Annual Report 2018 CONTENTS

2018 Highlights 1

CEO’s Message 2

Leadership 6

Board of Directors 8

CARE Initiative 10

Learning Initiatives 14

Diversity and Inclusion 16

Arts and Culture 18

International Aviation School 20

Avolon’s New HQ 22

Our Fleet 24

CFO’s Statement 26

@avolon_aero avolon

Note Regarding Forward-Looking Statements This document includes forward-looking statements, beliefs or opinions, including statements with respect to Avolon’s business, financial condition, results of operations and plans. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond our control and all of which are based on our management’s current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as “believe,” “expects,” “may,” “will,” “could,” “should,” “shall,” “risk,” “intends,” “estimates,” “aims,” “plans,” “predicts,” “continues,” “assumes,” “positioned” or “anticipates” or the negative thereof, other variations thereon or comparable terminology or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. No assurance can be given that such future results will be achieved. Forward-looking statements appear in a number of places throughout this document and include statements regarding the intentions, beliefs or current expectations of management with respect to future events, and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to our business concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which the Avolon operates, most of which are difficult to predict and many of which are beyond Avolon’s control.

Cover: Avolon’s new HQ, Number One Ballsbridge, Dublin Avolon Annual Report & Accounts 2018 1 2018 HIGHLIGHTS

Youngest Fleet 971aircraft of the top 3 lessors customers150 countries61

bn m bn Total$2.6 revenues Profit$717 for the year Total$5.7 available liquidity

Credit Ratings bn Net$2.2 cash from Lease153 transactions operating activities FitchBB Ratings

Moody’sBa1

bn bn S&PBB+ Global Unencumbered$8.7 Proceeds$2.2 from assets disposal of aircraft

KBRABBB+

All figures in US$ 2 WelcomeAvolon Annual to Avolon Report & Accounts 2018

CEO’s message

A Transformative Year Avolon Annual Report & Accounts 2018 33

‘ THE PROGRESS WE HAVE MADE AS A BUSINESS IN 2018 IS TESTAMENT TO THE CAPABILITY AND COMMITMENT OF OUR TEAM ’

2018 was another year of Strong Financial We also sold 87 aircraft, one transformational growth for Performance engine and disposed of one Avolon. We executed against aircraft constituting an insured each of our strategic and We delivered a robust financial total loss, including 47 aircraft financial objectives including: performance in 2018; our first to our new joint-venture, Jade making significant progress on full year of operation following Aviation and an asset backed our journey to an investment the acquisition and integration of securitisation, Sapphire Aviation grade rating; building new and the CIT aircraft leasing business. Finance. Across all this activity, strong relationships with aircraft We generated total revenue of our focus has been to maintain a trading partners; refining our US$2.6bn and profit for the year portfolio of young, modern fleet to focus on our chosen of US$717m. Our net cash from fuel-efficient single-aisle and single-aisle and twin-aisle operating activities continued twin-aisle aircraft. Our owned aircraft models; moving into a to grow to US$2.2bn and we fleet of 512 aircraft had an average new global HQ, consolidating ended the year with US$5.7bn of age of 5.0 years at year-end. our team and position as a available liquidity to finance the During 2018 we continued to be leading player in our sector. continued growth of the business. an active participant in the debt The progress we have made as a Our financial performance reflects markets, raising US$4.2bn in new business in 2018 is testament to an active year during which we debt. This comprised US$1.6bn of the capability and commitment executed lease agreements for secured debt, and, in line with our of our team, the strength of 153 aircraft and agreements for objective to reduce the secured our relationships with our the sale of a further 130 aircraft. level of debt within our portfolio, customers and suppliers We delivered a total of 61 aircraft, US$2.6bn of unsecured debt. along with the support of our including 28 transitions, to 30 We issued US$1.5bn of senior Board and shareholders. customers, one of the many unsecured bonds during the highlights being the delivery of year and are now an established the world’s first Airbus A330neo participant in the unsecured to TAP Air Portugal in November. bond market. Raising additional unsecured debt during 2019 will maintain our momentum towards investment grade which will, in turn, drive earnings growth and enhance shareholder returns. A full review of our 2018 financial performance is set out in a Financial Review on pages 31 to 132 of this report. 4 Avolon Annual Report & Accounts 2018

