portion (based on the then-current aggregate LTV ratio) of the end-of-lease payments will beallocated to the series A, B, and C notes according to their pro rata percentage (unpaid amountswill accrue to subsequent payment periods).The scheduled principal payments of the series A,B, and C notes in the following periods will be adjusted down to reflect end-of-lease paymentsreceived in this period.

- Half of the utilization rents paid under certain leases for widebody aircraft is classified asexcess proceeds for current and future leases. These amounts are paid pro rata to the series Aand B notes in item 8 of the priority of payments and to the series C notes in item 14 of the



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priority of payments, and will be applied to pay principal on the notes.

Weaknesses

The transaction's weaknesses or other external factors that can negatively impact the transactionare as follows:

- The aviation sector needed to adapt to new operating conditions in the aftermath of thepandemic. In general, there has been an impact on airlines' liquidity and their ability to remaincurrent on lease payments, an increase in transition times, and stress on aircraft values andlease rates.

- Three of the lessees, Aeromexico, Philippine Airlines, and Air Changan are subject toreorganization proceedings.

- The notes have a relatively high initial LTV ratio, and the series C LTV is over 100% based onS&P Global Ratings' depreciated LMM.

- Eight aircraft--representing approximately 22% by LMM of half-life values of the aircraft--arecurrently or expect to be on power-by-the-hour (PBH) agreements for a period of time followingthe closing date.

- Lessees for seven of the aircraft are more than 30 days late in the payment of basic rent orutilization rent. Under the servicing agreement's terms, the servicer may agree to defer certainamounts due.

- Two aircraft are currently not owned by the seller. The pool's composition may differ if theissuer does not acquire the initial aircraft.

- Ethiopian Airlines leases a B777-200LR aircraft, accounting for 14% of the LMM, the largestexposure to any one airline. There are recent news reports alleging that in November 2020,Ethiopian Airlines used certain aircraft to transport weapons and other military items on behalfof the Ethiopian government, which was in violation of international aviation laws. The airlinehas denied the allegations made in the news reports, and the allegations do not relate to theaircraft in the AASET portfolio. If the airline violated international aviation laws, it is possiblethat such violations (or sanctions relating thereto, if any such sanctions were imposed) couldconstitute a default under the lease of the aircraft in the AASET portfolio, which could in turnresult in an early termination of the lease.

- All of the aircraft in the portfolio are owned by pre-existing entities. A potential liability claimarising from the pre-existing aircraft-owning entities' prior activities could have a negativeimpact on this transaction.

Mitigating factors

The following factors partially mitigate the transaction's weaknesses:

- The roll out of vaccines and improving consumer confidence should provide some boost to thesector.

- Our criteria (see "Revised Cash Flow Assumptions And Stresses For Global Aircraft And AircraftEngine Lease Securitizations," Aug. 26, 2010) and modelling assumptions apply a number ofstresses through a constant compounding factor each year to depreciate the aircraft's value,application of defaults over three separate four-year recessionary cycles, longer



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aircraft-on-ground (AOG) assumptions upon default or lease termination, and lease ratedecline assumptions, which reduce re-lease rates and the residual value upon sale of anaircraft during a modelled recession. We also ran additional break-evens on revenue haircutsand delinquencies to test the stability of the ratings (see cash flows section for details). Thenotes meet the payment requirements, as specified in the transaction documents, at theirrespective levels under these stress runs.

- In our rating run we assume zero rental collections for the aircraft on lease to Philippine Airlinesand Air Changan for the first 12 months of the transaction.

- The series C notes are entitled to supplemental amortization amounts beginning in month oneof the transaction.

- Under our cash flow runs, we only give credit to the minimum lease amounts on PBH leases,and, in the absence of it, we assume zero cash flows from that aircraft during those periods.

- We ran an additional scenario to test the transaction sensitivity to a reduction in cash flows for48 months.

- The AOE issuers are not obligated to acquire any aircraft if the applicable lessee is more than30 days late in scheduled lease payments. Subject to certain conditions, if the aircraft is notacquired, the issuer may replace with another aircraft or redeem the allocable portion of thenotes, which will alter the pool composition and/or concentration.

- The replacement of aircraft not transferred to the issuer during the 270-day acquisition periodare subject to certain requirements, including that the replacement aircraft is subject to anoperating lease with an aggregate rent payment for the remaining lease term with a presentvalue that equals or exceeds the present value of the basic rent payments for the aircraft thatwas replaced, and that a widebody aircraft may not replace a narrowbody aircraft.

- In our analysis, we apply defaults from highest to lowest aircraft value. Ethiopian Airlinesdefaults in month one and then remains off lease in our model for 15 months, 14 months, and12 months under our 'A', 'BBB', and 'B' rating stresses, respectively, before being put back onlease.

- The pre-existing aircraft-owning entities have been restricted to owning, acquiring, and leasingthe aircraft. There are also local law and FAA opinions, which state that the aircraft have noother liens except for the liens in favor of the security trustee. The seller is expected to providean officer's certificate and representations and warranties in the contribution agreement,stating that there are no other liens on these aircraft except for the liens in favor of the securitytrustee.

Environment, Social, And Governance (ESG) Factors

Our rating analysis considers a transaction's potential exposure to ESG credit factors. In our view,the transaction has material exposure to environmental and social credit factors.

Under the environmental credit factors, we consider the additional costs airlines who lease theaircraft may face, or reduced aircraft values and lease rates, due to increasing regulation ofgreenhouse gas emissions. Although aviation produces a small portion (less than 3% currently) ofglobal transport emissions, they are increasing and are difficult to reduce.

Under the social credit factors, we believe that planes are a high-profile target for terrorism andinternational routes can be disrupted by war. Health concerns, such as the pandemic, havedramatically reduced air traffic, revenue, and earnings. Airlines carry insurance for potential



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liabilities, though particularly catastrophic attacks may exhaust their coverage and require agovernment backstop. Human capital management represents another exposure because manyairlines are heavily unionized and strikes can be very costly and disruptive. Safety is also a riskbecause airplane accidents are highly visible and deadly (albeit rare statistically, and aircraftvalue is typically covered by insurance).

We have generally accounted for this risk by applying stresses to the re-lease rates and residualvalues upon sale of the aircraft. We assign aircraft-specific depreciation rates along withaircraft-specific technological and liquidity scores that determine the stress to re-lease rates andresidual values. Our modelled recessionary periods and the default rates applied during theseperiods generally capture the impact on an airline's credit quality.

The structural features, such as the deleveraging of notes under events of stress determinedthrough trigger events, and the availability of a liquidity facility covering nine months' interest onthe senior notes, could generally protect the notes from an unexpected reduction in lease incomeand liquidation value due to the environmental and social credit factors.

Legal Structure

AASET is a Delaware statutory trust that will issue the initial notes (series A, B, and C notes) undera master indenture. AASET expects to use the proceeds of the notes to acquire all of the AOE notes(series A, B, and C notes) issued by the two AOE issuers (AASET 2021-1 US Ltd. [AASET US] andAASET 2021-1 International Ltd).

Each of the AOE issuers was established as special purpose entity to acquire and indirectly own aportfolio of aircraft that are subject to leases and to finance, refinance, lease, re-lease, maintain,modify, part-out, and dispose of its assets, which are expected to initially consist of the initial 34aircraft, and engage in other business activities relating thereto subject to the limits set forth inthe AOE indentures. Each AOE issuer is governed by a Board of Directors. The AOE issuers willacquire the initial aircraft through the acquisition of the transferred entities that directly orindirectly own or will acquire the initial aircraft.

Payments on the AOE notes will be used to make payments to the initial notes. Each AOE issuerjointly and severally guarantees the obligations of the other AOE issuer under the AOE notes andthe obligations of AASET under the initial notes.

After the transaction closes, the master issuer will rely on the cash flow it receives from the AOEnotes to pay interest and principal on the initial notes.

Chart 1 describes the transaction's anticipated structure at the end of the purchase period.Dotted lines indicate payment or performance obligations, and solid lines indicate ownershipinterests.



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Chart 1

As security for its obligations under the initial notes, AASET will pledge its interests in the AOEnotes to the security trustee.

As security for their obligations under the AOE notes and the guarantees, the AOE issuers andtheir subsidiaries will pledge the following to the security trustee:

- The interests in the aircraft and engines;

- The beneficial interests in the AOEs and in certain other wholly owned subsidiaries;

- The leases and associated payments;

- The accounts;

- The cash on hand and invested cash;

- The interests under any hedge agreements and the liquidity facility;



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- Certain other collateral; and

- The collateral proceeds.

The transaction features the registration of interests under the Cape Town Convention (theConvention) and its related aircraft equipment protocol, to the extent applicable. The Conventionis an international treaty that creates a centralized electronic registry for interests, referred to as"international interests in aircraft objects," such as those in the portfolio. When internationalinterests are created and assigned, they must be registered under the Convention to ensure thatthe interests and their relative priorities are effective against other subsequently registeredinternational interests.

Currently, 11 of the initial leases are to airlines based in countries that are not parties to the CapeTown Convention. All of the aircraft owners are located in a contracting state under the Conventionand are expected to pledge interest in their aircraft and engines to the security trustee, which isexpected to be registered as an international interest under the Convention. Other interests in theaircraft that may be registered under the Convention include certain lease agreements andinternational interest assignments.

Similar to other aircraft securitizations, local law mortgages generally will not be filed in theaircraft registries where the aircraft are registered, even though security interests will be grantedunder the security agreement and, in some cases, registered under the Convention. If the securitygranted under the security agreement is not effective in a local jurisdiction because a mortgagehas not been filed, then a registration under the Convention would not necessarily enablecreditors to exercise certain direct rights and remedies regarding the aircraft. However, if aninternational interest under the Convention is created but not registered, then the unfiled interestcould be primed by a subsequently filed international interest in terms of the international registrypriority scheme.