Aircraft Portfolio Locked in Growth ORIX Corporation We ended 2018 with an owned Our commitment to our During the year ORIX Corporation and managed fleet of 561 aircraft. customers is to provide them with acquired a 30% ownership While this is a modest reduction access to the most in-demand, interest in Avolon for US$2.2bn. on the fleet number at the end of new technology and fuel-efficient This is a strategic long term 2017, there has been considerable aircraft for their fleet growth investment. ORIX is a leading change in the composition of or renewal needs. To deliver on Japanese financial institution our portfolio as we continue this commitment, we ensure and an experienced investor in to manage the integration of we have the optimal order book the aircraft leasing sector. ORIX the CIT fleet by divesting older comprising the right balance of has a strong investment grade aircraft whilst continuing to single-aisle and twin-aisle aircraft profile and is listed on the Tokyo invest in new liquid and efficient to meet our growth objectives and New York Stock Exchanges. aircraft models. An extensive while driving industry leading, aircraft trading activity is core to risk-adjusted returns. The transaction accelerates our portfolio risk management our momentum on the path At the end of 2018, we had a strategy and contributes to our to investment grade which is committed portfolio of 410 new strong liquidity position. We central to reduce our cost of technology aircraft. This includes sold aircraft into our new joint- debt. The market responded our recent order for 100 Airbus venture, Jade Aviation, and asset positively to the investment A320neo family aircraft valued backed securitisation, Sapphire with Moody’s upgrading at over US$11.5bn at list prices. Aviation Finance. Sapphire Avolon’s corporate rating to Ba1. This represented our largest ever Aviation Finance and Jade Beyond the financial benefit of order with Airbus and positions Aviation acquired 41 and 6 aircraft a stronger and more diversified Avolon as Airbus’ largest aircraft respectively increasing our shareholder base, the investment lessor backlog customer. It managed fleet to 49 aircraft. also creates the opportunity follows our order for 75 Boeing for increased collaboration Our Jade Aviation joint-venture 737 MAX 8 aircraft in 2017 and with ORIX’s extensive network with China Cinda, a US$200m means we now have an order book of aircraft equity investors, asset manager headquartered in to support our growth, and the particularly in Japan. China, was a significant milestone demand from airlines globally, well in 2018. It deepens our access into the next decade. to the Chinese capital markets Board We also continue to make strong and is the world’s first joint- Our Board composition evolved progress in placing our order venture between a global lessor in 2018 reflecting the change book with customers. At the end and a leading Chinese asset in our ownership structure. of 2018 we had placed 100% of all manager. It also enhances our We welcomed two new Board new aircraft deliveries through to position as the leading lessor members, Kiyoshi Fushitani and the end of 2019 and the majority in China – one of the fastest David Power as representatives of new aircraft scheduled to be growing aviation markets in the of ORIX Corporation. We would delivered in 2020. Our ability world – and provides Avolon with like to record our appreciation to place these aircraft reflects access to an additional capital for Denis Kalscheur, Ciarán our attractive delivery pipeline pool to finance further growth. Ó hÓgartaigh and Joe Nellis, combined with a globally diverse who stepped down from the Looking at our aircraft portfolio customer base. Board during the year, for their as a whole, we have exposure to invaluable service and counsel all major global markets but with over the past number of years. an orientation towards the higher growth markets for air traffic demand, in particular Asia Pacific, while also maintaining a bias for single-aisle aircraft. ‘ WE NOW HAVE AN ORDER BOOK TO SUPPORT OUR GROWTH, AND THE DEMAND FROM AIRLINES GLOBALLY, WELL INTO THE NEXT DECADE ’ Avolon Annual Report & Accounts 2018 5

CSR and CARE Our commitment to innovation Outlook and learning also extends to Corporate Social Responsibility our customers, financiers and Our absolute key focus for 2019 is central to the Avolon culture. suppliers. In October, we hosted is to continue our path towards an We have a strong and long- our first International Aviation investment grade credit rating, standing CARE programme which School which brought together which will secure our future incorporates four pillars under 75 executives from our key competitiveness and long-term which we contribute back to the stakeholders for a two-day growth trajectory. communities in which we live and educational and networking event Although air travel demand is work. We have for the past number in Dublin. Further details on the expected to slow from its recent of years held an annual CARE Day Aviation School are set out on strong levels, growth is forecast where all employees spend a day page 20 of this report. to remain above trend in 2019 working outside of the business and airline profitability to exceed to support local causes. In June $35bn, sustaining a healthy of 2018, our CARE Day became TRIBE environment for aircraft demand. a CARE Month, with events held The success we have had at The lessors’ share of delivery on three continents to support Avolon reflects the strength financing is also predicted to local communities and causes in and commitment of our 250 remain robust, providing over Ireland, Hong Kong and the USA. plus employees – our TRIBE. 40% of the liquidity needed to Our defining asset, the Avolon In addition, in 2018, through our fund deliveries. TRIBE is founded on our guiding Arts and Culture bursary, we values of Transparency, As the business environment provided support to a variety of Respect, Insightfulness, moderates, Avolon has the team, causes and institutions in Ireland Bravery and Ebullience. fleet and business model to including: the Abbey Theatre, These core tenets inform how continue to grow while sustaining the Little Museum of Dublin, our company interacts, not strong risk adjusted returns. We the Druid Theatre Production just with our customers, but have a proven track record of Company, the RHA Gallery and amongst the TRIBE itself. success over previous cycles the Wexford International Opera and I am confident that the Festival. Globally we also assisted We moved into a new combination of our substantial the Metropolitan Museum of headquarters at Number One reserves of liquidity, our culture New York, while India has been Ballsbridge in Dublin in July, and our ability to execute will work the recent focus of our Avolon followed by an official opening to our advantage over the coming Global Studio Award. Further by the Irish Taoiseach (Prime year and beyond. details of our CARE initiatives Minister) Leo Varadkar. The new are set out on pages 10 to 13; HQ represents a significant and information of our support investment in our business and for the Arts can be found on our TRIBE. This state of the art pages 18 and 19 of this report. work environment is designed to deliver 21st century facilities that Innovation & Learning set Avolon apart as the employer Dómhnal Slattery of choice in the sector. Chief Executive Officer In January 2018, as part of a commitment to nurturing In 2018 we initiated an active our talent and continuing Diversity and Inclusion professional development across programme, recognising its the business, we entered into importance to our values. We will a multi-year partnership with continue our efforts into 2019 INSEAD, one of the world’s leading with an increased emphasis graduate business schools. on diversity of thought. Further details on our Diversity and Inclusion programme are set out on page 16 of this report. For more on our new HQ, please see page 22. 6 Avolon Annual Report & Accounts 2018 LEADERSHIP