Preexisting AOEs

All of the aircraft in this portfolio are owned by preexisting entities and many are subject to theliens of the existing transaction. There is risk associated with potential liabilities arising from apreexisting AOE leasing activities. All prior financing on the aircraft in the portfolio will be releasedas of the closing date.

Transaction Comparison

Table 1 provides a comparison of recent aircraft securitization transactions.

Table 1

Transaction Comparison(i)

AASET2021-1 Trust

CastlelakeAircraftStructuredTrust2017-1R

MAPS2021-1Trust

Tailwind2019-1

Raptor2019-1

WAVE2019-1 LLC

JOL Air Ltd.Series2019-1

MAPS2019-1Ltd.

ZephyrusCapitalAviationPartners2018-1Ltd. START Ltd.

MAPS2018-1Ltd.

Servicer CarlyleAviationManagementLtd.

CastlelakeAviationHoldingsLtd.

MerxAviationServicingLtd.

AirborneCapital Ltd.

SeraphAviationManagementLtd.

WingsCapitalPartnersLLC

Stratos MerxAviationServicingLtd.

ZephyrusAviationCapital Ltd.

GE CapitalAviationServicesLtd.

MerxAviationServicingLtd.



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Table 1

Transaction Comparison(i) (cont.)

AASET2021-1 Trust

CastlelakeAircraftStructuredTrust2017-1R

MAPS2021-1Trust

Tailwind2019-1

Raptor2019-1

WAVE2019-1 LLC

JOL Air Ltd.Series2019-1

MAPS2019-1Ltd.

ZephyrusCapitalAviationPartners2018-1Ltd. START Ltd.

MAPS2018-1Ltd.

LMM of aircraft half-life base values andhalf-life current market values (mil. $)

824 471 597 701 827 781 638 521 454 703 605

Class A initial LTV (%)(iii) 75 67 70 73 67 71 72 63 74 61 69

Class A initial rating A (sf) (ii) A (sf) A (sf) (ii) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf) A (sf)

Class B initial LTV (%)(iii) 90 83 82 84 81 82 83 76 N/A 78 78

Class B initial rating BBB- (sf) (ii) BBB (sf) BBB (sf) (ii) BBB (sf) BBB (sf) BBB (sf) BBB (sf) BBB (sf) N/A BBB (sf) BBB (sf)

Class C initial LTV (%)(iii) 99 95 90 91 88 87 87 83 N/A 84 84

Class C initial rating B (sf) (ii) B- (sf) BB (sf) (ii) BB (sf) BB (sf) BB (sf) NR BB (sf) N/A BB (sf) BB (sf)

Classes A and B scheduled amortization tozero (years)

14-yearclass A,13-yearclass B

12-yearstraightline

13-yearstraightline

13.5-yearstraightline

14-yearstraightline

14-yearstraightline

14-yearstraightline

12.5-yearstraightline

12-yearstraightline

14-yearstraightline

13-yearstraightline

Expected maturity (years) 7 6 7 7 7 8 7 7 7 7 7

No. of aircraft 34 34 20 17 19 23 15 19 21 24 25

Weighted avg. age (years) 10.47(iv) 16.7 5.8 4.7 3.9 4.5 4.1 8.5 13.3 8.2 9.0

Weighted avg. remaining lease term (years) 5.28(iv) 3.8 8.4 6.3 6.8 6.4 8.1 5.2 2.9 4.0 4.4

Developing market exposure (%) 71 41 34 60 80 91 72 76 29 64 56

Narrow-bodies/wide-bodies/cargo/regionaljet (%)

72/14/14/0 72/28/0/0 82/0/18/0/0 75/25/0/0 67/33/0/0 100/0/0/0 63/37/0/0 89/11/0/0 69/31/0/0 89/11/0/0 100/0/0/0

Largest initial country concentration (%) Ethiopia(14.1)

Russia(20.1)

U.S. (30.2) Indonesia(13.9)

China (14.2) Vietnam(19.1)

Malaysia(23.6)

U.S. (20.1) SouthKorea(17.1)

India (14.7) U.S. (33.6)

Largest initial lessee (%) EthiopianAirlines(14.1)

AmericanAirlines(16.7)

Delta AirLines (23.8)

Air France(12.9)

Avianca(12.4)

Interjet(11.1)

QatarAirwaysQ.C.S.C.(18.7)

Avianca(15.7)

Qantas(12.9)

Jet AirwaysIndia Ltd.(14.7)

American(15.9)

(i)All percentages and averages are weighted by the aircraft initial appraised values as per transaction documents. (ii)Expected. (iii)Based on LMM of half-life base values and half-life current market values. (iv) As of Sept. 30,2021. LMM--Lower of the mean and median. LTV--Loan-to-value. N/A--Not applicable.

Portfolio Overview

Table 2 provides a summary of the transaction's closing aircraft portfolio.



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Table 2

Closing Aircraft Portfolio

No.SerialNumber Aircraft model

Date ofManufacture Lessee

LMM of HLBV andHLMV ($)

MBA maintenanceadjustment (July 2021)

1 1369 A319-100 11/20/2000 AmericanAirlines

7,796,108 (2,326,741)


7,796,108 2,632,321


7,850,204 (1,758,285)


7,850,204 (2,085,907)

5 32710 B777-300ER 6/9/2006 Rossiya 37,680,000 (3,128,300)

6 35676 B777-300ER 6/30/2006 Air France 37,790,000 15,699,098

7 35677 B777-300ER 8/3/2006 Air France 38,220,000 18,449,938

8 31765 B737-800 6/14/2010 UTair 20,622,344 5,195,706

10 35785 B737-700 8/8/2006 Nordavia 11,925,589 3,702,452

11 35222 B737-800 12/14/2007 Air China 16,920,000 (3,346,367)

12 4793 A320-200 8/4/2011 AirAsia Berhad 20,372,023 7,279,970

12 5397 A320-200 12/13/2012 AirAsia Berhad 22,557,467 (6,009,168)

13 5505 A320-200 2/27/2013 AirAsia Berhad 23,135,573 (4,842,000)

14 3237 A320-200 8/30/2007 Vueling 13,937,600 1,408,879

15 35089 B737-800 9/14/2006 Air Changan 15,616,530 (1,113,192)

16 31161 B737-800 1/25/2013 AmericanAirlines

24,800,791 (2,284,352)

17 39018 B737-800 12/19/2012 Aeroméxico 25,270,949 (3,737,134)

18 31713 B737-800 3/23/2010 Aeroméxico 20,466,383 6,319,758

19 39319 B737-800 2/14/2011 MalaysiaAirlines

21,686,796 (4,860,330)

20 39320 B737-800 6/28/2011 MalaysiaAirlines

22,081,779 (4,595,333)

21 29682 B737-800 4/3/2009 Oman Air 18,830,000 5,863,250

22 39330 B737-800 2/25/2013 ShandongAirlines

25,106,791 3,105,836

23 39332 B737-800 6/12/2013 ShandongAirlines

25,598,533 (4,273,914)

24 34901 B737-800 5/18/2007 Transavia 16,040,000 6,609,443

25 34902 B737-800 6/29/2007 Transavia 16,140,000 2,589,352

26 37238 B737-800 11/22/2010 TUI 21,273,905 (3,833,286)

27 6432 A321-200 1/20/2015 Condor 31,615,100 1,739,782

28 6330 A321-200 10/28/2014 PhilippineAirlines

31,103,200 1,520,831

29 39070 B737-800 12/15/2014 El Al 28,394,733 4,113,166

30 39069 B737-800 10/21/2014 Izhavia Air 28,394,733 (1,240,534)



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Table 2

Closing Aircraft Portfolio (cont.)

No.SerialNumber Aircraft model

Date ofManufacture Lessee

LMM of HLBV andHLMV ($)

MBA maintenanceadjustment (July 2021)

31 42805 B737-800 11/24/2014 Samoa Airways 28,394,733 3,723,428

32 42034 B777-200LRF 10/22/2015 EthiopianAirlines

116,096,691 (1,187,755)

33 3410 A320-200 2/22/2008 Ural 15,977,000 (299,413)

34 3785 A320-200 2/11/2009 Aegean 17,346,275 6,938,235

Total 824,688,143 45,969,436

LMM--Lower of the mean and median. HLBV--Half-life base value. HLMV--Half-life market value. MBA--Morten Beyer & Agnew Inc.

Leases of Note

Airline bankruptcy/restructurings

Three of the initial lessees (representing approximately 11% of total portfolio based on the S&Pcalculated LMM) are subject to reorganization proceedings: Aeromexico, Philippine Airlines, andAir Changan. As noted in more detail below, the delivery and/or acquisition of the aircraft by theissuer are subject to conditions precedent.

Aeromexico

There are two aircraft on lease to Aeromexico, representing approximately 5.5% of the pool byLMM. The leases have been approved by the bankruptcy court and Aeromexico is current on itspayment under the lease agreements. In our rating run, we assume lease rent is paid pursuant tothe terms of the lease.

Philippine Airlines

There is one aircraft on lease to Philippine Airlines, which represents approximately 3.8% of thepool by LMM. As part of the reorganization plan, which remains subject to bankruptcy courtapproval, the lease with Philippine Airlines will be amended to include PBH payments beginningafter the debtor in possession financing is obtained. In our rating run, we assume no payments aremade for the first 12 months of the transaction.

As a condition to the transfer of the aircraft, as of the transfer date, the bankruptcy court musthave entered an order authorizing Philippine Airlines to assume the restructuring supportagreement filed by the lessee in its chapter 11 restructuring case.

Air Changan

There is one aircraft on lease to Air Changan, which represents approximately 2.0% of the pool byLMM. The bankruptcy court approved the lease amendment, which provides for rent payments tobegin approximately three months after approval from bankruptcy court of the emergence plan. In



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our rating run we assume no payments are made for the first 12 months of the transaction.

Up to six months of basic rent will be withheld from the purchase price payable to the seller andwill be applied to available collections prior to the date when the lessee begins paying basic rent.

Aircraft subject to PBH agreements

As of the closing date, the initial leases associated with eight aircraft (B737-800, A321-200, andA320-200), which represent approximately 22.3% by LMM include PBH provisions. In our analysiswe give credit to minimum lease payments and if no minimum, zero cash flow credit during thePBH period.

Unowned aircraft

Two of the aircraft were not owned by the seller or its affiliate as of Oct. 8, 2021, and may not beacquired before closing. During the purchase period, amounts may be withdrawn from theacquisition account and deposited into the collection account for distribution through thepayment priority. Should the issuer not purchase the aircraft, the seller may be liable forrescission payments.

The AOE issuers are not obligated to acquire the aircraft if the lessee is more than 30 days late inscheduled monthly lease payments.

If the aircraft are not acquired and a replacement aircraft is not acquired, the AOE issuers willapply the allocable portions of the balance in the unowned aircraft reserve account to redeem thenotes. Given the diversification of the initial portfolio, the non-transfer of these two aircraft is notexpected to introduce any significant concentration risk in the transaction.

FX exposure

A portion of the lease payments due from one lessee are payable in euros. In our analysis, weconvert the euro dollar payment to U.S. dollar, assuming the 10-year average historical euro/U.S.dollar spot rate for and further depreciate the lease rental paid by 54%, based on our structuredfinance foreign exchange risk criteria. All subsequent re-leasing revenues under our cash flowprojections from this aircraft are assumed to be in U.S. dollars. The transaction documents alsolimit non-U.S.-dollar exposure at 5% at any time.

Initial Asset Values

We have received aircraft appraisals as of July 2021 from AVITAS Inc., Collateral Verification LLC,and MBA. Each appraiser provided us with the half-life base value (HLBV) and half-life currentmarket value (HLMV) of each aircraft in the portfolio.

Unlike the maintenance-adjusted value, which reflects an aircraft's actual technical status andmaintenance condition, the half-life value assumes that an aircraft is halfway between majormaintenance overhauls. We use the half-life value in our analysis to project future lease rentals.

To project the initial aircraft portfolio's cash flow, the half-life value we use is the LMM of thethree appraisers' HLBVs and HLMVs, which totals $824,688,142 for this portfolio. We use thishalf-life value in both our cash flow modeling and portfolio statistics. Using our depreciation rateassumptions for each aircraft type as listed later in the report, the depreciated aircraft value as of



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October 2021 is $810,216,513.

The initial appraised value reported in the transaction documents is $992,211,076, which equalsthe sum of the average of the three appraisers' HLBVs as of their appraisal date and maintenanceadjustments as of July 2021 (see table 3).

Table 3

Initial Asset Portfolio Values

Appraisals

Half-life base value ($) Half-life current market value ($)

Morten Beyer & Agnew Inc. 926,480,000 806,250,000

Collateral Verification LLC 1,066,526,728 788,281,651

AVITAS Inc. 845,718,193 773,760,136

LMM of half-life base values and half-life currentmarket values

-- 824,688,142

Average of half-life base values -- 946,241,640

Initial appraised value reported in the transactiondocuments

-- 992,211,076

LMM--Lower of the mean and median.

Aircraft Asset Analysis

All percentages are based on the LMM of HLBV and HLMV of $824,688,143.

Aircraft type

The initial aircraft portfolio consists of 30 narrowbody, three widebody aircraft, and one freighter.

Table 4

Initial Asset Portfolio Composition By Aircraft Type

Aircraft model LMM half-life value % of LMM No. of aircraft Average age (years) (i) Airframe still in production?

A319-100 3.8 4 20.83 Yes

A320-200 13.7 6 10.93 Yes

A321-200 7.6 2 6.81 Yes

B737-700 1.4 1 15.14 Yes

B737-800 45.5 17 10.05 Yes

B777-200LRF 14.1 1 5.94 Yes

B777-300ER 13.8 3 15.24 Yes

(i)Based on the LMM half-life value and calculated as of Sept. 1, 2021. LMM--Lower of mean and median.

Approximately 25% of the portfolio's value consists of Airbus' A320 family aircraft: four A319-100s(4%), six A320-200s (14%), and two A321-200s (8%). The A320-200, a medium-sized, narrowbodyjet introduced in 1989, remains one of the most widely used and marketable aircraft. TheA319-100, introduced in 1994, is a similar but slightly smaller model than the A320-200. The



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A319-100, A320-200, and A321-200 models have broad airline user bases that would likely attractmany potential lessees if an aircraft in the portfolio is repossessed from its original lessee.

Airbus delivered its first new fuel-efficient engine option version (neo) of these planes in January2016. This version is up to 15% more fuel efficient than the A320-200. However, we don't foresee asubstantial negative value on A320-200 lease rates and values for the foreseeable future, sincereplacing all of the current A320 family will take many years.

Approximately 14% of the portfolio's value consists of one B777-200LRF aircraft. TheB777-200LRF is an in-production widebody freighter. The freighter market saw an increase inutilization during the COVID-19 pandemic as passenger flights decreased, resulting in lesstransports in the lower cargo hold. According to Boeing, prior to the pandemic, almost 50% of aircargo worldwide was transported in the widebody's lower cargo hold. During the COVID-19pandemic, freighter operators responded to the sharp decline in widebody passenger capacity byoperating above-normal utilization rates and delaying aircraft retirements, among other things.However, these measures were not sufficient to offset the loss in passenger widebody lower-holdcapacity and capacity was still below 2019 levels.

An additional 14% of the portfolio's value comprises three B777-300ER aircraft. Older vintagesmay see a decline in value as operators turn to younger, more efficient aircraft such as the Boeing787 and Airbus A350.

We consider the B737-800 to be, along with the A320-200, the best aircraft collateral currentlyavailable, given its very extensive user base and strong residual value performance. However, as isthe case for the Airbus narrowbody aircraft, Boeing has introduced a successor model--the MAXversion, featuring new, fuel-efficient engines and some other changes. In addition, the neo versionof the Airbus A320 has already been in service since 2016, unlike the MAX. Although operationsand deliveries of the MAX version have resumed after being grounded for almost two years due totwo crashes of the model, given the size of the existing B737-800 fleet and the long backlog for theMAX version, we do not expect material downward pressure on the value of these planes in theforeseeable future.

Aircraft depreciation and useful life

For aircraft that employ older technology or have other adverse asset risk factors, assumeddepreciation would be more rapid (and vice versa). We applied an annual compoundingdepreciation rate (see table 5) on the preceding year's value. Our depreciation rates generallycorrelate with our views on the aircraft models' resale liquidity and technological risk.

Table 5

Aircraft Depreciation And Useful Life

Aircraft Annual compounding depreciation (%) Aircraft useful life (rating run) (years)

A319-100 93.0 22

A320-200 93.0 22

A321-200 92.5 22

B737-700 93.0 22

B737-800 94.0 22

B777-200LRF 92.0 30

B777-300ER 92.5 22



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Given the age of the aircraft, the drastic decline in passenger demand during COVID-19, therelated decrease in capacity among airlines, and the introduction of more fuel-efficienttechnology, including the clearance of the 737 MAX, we assume a 22-year useful life for all aircraftin the portfolio other than the freighter (B777-200LRF). For the freighter, we assume a 30-yearuseful life, and assume the aircraft is sold in the last period of the transaction.

Initial asset age

The aircraft in the portfolio were manufactured between 2000 and 2015. The weighted averageage of the total portfolio is 10.47 years as of Sept. 1, 2021, based on the half-life values (see chart2).

Although most of these aircraft models are still in production, aircraft that are manufactured nearthe end of the model's production tend to have higher volatility in value retention than earlierproduced aircraft.

Chart 2

Lessee Analysis

The top three lessees represent approximately 31.3% of the portfolio by portfolio value (see tables6 and 7). Our CDO Evaluator considered the lessee concentration and correlations; therefore, ourprojected default rates at various rating stresses reflect this portfolio's lessee concentration. Tothe extent any of the aircraft are not acquired by the issuer, portfolio exposures will differ.



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Table 6

Lessee Country Distribution

Country LMM half-life value (%) No. of aircraft

Ethiopia 14.0 1

Russia 13.9 5

France 13.4 4

Malaysia 13.2 5

China 10.1 4

U.S. 6.8 5

Mexico 5.5 2

Germany 3.8 1

Philippines 3.8 1

Samoa 3.4 1

Israel 3.4 1

U.K. 2.6 1

Oman 2.3 1

Greece 2.1 1

Spain 1.7 1


Table 7

Lessee Distribution

Lessee LMM half-life value (%) No. of aircraft

Ethiopian Airlines 14.0 1

Air France 9.4 2

AirAsia Berhad 8.0 3

American Airlines 6.8 5

Shandong Airlines 6.1 2

Aeroméxico 5.5 2

Malaysia Airlines 5.3 2

Rossiya Airlines 4.7 1

Transavia 3.9 2

Condor 3.8 1

Philippine Airlines 3.8 1

El Al 3.4 1

Izhavia Air 3.4 1

Samoa Airways 3.4 1

TUI 2.6 1

UTair 2.5 1



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Table 7

Lessee Distribution (cont.)