Executive Committee

Dómhnal Slattery John Higgins Chief Executive Officer President and Chief Commercial Officer Dómhnal Slattery is the Chief Executive Officer with 30 years’ John Higgins is the President and Chief Commercial Officer experience in the aircraft leasing industry. As CEO, Dómhnal at Avolon. John is responsible for leading the Origination sets the company strategy and commercial objectives and Team at Avolon, and has global responsibility for all aircraft oversees their execution. Dómhnal has built Avolon to be a origination, marketing and trading activity. John is also global leader in aircraft leasing through a period of private responsible for executing aircraft orders, and overseeing equity ownership, a successful listing on the NYSE; and, the management of Avolon’s orderbook. John has over a take private to become a member of the HNA Group. 25 years’ experience in aircraft leasing and finance.

In 1989, Dómhnal began his aviation financing career, initially Prior to joining Avolon John was Chief Commercial Officer in marketing roles with Guinness Peat Aviation (GPA) and at RBS Aviation Capital, with global responsibility for all GECAS. In 1994, he established his own aircraft advisory airline and OEM relationships; including new business and investment banking services company, International origination, aircraft remarketing and new order placement. Aviation Management Group (IAMG). In 2001 The Royal Bank He originally joined RBS Aviation as Head of Origination for of Scotland Group acquired IAMG as the launch platform the EMEA region in 2004. Prior to joining RBS Aviation Capital, of RBS Aviation Capital. Dómhnal was Chief Executive of John worked in several marketing roles with GECAS. John this business from 2001 to 2004 and went on to become trained and qualified as a Chartered Accountant with Price Managing Director of the Structured Asset Finance business Waterhouse before joining GPA in 1994 as Treasury Manager, for the Royal Bank of Scotland Group. He continued as a non- working primarily on the refinancing of the GPA debt facilities. executive Director of RBS Aviation Capital until January 2008. John has a Bachelor of Science (Management) with First Dómhnal has a Bachelor of Commerce (Hons) from University Class Honours from Trinity College Dublin and is a Fellow College Galway and is a graduate of the Accelerated of the Institute of Chartered Accountants of Ireland. Development Programme from the London Business School. Avolon Annual Report & Accounts 2018 7

Andy Cronin Tom Ashe Yi Shen Chief Financial Officer Chief Operations Officer Managing Director, Andy Cronin is Chief Financial & Head of Risk Business Development Officer at Avolon. In this role he Tom Ashe is the Chief Operating Yi Shen is Managing Director, has successfully led Finance and Officer and Head of Risk at Avolon. Business Development at Avolon. Capital Market teams through Tom is responsible for all operational Prior to joining Avolon, Yi held the numerous capital raises, debt activity within the business, including position of Chief Information Officer at issuances, successfully listing Avolon transaction structuring and pricing, CWT International, a listed company on the NYSE, privatizations and contract execution, technical on the Hong Kong Stock Exchange. subsequent corporate acquisitions. asset management, contracts Yi has held a variety of Chief Financial management and risk management. Prior to joining Avolon, Andy served as Officer positions across the HNA SVP Investor Markets at RBS Aviation In 2002, Tom joined RBS Aviation organisation, including CFO of HNA Capital with responsibility for disposal, Capital, rising to Head of Origination Innovation Finance Group, CFO financing and debt syndication of for the EMEA region before leaving of HNA Tourism Group and CFO of operating lease and structured debt to join Avolon in May 2010. Offshore Heavy Transport AS. products to a wide pool of investors and banking communities. Before Prior to this, Tom worked at GPA/ Yi holds a Bachelor of Engineering working at RBS Aviation Capital, Andy AerFi and had responsibility for from Sichuan University and a worked in numerous commercial and financial planning until 2000 Masters of Aerospace Materials operational roles at FLS Aerospace. when, following its acquisition from the University of Cambridge. by debisAirFinance, he assumed Andy has a Bachelor of responsibility for originating aircraft Engineering and a Masters of and engine trading opportunities. Industrial Engineering, both with First Class Honours from Tom holds a Bachelor of Commerce University College Dublin. (Hons) and a Diploma in Professional Accounting, both from University College Dublin. Tom is also a Fellow of the Institute of Chartered Accountants in Ireland. 8 Avolon Annual Report & Accounts 2018 Board of directors

Avolon has a strong, experienced Board which provides eff ective oversight and stewardship of our business.