Lessee LMM half-life value (%) No. of aircraft

Oman Air 2.3 1

Aegean 2.1 1

Air China 2.1 1

Ural 1.9 1

Air Changan 1.9 1

Vueling 1.7 1

Nordavia 1.4 1


The initial airline lessees' overall credit quality is estimated to be well into the speculative-gradecategory ('BB+' or below), which is typical for aircraft operating lease portfolio securitizations. Weuse our CDO Evaluator to generate the aircraft portfolio-level default rate. The simulation modelinputs include lessee name, lessee credit quality, aircraft value, correlation within the airlineindustry, lessee country, country rating, and correlations among countries and regions. For airlinelessees in the portfolio that S&P Global Ratings does not rate, we will provide a credit qualityestimate. Our credit quality estimate takes into consideration public information, including,among other things, company structure and parent entities.

Chart 3 shows the initial asset portfolio distribution by initial lease remaining maturity.

Chart 3



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Aircraft Leasing Business Outlook

Prior to the COVID-19 pandemic, airline traffic had been growing at approximately twice the rate ofglobal GDP. Had this growth rate continued, aircraft manufacturers estimated the need for around30,000-40,000 new aircraft over the next 20 years, a majority to support growth, rather thanreplacing retired aircraft. However, global air traffic declined sharply as a result of the COVID-19pandemic and the various regulations and restrictions on air travel since March 2020. According tothe International Air Transport Assn., global traffic declined by around 66% in 2020 compared with2019 levels and recovery will vary based on travel restrictions in the area and vaccinations in theregion. We expect the recovery to be slow and at a varying pace across jurisdictions, and that thetraffic levels in 2021 could still be 40%-60% lower than in 2019. With more widespreadvaccinations, airline traffic has recovered close to pre-pandemic levels in the domestic leisureshort haul routes such as in China and in the U.S. We expect longer-haul and business traffic totake longer to recover--likely not for a few years. According to the Boeing Commercial MarketOutlook 2021-2040, released April 2021, the rebounding domestic travel volumes indicate resilientdemand for air travel once COVID-19 health concerns begin to recede and governments are able toease travel restrictions.

Aircraft lessors account for around 40% of the total global aircraft fleet, a proportion that couldincrease to perhaps 50% in coming years. However, the pandemic and traffic decline has resultedin the need for fewer aircraft in general. This is especially the case for widebody aircraft, asinternational traffic has declined to a greater extent than shorter haul and mostly domestic trafficlargely served using narrowbody aircraft. This is due in large part to widespread quarantines andpassenger concerns about lengthy flights and the possibility of being stranded overseas. Manyairlines have sharply reduced their fleets by parking aircraft until demand recovers and retiringsome of them permanently. At the same time, near-term airline and aircraft lessor order books fornew aircraft from the manufacturers have been sharply reduced, either through deferrals oroutright cancellations.

Thus far, the lessors have fared better than their airline customers, some of which have filed forbankruptcy or, in some cases, shut down. Against this backdrop, aircraft lessors have experiencedextensive requests for rental deferrals from airline customers. A significant portion, especially forthose airlines receiving government aid and which are expected to survive, have been granted. Thedeferrals, which have abated, have mostly been for several-month periods, with the expectationthey will be fully repaid later in 2021 or over a more extended period. Indeed, many of the Chineseairlines, which were the earliest to request deferrals, have already begun to repay, as they havepartly restored their flying. Aircraft repossessions have so far been less common and in thosecases, lessors have mostly been able to sign leases with new airlines, albeit at lower lease rates.In some cases lessors have helped airline customers raise liquidity by buying some of their aircraftand leasing them back to the airline.

Aircraft lessors have also cancelled or deferred new aircraft deliveries, a situation that has beenaided by the grounding (March 2019 to December 2020) of the Boeing 737 MAX, as well asproduction cutbacks by the manufacturers, the latter a trend we expect to continue over the nextfew years due to weaker demand. Most aircraft lessors have maintained strong liquidity, withaccess to the capital markets, including for unsecured debt. Many aircraft lessors also haveexperienced management teams, who have been through previous industry downturns (e.g., after9/11 and the global financial crisis), although the breadth of this downturn is unprecedented.However, even in this environment, for the most part, aircraft lessors rated by S&P Global Ratingshave maintained their ratings. Most aircraft lessors also have stable outlooks as the impact fromlower revenues and cash flow has been less negative on their credit metrics than originally



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expected. We have maintained negative outlooks on others for other reasons, such as AerCap'sproposed acquisition of GECAS. Lessors that ran into financial difficulties have been those thatwere relatively small with mostly encumbered assets and weak liquidity.

While we still believe the outlook for aircraft lessors is positive over the longer term, theenvironment over the nearer term is cloudier due to the impact from the pandemic. The scale ofrental deferrals has been greater than we initially anticipated. If most of these are repaid in 2021or in 2022, this will have limited credit implications, since the lessors mostly have strong liquidity.However, we expect lease rates to remain under pressure and not return to pre-pandemic levelsfor several years. Yet, we expect lessors to continue to benefit from the use of their balance sheetsto provide liquidity to the airlines over the nearer term. Over the longer term, we expect them tobenefit from their newer and more efficient aircraft that will be in great demand as the emphasison ESG becomes more prevalent.

In the aircraft securitization space, we saw some significant reductions in lease revenues due tothe deferral requests, PBH agreements, and late payments by the lessees. Most of thetransactions saw a steep decline in their DSCR (even below 1x) due to a combination of reducedcollections and accumulation of unpaid scheduled principal payment amounts. All transactionshave a liquidity reserve or a third-party provided liquidity facility to cover interest payments on thesenior notes (typically sized at nine months' interest on the senior notes). The subordinated notesdid not receive their interest payments, which gets added to the outstanding principal balance ofthe series, thereby increasing their LTVs. We took several rating actions to reflect the impact of thestress on these transactions (see "Various Actions Taken On Four Aircraft ABS Transaction,"published Sept. 30, 2021; and "Merlin Aviation Holdings DAC Class A, B, and C Notes Lowered; OffCreditWatch," published Sept. 3, 2021, and "Various Actions Taken On Aircraft And Aircraft EngineABS Transaction Ratings Previously Placed On Watch," published Sept. 15, 2020

Servicer Review

CAML, an affiliate of Carlyle, is the servicer for the transaction. It will provide the transaction withre-lease remarketing, aircraft/engine sales, and other professional services.

Carlyle was founded in 2002 and now has over 90 employees with offices in Miami, Dublin, andSingapore. Over the years, Carlyle has developed expertise in the origination, marketing, andtechnical analysis of aircraft, among other aspects. Carlyle is experienced in investing incommercial aircraft, engines, and components across their lifecycle.

As of June 30, 2021, Carlyle had approximately $8.5 billion in assets under management including310 commercial aircraft owned, managed, or committed to purchase.

In August, Carlyle completed its acquisition of FLY Leasing Ltd. (FLY), a global aircraft leasingcompany. The seller acquired a number of the assets in connection with the acquisition.

Other Service Providers

Maintenance appraiser

The issuer contracted MBA to forecast the transaction's life-time maintenance-related cash flowsbefore the transaction closes. After the transaction closes, the servicer will provide aforward-looking 24-month maintenance expense projection at least semiannually. The servicer'sprojections will be reviewed and confirmed by MBA for reasonableness and achievability.



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Initial liquidity facility provider

BNP Paribas, New York Branch (A+/Stable/A-1) will provide a liquidity facility that may be drawnon to pay expenses, any senior hedge amounts due, and interest on the series A and B notes. Therating on BNP Paribas is expected to be consistent with our counterparty criteria to support thepreliminary ratings we assigned to the notes. The transaction's threshold rating requires along-term issuer credit rating of 'BBB' or better, which is consistent with S&P Global Ratings'counterparty criteria.

Security trustee, trustee, and operating bank

UMB Bank N.A. (A/Negative/A-1) will act as the security trustee, trustee, and operating bank. UMBBank will continue to be the operating bank so long as it is rated at least 'BBB' by S&P GlobalRatings.

Managing agent

Canyon Financial Services Ltd. will act as managing agent. The managing agent will performcertain administrative and cash management services, including producing the monthly,quarterly, and annual reports.

Transaction Provisions

Maintenance reserve account

The transaction has a maintenance reserve account that will be funded at $40 million on theclosing date. The account will be used to primarily cover the portfolio's maintenance expense. Theaccount will be replenished at different levels in the priority of payments up to the maximumsenior reserve required amount (step four of the priority of payments pre-default) and themaximum junior reserve required amount (step seven of the priority of payment pre-default). Therespective required amounts will be sized as a percentage of the projected maintenance expensesdue, on a forward-looking basis as specified in table 8 below (the required amount will be theaggregate value derived from such calculation). The maximum junior reserve required amount willbe the excess of the junior maintenance required amount over the amount on deposit in themaintenance reserve account.

Table 8

Maintenance Required Amounts--Payment Period 1-29

MonthSenior maintenance required amount (% of

projected maintenance expenses)Junior maintenance required amount (% of

projected maintenance expenses)

1 100 100

2 80 95

3 60 90

4 40 85

5 20 80



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Table 8

Maintenance Required Amounts--Payment Period 1-29 (cont.)




6 -- 75

7 -- 70

8 -- 65

9 -- 60

10 -- 55

11 -- 50

12 -- 45

13 -- 40

14 -- 35

15 -- 30

16 -- 25

17 -- 20

18 -- 15

Table 9

Maintenance Required Amounts--Payment Period 30-83




1 100 100

2 50 95

3 30 87.5

4 20 70

5 10 65

6 -- 60

7 -- 55

8 -- 50

9 -- 50

10 -- 50

11 -- 50

12 -- 45

13 -- 45

14 -- 45

15 -- 45

16 -- 45

17 -- 35

18 -- 25



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Table 10

Maintenance Required Amounts--Payment Period 84 And Thereafter




1 100 100

2 100 100

3 100 100

4 100 100

5 100 100

6 100 100

7 100 100

8 100 100

9 100 100

10 50 100

11 -- 100

12 -- 100

13 -- 100

14 -- 100

15 -- 100

16 -- 100

17 -- 100

18 -- 100

Security deposit account

Since the security deposits on the leases are not transferred to the issuer, it becomes the issuer'sobligation to repay the deposits when they become due upon a lease expiration. On the closingdate, the account will not be funded. The amounts in the account can be used to repay securitydeposits due amounts, remarketing/reconfiguration/repossession (RRR) costs, maintenancecosts, interest and scheduled principal payment amounts on the series A and B notes, liquidityfacility advance obligations, and the liquidity facility reserve account top up. The account will bereplenished in step 6 of the priority of payment pre-default, up to the target security depositreserve amount, which is the sum of 100% of any cash security deposit not required to bemaintained in a segregated account relating to leases expected to expire over the next 12 months.The maximum amount that can be drawn from this account to cover expenses other than securitydeposit repayments will be the excess, if any, of the balance in the account over the look forwardamount. On any payment date, the excess in this account over the required amount will betransferred to the collections account.

Series C reserve account

This account will have a balance of $4 million on the closing date. The account can be used tocover interest and principal payments on the series C notes until the 48th payment date after



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closing. The account will not be replenished in the waterfall.

Expense account

The transaction has an expense account funded at $202,000 on the closing date to cover for anysenior expenses. The account is sized to cover the next three months' expenses (like RRR costsand per aircraft fees) and is replenished at the top of the waterfall.

Scheduled amortization

The series A and B notes' scheduled principal payments are aircraft-specific and range from7%-11% principal amortization for narrowbody aircraft and 11%-12.5% principal amortization forwidebody. Average principal amortization for series A is approximately 9.4%, and 10% for series B.The last scheduled principal payment date is 14 years for class A, and 13 years for class B. Theseries C notes' scheduled amortization is straight line over seven years.

Similar to most aircraft securitization transactions rated by S&P Global Ratings prior to thepandemic, this transaction has an expected final payment date (seven years post-closing), afterwhich the amortization will be full turbo after scheduled principal payments.

Acquisition balance redemption

The notes may be partially redeemed in the event that aircraft is not transferred to the issuer bythe end of the purchase period and a replacement aircraft is not delivered to the issuer. Theprincipal amount of the redemption of each series of notes will equal the amount allocated to eachseries of notes.

Excess proceeds payment

The excess proceeds payment equals the pro rata portion of 105% of any excess proceedscollected.

Excess proceeds include:

- End of lease payments, proceeds, or fees associated with the restructuring or termination of alease, and the re-leasing of all or part of the same aircraft to the same lessee;

- Lease payments (other than any security deposit) under a "green-time" lease, where the lesseeis not obligated to perform any maintenance that would require a shop visit, and where theaircraft may be returned with less than 25% life return status;

- Lease payments under a lease that is a finance lease under U.S. GAAP;

- 50% of the utilization rent received under the leases (including future leases) for the aircraftbearing manufacturer's serial numbers 32710, 35676, 35677, and 42034 (and any widebodyreplacement aircraft acquired to substitute an initial aircraft);

- 50% of the utilization rent received under a future lease of any Boeing 777-300ER or Boeing777-200LRF aircraft, other than the previously referred to widebody aircraft;

- Payments relating to the re-leasing if the aircraft's adjusted base value at the time of there-leasing is less than 75% of the allocable notional series amount for the asset as of theimmediately preceding payment date; and



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- Other payments by a lessee in lieu of maintenance or future lease payments, or any otherobligations under a lease, other than amounts equal to amounts that are either used orreasonably expected to be used (as reasonably determined by the servicer) to discharge thecost of performing any maintenance or repair of an asset.

Rapid amortization with respect to the series A and B notes

A rapid amortization event includes any of the following:

- The DSCR is below 1.15x within a three-month period from the third-month anniversary of theinitial closing date;

- The utilization test is breached (less than 75% of the adjusted portfolio value of the aircraft isutilized) within a three-month period;

- The AOE issuers, collectively and indirectly, at any time own fewer than eight aircraft;

- The seventh anniversary of the initial closing date has occurred; or

- At the election of the AOE issuers (as directed by the Board of Directors) if there is a DSCR cashtrap event.

Cash trap

A DSCR cash trap event occurs on a payment date occurring on or after the third payment dateafter the initial closing date when the DSCR for that payment date or either of the two immediatelypreceding payment dates is less than 1.20x. If a DSCR cash trap event has occurred and iscontinuing, but no rapid amortization event has occurred, all the remaining collections will betransferred to the cash trap account. On the next payment date, amounts in the cash trap accountwill be transferred to the collections account. If the DSCR is above 1.20x for three consecutivemonths, the trigger will be cured and all amounts on deposit in the cash trap account will bereleased to the collections account.

Cash sweep

Series A and B benefit from cash sweeps from the third anniversary of the closing date to theseventh anniversary of the closing date, provided an event of default has not occurred. The cashsweeps provide for a specified percentage of available amounts, after payment of all prior rankingamounts in the waterfall, to pay principal on the notes. The below table details the cash sweepamount for each series of notes.

Table 11

Series Cash Sweep Amounts

Period Amount of remaining available collections (%)

Series A cash sweep amounts

49-60 5.0

61-72 15.0

73-84 25.0

84 and thereafter 100.0



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Table 11

Series Cash Sweep Amounts (cont.)

Period Amount of remaining available collections (%)

Series B cash sweep amounts

49-60 10.0

61-72 30.0

73-84 40.0


Series C additional amortization and cash sweep amounts

1-48 (i) 15.0

49-75 55.0


(i)Shortfalls in the payment of principal on the series C notes will be offset against the supplemental amortization previously paid.

Aircraft disposition/part-out

The issuer may sell, transfer, part-out, or dispose of any part, engine, or asset aircraft subject tocertain conditions, including the following:

- No more than 15% of the appraised value of the portfolio may be subject to a part-out prior tothe second anniversary of the closing date.

- No more than 20% of the appraised value of the portfolio may be subject to a part-out after thesecond anniversary of the closing date, but prior to the fourth anniversary of the closing date.

- The part-out is approved by a director resolution if it relates to an aircraft that is less than 15years of age.

- The adjusted base value of all aircraft that are below-value dispositions may not exceed 10% ofthe portfolio value in any one-year period if a rapid amortization event is continuing.

Permitted engine trades

The issuer may sell an engine and acquire a replacement. Subject to certain conditions, theproceeds of the sold engine may be applied to available collection and amounts may be reservedin the maintenance reserve account to be used to acquire a replacement engine. The maximumamount of payments withdrawn from the maintenance reserve account to acquire a replacementengine is limited to $10 million, per annum, without board approval.

Payment Priority--AOE Issuer Level (AASET 2021-1 US Ltd. and AASET2021-1 International Ltd.)

Payment priority before an event of default (AOE issuer)



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The amount the collection account is payable on each payment date in the following priority ifthere is no event of default (see table 12). All "guaranteed shortfall amounts" at different steps inthe waterfall below are deposited into a guarantee account, which are then used to pay likeobligations for the AOE issuer at the same level of priority.

Table 12

Priority (Before An Event Of Default)

Priority Payment

1 First, expenses including the liquidity facility commitment fee, servicer provider fees (excluding sales feesand servicer incentive fee, maintenance incentive fee, subordinated sales fees, and subordinated end oflease compensation), maintenance expenses not funded out of the maintenance account, andindemnification amounts capped at $10 million; and second, the guaranteed required expense amountshortfall(i).

2 First, pro rata to pay the series A note interest amount and hedge payment; second, the guaranteed seriesA interest shortfall and the guaranteed senior hedge payments shortfall; third, the series B notes interestamount; and fourth, the guaranteed series B interest shortfall.

3 First, pro rata, (a)to the liquidity facility reserve account, up to the required amount, and (b)any liquidityfacility advance obligations; and second, pro rata, to the guarantee account, (a)any guaranteed requiredamount shortfall, and(b)any guaranteed liquidity facility advance obligations shortfall.

4 First, the senior additional maintenance support amount, if applicable; and second, to the guaranteedsenior additional maintenance support amount shortfall.

5 First, to pay the series A notes scheduled principal payment amount; second, the guaranteed series Ascheduled principal payment amount shortfall; third, scheduled principal payment amount on the series Bnotes; and fourth, guaranteed series B scheduled principal payment amount shortfall.

6 To the security deposit account, the additional security deposit reserve amount then the guaranteedadditional security deposit reserve amount shortfall.

7 First, to the maintenance reserve account, the additional junior reserve amount; and second, anyguaranteed additional junior reserve amount shortfall.

8 First, the series A excess proceeds; second; the guaranteed excess proceeds series A payment shortfall;third, the series B excess proceeds; and fourth, the guaranteed excess proceeds series B paymentshortfall.

9 First, to pay the series A outstanding disposition premium; second, guaranteed series A dispositionpremium; third, the series B outstanding disposition premium; and fourth, guaranteed series B dispositionpremium shortfall.

10 After the fourth anniversary of the closing date, so long as no senior rapid amortization event has occurredand is continuing, the series A partial rapid amortization amount and any shortfall in the series A partialrapid amortization amount of the other AOE issuer.