Xiangdong (Adam) Tan Non-Executive Chairman Adam Tan has served as a director and Chairman of the Board of Avolon since April 2016. Prior to joining Avolon, Mr. Tan has served as the Vice Chairman of the Board and Chief Executive Offi cer of the HNA Group since 2011 where he was in charge of its fi nancial services, international business and logistics business. Additionally, Mr. Tan served as Executive Director of Hainan, Chairman of the Board of Directors of HNA Insurance Brokers Limited from 1997 to 2001, and various roles for Hainan from 1991 to 1997, including Senior Assistant to the President.

Denis Nayden Non-Executive Vice Chairman Denis Nayden has served as Vice Chairman of the Board since April 2016 and was previously the Chairman of the Board from May 2010 to January 2016. Mr. Nayden also holds the positions of Chairman of Varagon Capital, Chairman, Investment Committee member and Operating Investor at Harkness Capital Partners, Board member of buildOn and Board member of LiteSheet Solutions. Mr. Nayden was formerly an Advisory Managing Partner of Oak Hill Capital from January to December 2017 and a Managing Partner from 2003 through 2016. Prior to joining Oak Hill, Mr. Nayden served as the Chairman and CEO at GE Capital. Mr. Nayden spent more than 25 years serving in various roles at GE Capital, including oversight of GE Capital Aviation Services. Mr. Nayden previously served as Chairman of the Boards of Duane Reade, Firth Rixson Limited, Omada International, Primus International and RSC Equipment Rental.

Kiyoshi Fushitani Non-Executive Director Kiyoshi Fushitani has served as a director since November 2018. Mr. Fushitani is a member of the Board of Directors of ORIX Aviation. He also serves as Director and Senior Managing Executive Offi cer of ORIX and is in charge of Head of Global Business Headquarters, Head of East Asia Business Headquarters and Head of Global Transportation Services Headquarters. Mr. Fushitani joined ORIX in 1975, and has held various roles within the ORIX Group, including Deputy President of ORIX USA Corporation (currently ORIX Corporation USA), Director and Managing Executive Offi cer of ORIX Life Insurance Corporation, Deputy Head of Global Business Headquarters, President and Chairman of ORIX Investment Corporation up to the present post. Prior to joining ORIX, Mr. Fushitani spent two years working for The Sumitomo Bank. Mr. Fushitani holds a Bachelor Degree in Business Administration and Economics from Kobe University. Avolon Annual Report & Accounts 2018 9

Xiaofeng (Daniel) Chen Non-Executive Director Daniel Chen has served as a director since October 2018. Mr. Chen has served as the Board Director, Assistant to Chairman and Vice CEO of HNA Group and as Chairman and CEO of HNA Group North America LLC since August 2018. Mr. Chen has also served as Vice Chairman of Swissport International Ltd. since August 2018. Mr. Chen has served on the board of Gategroup, BrightSphere Investment Group, and SR Technics since October 2018. Prior to joining HNA Group, Mr. Chen served as the President of Pacifi c American Investment Limited from 2008 to 2017. Mr. Chen founded Inception, LLC in 2006 and served as Managing Director from 2006 to 2008. Mr. Chen served as President of Kingdom Investment Advisors Ltd from 2006 to 2008. Both entities consulted Chinese companies on fi nancing, M&A and business development. Mr. Chen serves on several boards, including as a director and secretary general of the Hainan Cihang Charity Foundation, a trustee of the Pingry School, a member of summit advisory committee of the China Institute and a trustee of the Hainan Chinese Overseas Friendship Association.

Chris Jin Non-Executive Director Chris Jin has served as a director since January 2016. Mr. Jin has served as CEO of HNA Capital Group Co., Ltd. since November 2016. Mr. Jin served as the Chairman of the Board and CEO of Bohai from May 2015 to May 2017 and as the Chairman of the Board of Tianjin Bohai from May 2015 to May 2017. From October 2012 to April 2015, Mr. Jin was Deputy CEO and CFO of Seaco SRL. From January 2011 to October 2012, Mr. Jin was the Chairman of the Board and President of HKIAL, an aircraft leasing company in Hong Kong. Prior to this, Mr. Jin worked in the Bank of China New York Branch in charge of credit and business development related matters and with the Business Department, Credit Department and Corporate Department of Bank of China Headquarters in Beijing, China and at East-West Bank in California where he was in charge of its international business. Mr. Jin currently serves as Chairman of the Board of various Bohai entities.

Dómhnal Slattery Chief Executive Offi cer Dómhnal Slattery has served as our Chief Executive Offi cer since our inception in May 2010. Mr. Slattery served as the Managing Partner of Claret Capital Limited from 2006 through 2009. Mr. Slattery was the founding Chief Executive of RBS Aviation Capital from 2001 through 2004 and went on to become the Managing Director of the Structured Asset Finance business for the Royal Bank of Scotland plc. He continued to serve as a non- executive director of RBS AC until 2008. In 1994 Mr. Slattery established his own aircraft advisory and investment banking services company, International Aviation Management Group, which was acquired by RBS in 2001. Mr. Slattery began his aviation career in 1989 in marketing roles with Guinness Peat Aviation (GPA) and GE Capital Aviation Services.