11 After the fourth anniversary of the closing date, so long as no senior rapid amortization event has occurredand is continuing, the series B partial rapid amortization amount and any shortfall in the series B partialrapid amortization amount of the other AOE issuer.

12 If a senior rapid amortization event has occurred and is continuing, first, to pay down the outstandingprincipal balance of the series A notes in full; second, any shortfalls in senior rapid amortization amountof the other AOE issuer; third, to pay down the outstanding principal balance of the series B notes in full;and fourth, any shortfalls in the senior rapid amortization amount of the other issuer.

13 In case of a DSCR below 1.20x on any of the most recent three payment dates, so long as no senior rapidamortization event has occurred, all remaining collections to the cash trap account.

14 First, the interest amount on the series C notes; second, guaranteed series C interest shortfall; third,scheduled principal payment on the series C notes; fourth guaranteed series C scheduled principalpayment shortfall; fifth, excess proceeds series payment for the series C notes; and sixth, guaranteedexcess proceeds series C payment shortfall.

15 First, the series C supplemental amortization amount will be used to pay down the outstanding principalbalance of the series C AOE notes in full; and second, the series C supplemental shortfalls of the otherAOE issuer.



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Table 12

Priority (Before An Event Of Default) (cont.)

Priority Payment

16 First, the MR servicer incentive fee; second, any guaranteed MR incentive fee shortfall; third, the rentincentive fee; fourth, any guaranteed rent incentive fee shortfall; fifth, to the servicer, pro ratasubordinated sales fee and subordinated end-of-lease compensation fee; and sixth, any guaranteedsubordinated sales fee shortfall and any guaranteed subordinated end-of-lease compensation feeshortfall.

17 First, interest amount on the series D notes; and second, guaranteed series D interest shortfall.

18 First, series D scheduled principal; second, guaranteed series D scheduled principal shortfall; third,excess proceeds; fourth, guaranteed excess proceeds series D payment shortfall; and fifth, if a series Drapid amortization event has occurred, series D rapid amortization amount and any guaranteed series Drapid amortization amounts.

19 Subordinated indemnification amounts and subordinated hedge payments, if any, and guaranteedsubordinated indemnification and subordinated hedge payment shortfalls.

20 After the seventh anniversary of the closing date, the step-up amount first, to the series A notes and theguaranteed series A step-up amount shortfall; second, to the series B notes and the guaranteed series Bstep-up amount shortfall; and third, to the series C notes and the guaranteed series C step-up amountshortfall.

21 Servicer extraordinary expenses and guaranteed servicer extraordinary expense shortfall.

22 Additional disposition contribution account and guaranteed disposition shortfall.

23 Discharge net intercompany obligations owed to the other AOE issuer according to the intercreditoragreement.

24 All remaining collections, first, to repay cure advances; second, to repay additional advances; and third, tothe E certificateholders.

(i)Senior fees modeled include the following: servicing fee: 3% of rents collected; fixed expenses per aircraft $2990, disposition fee: 31.5% ofsales proceeds (after year seven only); end-of-lease compensation fee: 31.5% of end of lease proceeds; indemnification amount: $10,000,000over first 12 months; annual fixed expense for trustee, security trustee, managing agent, operating bank: $1,000,000604,000; liquidity facilitycommitment fee. DSCR--Debt service coverage ratio.

Payment priority following an event of default (AOE issuer)

The amount the collection account is payable on each payment date in the following priority ifthere is no event of default (see table 13). All "guaranteed shortfall amounts" at different steps inthe waterfall below are deposited into a guarantee account, which are then used to pay likeobligations for the AOE issuer at the same level of priority.

Table 13

Payment Priority (Following An Event Of Default)

Priority Payment

1 First, the required expense amount for payment of all expenses (including any amount payable to anylessee pursuant to a lease, excess indemnification amounts, and all service provider fees other than theissuer 2 MR incentive fee, the issuer 2 subordinated sales fee, or the issuer 2 subordinated end of leasecompensation fee (or any portion thereof), excluding any liquidity facility advance obligations)reimbursable on the payment date; and second, any guaranteed required expense amount shortfall.

2 First, to pay liquidity facility advance obligations; and second, the guaranteed liquidity facility advanceobligations shortfall.



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Table 13

Payment Priority (Following An Event Of Default) (cont.)

Priority Payment

3 First, to pay series A note interest amount and hedge payment, pro rata; second, the guaranteed series Ainterest shortfall and the guaranteed senior hedge payments shortfall, pro rata; third, series A notes'outstanding principal balance; and fourth, the guaranteed series A outstanding principal balanceshortfall.

4 First, series B note interest amount; second, the guaranteed series B interest shortfall; third, the series Bnotes' outstanding principal balance; and fourth, the guaranteed series B outstanding principal balanceshortfall.

5 First, series C notes' interest amount; second, the guaranteed series C interest shortfall; third, series Cnotes' outstanding principal balance; and fourth, the guaranteed series C outstanding principal balanceshortfall.

6 First, series D notes' interest amount; second, the guaranteed series D interest shortfall; third, series Dnotes' outstanding principal balance; and fourth, the guaranteed series D outstanding principal balanceshortfall.

7 First, series A notes' outstanding disposition premium; second, to the guarantee account, the guaranteedseries A disposition premium shortfall; third, series B notes' outstanding disposition premium; and fourth,to the guarantee account, the guaranteed series B disposition premium shortfall.

8 First, any outstanding sales fee; and second, any guaranteed sales fee shortfall.

9 From and after the seventh anniversary of the initial closing date, first, series A notes step-up amount;second, guaranteed series A step-up amount shortfall; third, series B notes step-up amount; fourth,guaranteed series B step-up amount shortfall; fifth, the series C notes step-up amount; sixth, theguaranteed series C step-up amount shortfall; seventh, the series D notes step-up amount; and eighth,the guaranteed series D step-up amount shortfall.

10 First, the junior additional maintenance support amount; and second, the guaranteed junior additionalmaintenance support amount shortfall.

11 First, special indemnity payments; and second, guaranteed special indemnity payments shortfall.

12 First, subordinated hedge payments; and second, guaranteed subordinated hedge payments shortfall.

13 First, servicer incentive fee; second, guaranteed servicer incentive fee shortfall; third, pro rata outstandingsubordinated sales fee and subordinated end of lease compensation fee; and fourth, pro rata guaranteedsubordinated sales fee shortfall and guaranteed subordinated end of lease compensation fee shortfall.

14 To the other issuer, the net intercompany obligations owed by the issuer.

15 First, repay cure advances; second, repay additional advance; and third, to the E certificate account, allremaining amounts.

Events Of Default--AOE Issuer Level

Each of the following constitutes an event of default for an AOE issuer (subject to certain cureperiods and grace periods) under the AOE issuer's document. We assume these events are unlikelyto occur and do not model the payment priority following an event of default.

- Failure to pay interest, when due, on the series A notes or failure to pay interest, when due, onthe series B notes while they are the senior-most series outstanding (in each case, excludingany step-up amount), and the failure is not cured in five business days;

- Failure to pay any of the AOE notes' outstanding principal or failure to pay all accrued andunpaid interest amounts (excluding step-up amounts) on the AOE notes on the legal finalmaturity date;



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- Failure to pay any other amount when due and payable in connection with any notes to theextent that there are available amounts in the collection accounts or under the liquidity facility,and the failure is not cured in five business days;

- Failure to comply with any of the representations, warranties, covenants, or obligations underthe transaction documents subject to materiality thresholds;

- The AOE issuer's voluntary or involuntary bankruptcy;

- A judgment or order for the payment of money exceeding 5% of the aggregate adjusted portfoliovalue;

- The lien of the security trust agreement ceases to be effective;

- The occurrence of the other AOE issuer's event of default; or

- The occurrence of an event of default as defined in the master indenture.

Payment Priority--Master Issuer Level

On each payment date, the master issuer shall receive the aggregate amounts paid by the AOEissuers on the AOE notes.

In each case, a payment applied to pay interest, principal, premium or otherwise under an AOEindenture will be applied to pay a like obligation hereunder (including the amount paid in respectof interest amount or step-up interest under each AOE indenture shall be applied to pay interestamount or step-up interest, and any amount applied to reduce the outstanding principal of aseries of AOE notes shall be applied to reduce the outstanding principal balance of thecorresponding series of notes).

Any fee/expense/indemnity payable by the borrower will be paid by the AOE issuers on its behalf.

Events Of Default--Master Issuer Level

Each of the following constitutes an event of default for the master, subject to certain cureperiods and grace periods, under the issuer's documents:

- Failure to pay interest, when due, on the series A notes or failure to pay interest, when due, onthe series B notes while they are the senior-most outstanding notes (in each case, excludingany step-up amount), and the failure is not cured in five business days;

- Failure to pay any of the initial notes' outstanding principal, or failure to pay all accrued andunpaid interest amounts (excluding step-up amounts) on the initial notes on the legal finalmaturity date;

- Failure to pay any other amount when due and payable in connection with any notes, to theextent that there are available amounts, and the failure is not cured in five business days;

- Failure to comply with any of the representations, warranties, covenants, or obligations undertransaction documents, subject to materiality thresholds;

- The issuer's voluntary or involuntary bankruptcy;

- A judgment or order for the payment of money exceeding 5% of the aggregate adjusted portfoliovalue;

- The lien of the security trust agreement ceases to be effective; or



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- The occurrence of any of the two AOE issuers' events of default.