David Power Non-Executive Director David Power has served as a director since November 2018. Mr. Power is the Chairman of ORIX Aviation Hong Kong Limited and Special Advisor to ORIX Aviation Group’s Chief Executive Offi cer. Mr. Power joined ORIX Aviation in 1992 and prior to his appointment as Chief Executive Offi cer in 2004 to 2018 he held other roles within the company, including General Counsel and Head of Asset Management. Prior to working for ORIX Aviation, Mr. Power held roles in leading solicitors fi rm McCann FitzGerald and other aircraft leasing entities based in Shannon, Ireland. Mr. Power holds an Honours Bachelor of Commerce Degree from University College Dublin. In 1988 he was admitted to the Roll of Solicitors in Ireland and in 1991 he was admitted to the Roll of Solicitors, England and Wales. 10 Avolon Annual Report & Accounts 2018

‘ IN TOTAL WE CONTRIBUTED OVER US$520,000 TO 74 CARE Initiative PROJECTS IN 2018 ’

The Avolon CARE initiative has delivered another year of outstanding achievement and support for people, charities and organisations all over the globe. In total we contributed over US$520,000 to 74 projects in 2018.

The Avolon CARE Committee is Last year alone over 300 CARE a voluntary group, consisting of Days were donated by Avolon members of the Avolon TRIBE, TRIBE members. From helping to who meet on a fortnightly renovate schools to the planting Pictured basis to assess numerous of gardens, from cooking for In 2018, 23 members of the projects worthy of support. parents of seriously ill children to TRIBE visited Ethiopia to see the valuable work being installing clean water pumps, we Projects supported by CARE carried out in the country by have given our time, along with can realise not just fi nancial our CARE partners Vita. fi nancial aid. assistance, but practical assistance also. Every TRIBE member of Avolon is encouraged to give at least two days a year to helping charitable organisations and these ‘CARE Days’ have become an integral part of life at Avolon. Avolon Annual Report & Accounts 2018 11 12 Avolon Annual Report & Accounts 2018 Avolon Annual Report & Accounts 2018 13

2018 CARE Highlights

Most of the CARE Days happen Ethiopia, witnessing fi rst hand the in the month of June. This year valuable work being done in the our CARE Day became a CARE crucial provision of clean water. of23% TRIBE members submitted month, with events held on three a CARE proposal in 2018 Our Corporate Social continents to support local Responsibility (CSR) spend is split communities and causes in between CARE, industry-related Ireland, Hong Kong and the USA. events, sponsorship, and support The Great Ethiopian Run team for the arts. In total, Avolon’s 95% expanded once again, with 2018 CSR spend has been over of TRIBE members 23 runners travelling to Addis US$740,000. participated in a CARE Day Ababa for the annual 10K event in November, where they raised over US$102,000 for Vita. The travelling team also visited 23 a number of Vita projects in TRIBE members ran in the Great Ethiopian Run raining $102,000

US$ Raised at 117,700the Hong Kong dinner ‘ IN TOTAL, AVOLON’S for Orbis and Hope for Children 2018 CSR SPEND HAS BEEN OVER US$50,000 US$740,000 ’ Raised for the Mark Pollock Trust by 30 TRIBE members who participated in Run in the Dark events that occurred in Dublin, New York, and Hong Kong.

Pictured In June, over 95% of the TRIBE took part in CARE month supporting local communities and causes on three continents. 14 Avolon Annual Report & Accounts 2018 Learning Initiatives

INSEAD In 2018, Avolon entered into a In 2018, INSEAD also produced a ‘ IN 2018, strategic learning partnership Case Study on Avolon, charting with the world’s leading business the evolution and growth of INSEAD ALSO school, INSEAD. The result of the company from inception to this partnership is a bespoke present day. The Case Study PRODUCED A Avolon programme consisting of was the focus for the MBA Class two learning strands, Strategic of 2018 as part of their Master CASE STUDY and Accelerated, which cover a Strategists Day which saw range of topics including strategic 500 MBA students across the ON AVOLON, thinking, process efficiency, Singapore and Fontainebleau organisational behaviour, global campuses battle it out to produce CHARTING THE communications, leadership and strategic plans for Avolon as it self-awareness. looks to its next stage of growth EVOLUTION and development. All employees will have access to these initiatives or an INSEAD AND GROWTH open programme over a three year period. Half of Avolon’s global OF THE TRIBE has attended to date. COMPANY FROM INCEPTION TO PRESENT DAY ’ Avolon Annual Report & Accounts 2018 15

Graduate Programme In 2018 Avolon launched its ‘ THE PRIMARY OBJECTIVES inaugural Graduate Programme offering five outstanding OF THE PROGRAMME WERE students a one-year graduate TO LAUNCH AVOLON AS placement within the business. THE LEADING GRADUATE The successful graduates will join in September 2019 and will EMPLOYER OF CHOICE, have the opportunity to work in a number of distinct placements, WHILE SIMULTANEOUSLY through a rotation structure. ATTRACTING A QUALIFIED The primary objectives of the AND DIVERSE TALENT POOL ’ programme were to launch Avolon as the leading graduate employer of choice, while simultaneously attracting a qualified and diverse talent pool that will gain invaluable, deep sectoral knowledge at Avolon.

Pictured The inaugural Graduate Programme attracted 875 applications from students from 142 universities globally. 16 Avolon Annual Report & Accounts 2018 Diversity AND Inclusion

Avolon embraces diversity of thought.

We recognise that strength In Q3, Avolon engaged EY to We recognise both the challenges comes through difference. Our undertake an independent and immense opportunity ambition is for a diverse employee diagnostic of where our associated with diversity and base that is reflective of the employees felt Avolon was inclusion. We are committed to environments in which we live on our diversity and inclusion creating a work environment that and work. This will contribute to journey. EY applied a number fosters diversity of thought and an environment where diversity of methods, including an online ensuring our culture is supportive of thought is embraced. survey, workshops and one to one for everyone. interviews, the feedback from During the year, we evolved our which will inform our long term equal opportunities statement: diversity and inclusion strategy. “ Avolon is an equal opportunities employer, which cultivates opinion, listens to all views with respect, recognises people based on their merits without bias and embraces diversity. ” 45% Female

‘ WE ARE COMMITTED TO 265 PEOPLE CREATING A WORK ENVIRONMENT THAT AVOLON TRIBE FOSTERS DIVERSITY OF THOUGHT AND ENSURING OUR CULTURE IS SUPPORTIVE FOR 55% male EVERYONE ’ Avolon Annual Report & Accounts 2018 17 18 Avolon Annual Report & Accounts 2018 Arts and Culture

Avolon has been a proud supporter of the arts since its inception. 2018 was a year in which we invested heavily in supporting and enabling the arts community not just in Ireland but around the world. Our strategy in this area is three-fold: visual arts, performing arts and education.

Education

The Avolon Youthreach Programme, now in its third year, offers children from disadvantaged communities to have access to a four day- long workshop, designed to inspire creativity among early school leavers in Ireland. The programme enables the RHA to identify and nurture artistic talent and to encourage VISUAL Arts the students to consider further education within the arts. Our cornerstone international programme, the Avolon Global Studio Award, now offers two residencies at the Royal Hibernian Academy (RHA) in Dublin. This year we ran a campaign to recruit our two residents from India and we were ‘ OUR STRATEGY IN both pleased by the number of applicants THIS AREA IS THREE- and the quality of submissions. FOLD, VISUAL ARTS, The campaign reached over 40,000 artists in India. This year’s residents are working PERFORMING ARTS through the medium of paint to produce works of art under the theme of “humanity”. AND EDUCATION ’ Avolon Annual Report & Accounts 2018 19

Performing Arts

In the performing arts, we This year we also sponsored also entered into a strategic Wexford’s international partnership with the Abbey Opera Festival. Theatre, Ireland’s National In the area of promoting Ireland’s Theatre, to sponsor its Winter rich history in aviation we also Season, the highlight of which co-sponsored an exhibition was the staging of the Tony Award at the Little Museum of Dublin winning musical Come From Away. titled “the Wings of Ireland”. Avolon also sponsored the Druid Theatre production of Samuel Beckett’s Waiting for Godot at New York’s White Light Education Festival at the Lincoln Center. 20 Avolon Annual Report & Accounts 2018 International Aviation School

In October, we hosted our inaugural International Aviation School at our new global headquarters in Dublin.

A total of 76 delegates from 17 A striking keynote address countries representing 40 of from motivational speaker Mark our customer airlines, aircraft Pollock, a long-standing friend and engine suppliers, technical of Avolon, gave the delegates support providers and financiers, a different perspective on spent two days with Avolon, dealing with personal and receiving insights into the aircraft business challenges with Pictured Below leasing industry and how a leading his compelling message to Mark Pollock introduced to aircraft lessor thinks about the choose to be a competitor, a International Aviation School key elements of its business. realist and a collaborator. delegates by Avolon Head of Strategy, Dick Forsberg Hosted by Avolon’s Head of We look forward to making this an Strategy, Dick Forsberg, the annual event and to introducing event addressed a range of more of our industry’s brightest topics through presentations and best to the Avolon culture. from senior Avolon executives, covering the fundamentals of aircraft leasing, technical aspects of aircraft redelivery, airline risk management, novations, capital markets, aircraft performance analysis, pricing and lease evaluations, contract management and insurance.

Pictured Right International Aviation School delegates spent two days with Avolon receiving insights into the aircraft leasing industry.

Pictured Opposite The International Aviation School closed with a Q&A by Avolon’s ExCo. Avolon Annual Report & Accounts 2018 21

‘ THE EVENT ADDRESSED A RANGE OF TOPICS THROUGH PRESENTATIONS FROM SENIOR AVOLON EXECUTIVES ’ 22 Avolon Annual Report & Accounts 2018 AVOLON’s NEW HQ

Avolon moved into new global headquarters in Dublin in July of 2018.