Cash Flow Analysis Assumptions

To assess the portfolio's ability to service the notes, we conducted our own stress tests builtaround a few deterministic scenarios. The stress test assumptions include:

- Lessee defaults;

- Reduced rental rates on leases during a recession;

- Diminished residual value for aircraft during a recession;

- The repossessed aircraft's off-lease time period;

- New leases' shortened terms;

- RRR costs;

- Deferred maintenance; and

- Reduced security deposit requirements.

Scenarios

Under our rating run, we assume that the aircraft will have a 22-year useful life. Although in priorS&P Global Ratings-rated transactions our rating scenario is generally based on a 25-year usefullife, in this case, we assume a 22-year useful life. We considered the stress on the sector due toCOVID-19, which severely curbed passenger air travel, prompting airlines to cut capacity.Additionally, strained airline liquidity, the 16.7-year weighted average age of the portfolio, theintroduction of more fuel-efficient aircraft, and the re-entry of the 737 Max were some of the otherfactors that led to the shortened useful life.

Recession assumptions

In general, we assume one recession will occur in every seven- to 10-year commercial aviationindustry cycle, which reflects the industry's historical averages. For aircraft with 25-year usefullife, we typically model three four-year recessions. During the first two modeled recessions, weusually stress both the lease rates and residual values. For the third recession, when we believemost of the planes in the portfolio would have reached the end of their useful lives, we usuallystress only the residual values because the aircraft's sale will likely generate most of the cashflow during this recession.

Table 14 shows the recession timing. We assume the recession timing to be the same for all therating levels analyzed.

Table 14

Recession Timing

Rating run

Recession 1 start (mos.) 1




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Table 14

Recession Timing (cont.)

Rating run


Length of the three recessions (mos.) 48

N/A--Not applicable.

Lessee defaults assumptions

We use our CDO Evaluator to generate the aircraft portfolio-level default rate. The simulationmodel inputs include lessee name, lessee credit quality, aircraft value, correlation within theairline industry, lessee country, country rating, and correlations among countries and regions. Forairline lessees in the portfolio that S&P Global Ratings does not rate, we will provide a creditquality estimate. Our credit quality estimate takes into consideration public information,including, among other things, company structure and parent entities.

In general, we view the airline industry as high-risk. Our assessment reflects our view of thesector's high-risk cyclicality based on observed cyclicality in revenue and profit margins and itsmoderately high-risk competitive risk and growth. This model enables us to address lesseeindustry, country, and region by running 500,000 correlated simulation scenarios to address thelease portfolio's concentration risk instead of setting a hard percentage limit on lessee, country,and region concentration. Under our default simulation model, a concentrated portfolio will have ahigher portfolio default rate and less generated cash flow.

Once the portfolio default rate is determined, we run a few deterministic default patterns, such asdefaulting by highest-to-lowest aircraft value, defaulting by lowest-to-highest credit qualitylessee, and defaulting by highest-to-lowest lease rental. Defaulting by highest-to-lowest aircraftvalue usually provides the most onerous result, and we use this as the default sequence for boththe rating and sensitivity runs. Our view is that as a portfolio ages, the re-marketability of theaircraft decreases. Airlines that lease the aging aircraft have historically tended to be of lowercredit quality and located in weaker jurisdictions. As a result, the default rates we use in thesecond and third recessions tend to be higher than those for the first recession (see table 15).

Table 15

Lessee Default Rate

Rating

A BBB- B

Lessee default rate (recession 1) (%) 79.6 66.6 48.5

Lessee default rate (recession 2) (%) 89.6 76.6 58.5

Default patterns

We assume that the default rates in table 15 are spread over the four-year recessionary period.The defaults are applied in the first month of each year of the recession (i.e., months 1, 13, 25, and37) for the first recession that starts in month one of our cash flow projections. Table 16 detailsthe distribution of the default pattern during the recessions.



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Table 16

Default Patterns

Year of recession Recession 1 (%) Recessions 2 and 3 (%)

1 25 30

2 25 40

3 25 20

4 25 10

Lease rate assumptions in and outside recessions

The lease rates outside recessions are based on the interest rate environment and aircraft age.During recessions, we apply additional reductions to a projected base-case depreciated value tostress lease rates and values. The decline magnitude is generally determined by the aircraftmodel's liquidity and technology level, the servicer's remarketing and disposition capability, theaircraft diversification, and the transaction's rating level. Such lease rate/sale-to-value declinesreflect our view of a particular portfolio's ability to maintain cash flow consistent with the ratingson obligations that are backed by the portfolio during recessions. This stress is intended to resultin lower residual values of the aircraft or the aircraft engines sold, or lower rental rates on planesor aircraft engines re-leased during recessions. We model the lease rate decline in full during thesecond and third years of a recession, but we apply 50% of the declining lease rate in the first andlast years of the recession. This assumption reflects our view that aviation industry recessions,particularly the aircraft values' and rental rates' decline and recovery, typically take time (seetable 17).

Table 17

Lease Rate/Value Decline

Rating

A BBB- B

Value decline (recession 1) (%) 54.6 38.0 19.2

Value decline (recessions 2 and 3) (%) 74.0 54.2 29.5

Repossession and remarketing period assumptions

The repossession period is the time it takes for the lessor to repossess an aircraft or an aircraftengine if the defaulting lessee has not agreed to a voluntary return of the equipment. Theremarketing period is the time necessary to find a new lessee once the aircraft or engine has beenreturned to the lessor. In summary, our criteria stipulate that we assume three months AOG timeoutside a recession and six-to-12 months during a recession with no differentiation betweennarrowbodies and widebodies.

However, due to the unprecedented decline in air travel resulting from government-mandatedrestrictions on travel, low consumer demand and confidence, and general uncertainties ofre-leasing markets during the pandemic, we believe that AOG downtime could be longer than whatour current criteria suggest. For this reason, we have made a criteria exception regarding AOGdowntime. As a result, we assumed longer AOG times during the first modeled recession as



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detailed in table 18 below. In addition to longer AOG times for all aircraft types, we havedifferentiated the AOG time for widebodies from narrowbodies because we believe thatwidebodies will be more vulnerable to lower demand and will likely be subject to longer downtimethan narrowbodies. Pre-COVID-19, we assumed that it would take 12 months to re-lease all typesof aircraft under a 'AAA' stress scenario. Comparatively, due to the impact on the sector fromCOVID-19, we assume that it will take 12 months to re-lease a narrowbody aircraft in an 'A' stressscenario and a widebody aircraft in a 'B' stress scenario.

Table 18

Repossession/Remarketing Time

Before application of criteriaexception After application of criteria exception

Rating All aircraft AOG Recession 1 NB AOG Recession 1 WB AOGRecessions 2 and 3 all aircraft

AOG

A 10 12 15 10

BBB- 9 11 14 9

B 7 9 12 7

AOG--Aircraft on ground. NB--Narrowbody. WB--Widebody.

Repossession/remarketing/refurbishment (RRR) cost assumptions

If a lessor has to repossess an aircraft or aircraft engine, it will typically incur various costs relatedto legal work, insurance, pilot expenses, fuel, storage, technical check, and deregistrationdocuments. These costs are in addition to the refurbishment or modifications necessary tore-lease the aircraft or the aircraft engine. We generally assume a widebody plane has higher RRRcosts than a narrowbody plane, a passenger plane has higher RRR costs than a freighter, andhigher RRR costs can occur during a recession. Our criteria provide a range of RRR costs to beapplied to different aircraft types and further differentiated during and outside a modeledrecessionary period. Previously, for the passenger planes we assumed the cost to be the lower endof the range. However, during our recent conversations with lessors amid the pandemic, theyprovided their historically observed costs, which leaned more toward the higher end of that range.Table 19 below provides the detailed RRR cost assumptions that we apply for this transaction. Wedo not differentiate the cost assumptions based on the series' rating level.

Table 19

Repossession/Remarketing/Refurbishment Costs

In recession ($) Outside recession ($)

Repossession costs (narrowbody passenger and regional) 750,000 500,000

Repossession costs (widebody passenger) 1,500,000 1,250,000

Repossession costs (narrowbody cargo) 250,000 200,000

Repossession costs (widebody cargo) 500,000 400,000

Lease term assumptions

For re-leasing events, we typically assume lease terms of three years during each recession. We



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also assume five-year lease terms for re-leasing events outside of a recession.

Security deposit assumptions

In most of the aircraft securitization transactions previously rated by S&P Global Ratings, theseller transfers the security deposits under the initial leases to the issuer when the relatedaircraft is delivered into the transaction. Security deposits held by the issuer can help to partiallyoffset the defaulted rent and RRR costs if a lessee defaults. We typically incorporate the securitydeposits into our modeling after reducing the amount by up to 40% of the security deposits forinitial leases (the higher percentage reductions correspond to the higher rating levels). Formodeling purposes, we assume no security deposits for subsequent leases.

However, in this transaction, the security deposits under the initial leases are not retained by theissuer or its subsidiaries, though the issuer or its subsidiaries need to pay back the securitydeposits if the related lessees do not default. Therefore, in our analysis, we modeled that theissuer must pay 100% of the security deposits back to the non-defaulted lessees at the initiallease maturity and a percentage of security deposits back to the defaulted lessees at the time ofdefault (see table 20).

Table 20

Security Deposit Haircut

Rating

A BBB- B

Security deposit haircut (%) 30 20 0

Aircraft Maintenance

Aircraft maintenance, which is heavily regulated, is essential in aircraft operation to keep theaircraft in serviceable and reliable condition. An aircraft's maintenance status is also important indetermining its value, especially for older aircraft. Depending on the type of work, such as airframemaintenance, airframe component maintenance, and engine maintenance (including engineperformance restorations and limited-life part replacements), aircraft maintenance can be costly.

Lessors typically manage the maintenance expense exposure by either requiring lessees to paymaintenance reserves (also referred to as maintenance or utilization rent) during the lease orrequiring an end-of-lease maintenance-adjustment payment if no maintenance reserve iscollected. In the former, the regularly collected maintenance reserves are typically calculatedbased on flight hours and flight cycles. When due, lessees typically have the maintenance workdone, pay the maintenance provider, and then claim a reimbursement from the lessor from amaintenance reserve account (funded by a maintenance reserve collection). In the latter, if thelessee defaults on the lease and doesn't pay an end-of-lease maintenance-adjustment payment,the lessor will have to bear the potential maintenance exposure when the aircraft is returned.

Maintenance Cash Flow Assumptions

Maintenance cash flow is an integral part of our cash flow model. We input the aircraftmaintenance cash flow (month-by-month maintenance reserves and expenses) that Altongenerates into our overall cash flow model and model the maintenance account activity per the



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maintenance account mechanism outlined in the transaction documents.

For the initial fleet, the MBA model forecasts each aircraft's utilization rates and conditions,according to the existing contractual lease terms and projected future lease terms, together withthe associated maintenance-related cash flows. Specifically, the model predicts the timing andlessor-related inflows and outflows associated with airframe (heavy checks), engine (performancerestorations and life-limited part replacements), and component (landing gear and auxiliary powerunit overhauls) maintenance. The model does not forecast cash flows for remarketing, leasetransition, repossession, etc.

MBA's analysis includes both base- and stress-case scenarios. The base-case scenario (a cashflow run without any stresses) assumes all aircraft remain subject to existing lease agreementsthrough the initial leases' contractual expiration dates, and then that each aircraft will bere-leased to consecutive new lessees until each aircraft reaches its assumed retirement age.Among other assumptions, the base-case scenario assumes that all payments are made in atimely manner and that no events of default occur.

For the stress-case scenarios, MBA provided stress scenario maintenance projections using a setof stress scenario assumptions consistent with our sector-wide stress maintenance projectionassumptions as outlined in "S&P Outlines Maintenance Analysis For Aircraft/AircraftEngine-Backed Securitizations," June 11, 2015. The article outlines recessionary periods, defaultrates, default timing, RRR duration, the new lease's length, the percentage of subsequent leasespaying a maintenance reserve, and maintenance delay timing. Given the uncertainty as to howmany new leases would require maintenance reserve payments after the initial leases mature, thestress maintenance projection assumes that the number of leases that have maintenance reserverequirements will decline by 50% after the initial leases mature in the stress-case scenario. Thestress maintenance projection further assumes that aircraft subject to defaulted leases have hadno major maintenance performed within the 12 months before the default, so that the transactionwill bear any required major maintenance costs. Utilizing these assumptions and its ownassumptions on aircraft and engine maintenance expenses and timing, MBA projected themaintenance-related cash inflows/outflows.

Under a "high" default rate scenario, for the maintenance cash flow period up to the end of theasset's useful life, MBA projected the total maintenance-related cash flows as shown in table 21for the rating runs.

Cash Flow Analysis Results

Our ratings approach considered cash flow primarily from the 34 assets in the portfolio. Cash isgenerated from lease or replacement lease payments, aircraft/engine disposition proceeds, andthe liquidity facility.

Table 21

Maintenance Cash Flows

Stress MX receipts($) MX due($) EOL ($)

A 273,456,577 330,401,391 149,093,238

BBB 266,341,211 317,011,937 160,653,637

B 278,488,008 324,696,298 259,883,519

MX--Maintenance. EOL--End of lease.



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Rating Run

Under the stress scenarios commensurate with our corresponding preliminary ratings, results ofour rating run indicated that timely interest would be received by the series A notes (and series Bnotes when most senior outstanding), and ultimate interest and principal received by the series A,B, and C notes by the dates shown in table 21.

Table 22

Results – Rating Run

Series Stress Pay-off date

A A January 2035

B BBB- February 2035

C B December 2034

Chart 4 below shows the series A notes' projected amortization curves under our rating runstresses compared with the scheduled amortization curve (approximately 14-year amortization).

Chart 4

Chart 5 below shows the series B notes' projected amortization curve under our rating runstresses compared with the scheduled amortization curve (approximately 13-year amortization).



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Chart 5

Chart 6 below shows the series C notes' projected amortization curve under our rating run stresscompared with the scheduled amortization curve (straight-line over seven years.



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Chart 6

Sensitivity Analysis

Aircraft are operating assets with lease revenue highly sensitive to lease rates, their useful lives,and the servicer's capability.

In sensitivity run 1, we analyzed how sensitive the preliminary ratings are to further reductions incash flows, in addition to the stresses already being applied at the respective rating level. Wereduced the total cash flows (lease plus sales revenues) for the transaction's life, to the maximumextent possible without triggering an event of default on account of payment shortfalls for therelevant series (or more senior series). All of the other assumptions are consistent with the ratingrun. The results are shown in table 22.

Table 23

Additional Lifetime Total Cashflow Haircut Breakeven

Series Stress Breakeven (%)

A A rating run 9

B BBB- rating run 12

C B rating run 12

In sensitivity run 2, we analyzed how sensitive the preliminary ratings are to further reductions incash flows during the first modeled recession, in addition to the stresses already being applied atthe respective rating level. We reduced the total cash flows (lease plus sales revenues) for the first48 months, to the maximum extent possible without triggering an event of default on account of



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payment shortfalls for the relevant series (or more senior series). All of the other assumptions areconsistent with the rating run. The results are shown in table 23.

Table 24

Additional Revenue Haircut In Recession 1 Breakeven

Series Stress Breakeven (%)

A A 31

B BBB- 35

C B 38

In sensitivity 3, we analyzed how sensitive the preliminary ratings are to cash flow delays duringthe first modeled recession, in addition to the stresses already being applied at the respectiverating level. We lagged a percentage of the cashflows (lease revenues) by 12 months for the first48 months, to the maximum extent possible without triggering an event of default. All of the otherassumptions are consistent with the rating run. The results are shown in table 24.

Table 25

Additional Revenue Haircut In Recession 1 Breakeven

Class Stress Breakeven (%)

A A 77

B BBB- 82

C B 85

In sensitivity 4, we analyzed how sensitive the transaction is to a reduction in cash flow related tocertain lessees whose lease payments may be uncertain. Specifically, we assume a 50% reductionin rental cash flows for Air Changan, Aeromexico, and El Al for the lease term, and zero rental cashflows for Philippine Airlines for the first 12 months of the transaction. Interest on the series Anotes was paid timely. Interest on the series B and C notes was paid by legal final maturity, andprincipal on all series was paid prior to legal final maturity.

Surveillance

We use surveillance data to perform periodic reviews on all rated aircraft securitizations in orderto identify potential and emerging trends. Our ratings reflect the transaction's ongoing risk profile.

We will maintain surveillance on the transaction until the notes are paid off, review the servicer'smonthly reports on underlying collateral performance, and maintain periodic contact with themanaging agent and the servicer to ensure that the minimum servicing standards are sustainedand any material changes in the servicer's operations are communicated and assessed.

We will continue to develop and provide transaction performance information, research, andanalysis, as well as information on our methodology and ratings, to increase the level oftransparency.



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Related Criteria

- General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10,2021

- Criteria | Structured Finance | General: Global Framework For Payment Structure And CashFlow Analysis Of Structured Finance Securities, Dec. 22, 2020

- Criteria | Structured Finance | Legal: U.S. Structured Finance Asset Isolation AndSpecial-Purpose Entity Criteria, May 15, 2019

- Criteria | Structured Finance | General: Counterparty Risk Framework: Methodology AndAssumptions, March 8, 2019

- Criteria | Structured Finance | General: Incorporating Sovereign Risk In Rating StructuredFinance Securities: Methodology And Assumptions, Jan. 30, 2019

- Criteria | Structured Finance | General: Foreign Exchange Risk In StructuredFinance--Methodology And Assumptions, April 21, 2017

- Criteria | Structured Finance | General: Global Framework For Assessing Operational Risk InStructured Finance Transactions, Oct. 9, 2014

- General Criteria: Global Investment Criteria For Temporary Investments In TransactionAccounts, May 31, 2012

- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011

- Criteria | Structured Finance | ABS: Revised Cash Flow Assumptions And Stresses For GlobalAircraft And Aircraft Engine Lease Securitizations, Aug. 26, 2010

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: Maintenance And RelatedIssues, Sept. 1, 2004

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: Rating Considerations ForLease Pools, Sept. 1, 2004

- Criteria | Structured Finance | ABS: Aircraft Securitization Criteria: The Rating Process ForAircraft Portfolio Securitizations, Sept. 1, 2004

- Criteria | Structured Finance | General: Structured Finance Criteria Introduced For CaymanIslands Special-Purpose Entities, July 18, 2002

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- Merlin Aviation Holdings DAC Class A, B, And C Notes Lowered; Off CreditWatch, Sept. 3, 2021

- Rating Considerations For New Aircraft ABS Securitizations, March 16, 2021

- Various Actions Taken On Aircraft And Aircraft Engine ABS Transaction Ratings PreviouslyPlaced On Watch, Sept. 15, 2020

- A Deal-By-Deal Look Behind The Aircraft And Aircraft Engine ABS Rating Actions As Of Sept. 15,2020, Sep. 15, 2020

- Global Structured Finance Scenario And Sensitivity Analysis 2016: The Effects Of The Top Five



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Macroeconomic Factors, Dec. 16, 2016

- S&P Outlines Maintenance Analysis For Aircraft/Aircraft Engine-Backed Securitizations, June11, 2015



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AASET 2021-1 Trust

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