Ranging over six floors, Number Thanks to its technological One Ballsbridge is a state assets, it is also the venue of the art work environment for daily global briefings that designed to deliver 21st include Avolon offices joining century facilities that are fit for onscreen from New York, Florida, purpose for the Avolon TRIBE. Singapore, Hong Kong and Dubai, enabling TRIBE members The building contains a number around the world to listen, view of initiatives aimed at enhancing and contribute via video to the the working experience, while briefings on Alpha’s giant screen. also reinforcing Avolon’s position as an employer of choice. Taoiseach of the Republic of Ireland (Prime Minister) Leo The TRIBE enjoys a bright and Varadkar TD officially opened spacious open plan working our new home in Dublin when he environment with an entire visited Avolon in September. floor dedicated to meeting rooms. Wellness and personal We have also made changes in development were at the other locations with a new office forefront of the design, the result facilities in Plantation, Florida of which is generous learning and New York. They are fit for and fitness facilities within. purpose and fit for TRIBE. Our two hundred seat auditorium, Number One Ballsbridge was Alpha, is already being used completed in June 2018 to LEED to great effect to host both Gold Development specifications, internal and external events. (Leadership in Energy and Environmental Design). Avolon Annual Report & Accounts 2018 23

‘ TAOISEACH OF THE REPUBLIC OF IRELAND (PRIME MINISTER) LEO VARADKAR TD OFFICIALLY OPENED OUR NEW HOME IN DUBLIN WHEN HE VISITED AVOLON IN SEPTEMBER ’ 24 Avolon Annual Report & Accounts 2018 Our Fleet

The Avolon fl eet is a risk-balanced portfolio of quality assets and the youngest fl eet among the world’s three largest aircraft lessors.

Portfolio as at 31 December 2018 Owned % Carrying Values Managed Commitment Total A320 CEO 202 29% 16 218 A320 NEO 36 8% 220 256 B737 NG 130 21% 22 152 B737 MAX 6 2% 135 141 E190/E195 24 3% 24 B757 6 0% 6 A330 46 15% 9 55 A330 NEO 2 1% 32 34 A350 8 5% 12 20 B767 2 0% 2 4 B777 3 2% 3 B787 22 13% 11 33 CRJ 21 1% 21 E175 4 0% 4

Total 512 100% 49 410 971 Avolon Annual Report & Accounts 2018 25

Hainan Airlines 5% IndiGo 4% Lion Air 4% Delta 4% American Airlines 3% DIVERSE Garuda 3% LESSEE Philippine Airlines 3% PROFILE Sri Lankan 2% Air India 2% owned5 years fl eet weighted average age Oman Air 2% Other 68%

total20% NBV with top 5 customers only

Narrowbody 64% NARROWBODY Widebody 36% WEIGHTING weighting64% towards narrowbody

committed410 portfolio of latest technology fuel-effi cient aircraft

APAC 51% GLOBALLY EMEA 27% DIVERSE Americas 22% ‘ OUR PORTFOLIO COMPRISES A BALANCE OF NEW AIRCRAFT ORDERED DIRECTLY FROM MANUFACTURERS, TOGETHER WITH 58% YOUNG AIRCRAFT Airbus OEM Boeing 37% ACQUIRED THROUGH BREAKDOWN Other 5% SALE AND LEASEBACK TRANSACTIONS ’ 26 Avolon Annual Report & Accounts 2018 CFO’s STATEMENT

The financial year ended 31 December 2018 was our strongest yet in terms of financial performance, where we achieved a record profit for the year of US$717m and generated US$2.2bn of net cash from operating activities for the year.

This is the end-result of a Operating Performance Through our involvement as year of optimisation with an servicer for Sapphire Aviation unwavering focus on our strategic We took delivery of 33 new Finance and our new joint-venture, commitment to maintaining a aircraft for total cash payments Jade Aviation, we materially young and fuel-efficient fleet of US$2.2bn, net of pre-delivery enhanced our management and a continuous focus on risk payments paid in previous years. activities during the year. Our management. With respect to our trading managed fleet increased to 49 activity we sold 87 aircraft and aircraft at the end of the year. one engine (and disposed of one This will facilitate growth in our aircraft constituting an insured servicer fee income as we look total loss) for total sales proceeds forward to 2019. of US$2.2bn. The average age of our aircraft sold was 10 years. Our aircraft aggregate net book value reduced slightly during the year from US$21.6bn to US$21.5bn and the average age of our fleet also reduced from 5.3 years to 5.0 years.

‘ 2018 WAS OUR STRONGEST YET IN TERMS OF FINANCIAL PERFORMANCE ’ Avolon Annual Report & Accounts 2018 27

Financial Performance 2018 was another strong year for airline profitability globally. Total revenues for 2018 were IATA has forecast total airline net Total$2.6 revenuesbn US$2.6bn, supported by an profit for 2018 of US$32bn, albeit annualised lease rate of 11.4%. with North American airlines This allowed us to recognise a accounting for just shy of half of year on year increase in profit of this balance. Notwithstanding the US$167m bringing total profit for strong back-drop we recorded the year to US$717m. a net benefit of US$22m to Profit$717 for the yearm We continue to see strong our profit for the year from the demand for aircraft in investor termination of leases relating to and lessor secondary markets. four airlines that were in default Our aircraft sales activity of their lease obligations. The resulted in a gain on disposal of benefit arose from the recognition property, plant and equipment of supplemental maintenance bn of US$75m for the year, an revenue of US$49m, security Total$27.2 assets increase of US$2m on the year. deposit and other income of US$14m and a gain resulting from We have always maintained a the de-recognition of net lease policy of operating a hedged related liabilities of US$26m, all book, and in a rising rate of which were offset in part by an environment this policy becomes impairment related to the lease $2.2bn increasingly critical. Our average Net cash from terminations of US$67m. interest rate, including the impact operating activities of hedging derivatives, increased We declared and paid total from 4.2% to 4.4% during the year. dividends to our shareholders The slight increase in our average during the year of US$490m. interest rate is partially as a result US$240m of this was paid to of unhedged floating rate debt Bohai during Q3 2018 as part which broadly equates to our of the pre-closing sequence Total$5.7 availablebn liquidity floating rate lease exposure, and for the ORIX transaction. This partially due to our increased level dividend payment facilitated of activity in the unsecured capital the early repayment of the last markets, which is of strategic intercompany loan between importance to us as we look to Avolon and Bohai ahead of its transition to investment grade. scheduled maturity date. As Our finance expense benefited we look forward to 2019 our from the recognition of IFRS 9 policy is to continue to provide a modification gains of US$86m dividend to our shareholders that following amendments to our is consistent with our strategic secured term loan and other objective of achieving further facilities, offset by amortisation investment grade credit ratings. of US$28m on all IFRS 9 modification gains during the year, resulting in a net decrease of US$58m in finance expense. On a total basis our finance expenses remained broadly flat at US$655m for the year.

All figures in US$ 28 Avolon Annual Report & Accounts 2018

Capitalisation We have consistently stated that achieving and maintaining 2018 was a very active year an investment grade profile is Net2.2 debt x/ equity with respect to capital raising the core strategic objective for where we raised US$4.2bn of our business. To this end we debt funding during the year maintain a prudent financial risk and added a commitment for an profile comfortably within the additional US$300m of unsecured boundaries of an investment debt to be drawn in Q1 2019. As grade risk profile. Our net 42% part of this debt raising activity debt to equity at 31 December Secured debt / total assets we issued US$1.5bn of senior 2018 was 2.2x. Similarly, our unsecured notes and doubled the total available liquidity at 31 scale of our unsecured revolving December 2018 was US$5.7bn, credit facility to US$2.2bn. We which when combined with our also increased our secured annual net cash from operating warehouse lines by US$150m. bn activities of US$2.2bn, provides Unencumbered$8.7 assets While our total assets remained us with excellent coverage stable year on year, we reduced for future CAPEX funding. our secured debt by US$1.6bn, increased our available liquidity by US$621m and invested US$4.3bn in new aircraft acquisitions, pre-delivery payments and deposit payments for aircraft.

Total Revenues Profit for the Year Total Available Liquidity n n n

*Includes both Predecessor Entity (period from 1 Jan 2016 - 8 Jan 2016) All figures in US$ and Successor Entity (period from 9 Jan 2016 – 31 Dec 2016)

3000000 800000 6000 100 10000 100

700000 2500000 5000 80 8000 80 600000

2000000 4000 500000 60 6000 60

1500000 400000 3000

40 4000 40 300000 1000000 2000

200000 20 2000 20 500000 1000 100000

0 0 0 0 0 0 A B C A B C A B C A B C A B C A B C Avolon Annual Report & Accounts 2018 29

We have a continuous focus grew by US$2.9bn to US$8.7bn. Our secured debt measured on liability management and This progress is even more as a percentage of total assets debt maturities. In 2018 we significant when we look back to reduced from 48% at the start of extended the maturity of our the end of 2016, when we held 2018 to 42% at year end. We look secured term loan (US$4.3bn at only US$0.9bn of unencumbered forward to continuing our swift 31 December 2018) from 2022 assets. The ratio of our total and meaningful progress on this out to 2025. As at 31 December unencumbered assets to drawn front and ultimately reaching our 2018 we reported a very unsecured debt was 1.4x at 31 stated target of 30% secured debt conservative weighted average December 2018, which provides to total assets. debt maturity of 4.5 years. As excellent credit protection to our a result of consistent liability unsecured debt investors. management only 8% of our debt As we look out over the next falls due in the next 2 years. 12 months, our relentless The reduction in secured debt focus is on achieving further outstanding of US$1.6bn during investment grade credit ratings. the year was a significant step on We expect to continue our Andy Cronin our path to further investment excellent progress on reducing Chief Financial Officer grade ratings, as it facilitated the secured debt and increasing release of aircraft collateralised our unencumbered assets. under various debt facilities. As a result, over the course of 2018, our unencumbered asset balance

Unsecured Debt / Total Debt Unencumbered Assets Secured Debt / Total Assets n n n

Unsecured Debt Secured Debt All figures in US$