ATLAS AIR WORLDWIDE HOLDINGS INC (Form: 10-Q, Received: 08/02/2012 12:37:02)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-16545

LOGO

Atlas Air Worldwide Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-4146982
(State or other jurisdiction of incorporation)		(IRS Employer Identification No.)

2000 Westchester Avenue, Purchase, New York		10577
(Address of principal executive offices)		(Zip Code)

(914) 701-8000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of June 30, 2012, there were 26,439,584 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)

	Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (unaudited)		1

	Consolidated Statements of Operations for the Three and Six Months ended June 30, 2012 and 2011 (unaudited)		2

	Consolidated Statements of Comprehensive Income for the Three and Six Months ended June 30, 2012 and 2011 (unaudited)		3

	Consolidated Statements of Cash Flows for the Six Months ended June 30, 2012 and 2011 (unaudited)		4

	Consolidated Statements of Stockholders’ Equity as of and for the Six Months ended June 30, 2012 and 2011 (unaudited)		5

	Notes to Unaudited Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29

Item 4.	Controls and Procedures		30

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		31

Item 1A.	Risk Factors		31

Item 5.	Other Information		31

Item 6.	Exhibits		31

	Signatures		32

	Exhibit Index		33

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Atlas Air Worldwide Holdings, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)


	June 30, 2012			December 31, 2011
Assets
Current Assets
Cash and cash equivalents	$	233,072		$	187,111
Short-term investments		11,122			8,097
Accounts receivable, net of allowance of $2,815 and $1,931, respectively		106,005			93,213
Prepaid maintenance		33,102			35,902
Deferred taxes		14,852			10,580
Prepaid expenses and other current assets		75,506			58,934

Total current assets		473,659			393,837
Property and Equipment
Flight equipment		1,656,431			1,466,384
Ground equipment		36,831			33,788
Less: accumulated depreciation		(157,039	)		(159,123	)
Purchase deposits for flight equipment		332,983			407,184

Property and equipment, net		1,869,206			1,748,233
Other Assets
Long-term investments and accrued interest		134,609			135,735
Deposits and other assets		98,130			73,232
Intangible assets, net		37,603			39,961

Total Assets	$	2,613,207		$	2,390,998

Liabilities and Equity
Current Liabilities
Accounts payable	$	37,849		$	27,352
Accrued liabilities		156,866			175,298
Current portion of long-term debt		91,883			70,007

Total current liabilities		286,598			272,657
Other Liabilities
Long-term debt		808,004			680,009
Deferred taxes		208,628			178,069
Other liabilities		119,909			118,888

Total other liabilities		1,136,541			976,966
Commitments and contingencies
Equity
Stockholders’ Equity
Preferred stock, $1 par value; 10,000,000 shares authorized; no shares issued		—			—
Common stock, $0.01 par value; 50,000,000 shares authorized; 27,666,883 and 27,462,116 shares issued, 26,439,584 and 26,304,764, shares outstanding (net of treasury stock), as of June 30, 2012 and December 31, 2011, respectively		277			275
Additional paid-in-capital		535,206			525,670
Treasury stock, at cost; 1,227,299 and 1,157,352 shares, respectively		(44,748	)		(41,499	)
Accumulated other comprehensive loss		(15,446	)		(15,683	)
Retained earnings		712,436			668,749

Total stockholders’ equity		1,187,725			1,137,512
Noncontrolling interest		2,343			3,863

Total equity		1,190,068			1,141,375

Total Liabilities and Equity	$	2,613,207		$	2,390,998

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Operating Revenue
ACMI	$	160,421		$	160,442		$	315,124		$	306,477
AMC charter		138,014			112,473			259,308			193,649
Commercial charter		120,827			71,067			197,774			136,603
Dry leasing		2,862			2,134			5,807			3,677
Other		2,581			3,458			5,996			6,775

Total Operating Revenue		424,705			349,574			784,009			647,181

Operating Expenses
Aircraft fuel		117,571			100,358			212,334			174,525
Salaries, wages and benefits		73,378			61,498			144,254			123,262
Maintenance, materials and repairs		43,371			46,860			96,351			96,929
Aircraft rent		42,758			41,567			82,176			79,921
Passenger and ground handling services		18,618			7,275			31,389			13,502
Navigation fees, landing fees and other rent		15,882			12,603			28,937			23,943
Depreciation and amortization		13,877			8,775			28,180			17,105
Travel		14,823			9,922			27,443			19,044
Gain on disposal of aircraft		(1,163	)		(181	)		(1,359	)		(301	)
Other		29,472			23,278			57,607			45,140

Total Operating Expenses		368,587			311,955			707,312			593,070

Operating Income		56,118			37,619			76,697			54,111

Non-operating Expenses (Income)
Interest income		(4,887	)		(5,080	)		(9,796	)		(10,196	)
Interest expense		15,631			9,912			29,594			20,208
Capitalized interest		(5,952	)		(6,185	)		(12,304	)		(11,602	)
Loss on early extinguishment of debt		142			—			142			—
Other (income) expense, net		1,082			(406	)		785			(364	)

Total Non-operating Expenses (Income)		6,016			(1,759	)		8,421			(1,954	)
Income before income taxes		50,102			39,378			68,276			56,065
Income tax expense		18,906			14,907			26,140			21,131

Net Income		31,196			24,471			42,136			34,934
Less: Net income (loss) attributable to noncontrolling interests		344			624			(1,551	)		570

Net Income Attributable to Common Stockholders	$	30,852		$	23,847		$	43,687		$	34,364

Earnings per share:
Basic	$	1.17		$	0.91		$	1.66		$	1.31

Diluted	$	1.16		$	0.90		$	1.65		$	1.30

Weighted average shares:
Basic		26,428			26,269			26,394			26,155

Diluted		26,511			26,491			26,500			26,397

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Comprehensive Income

(in thousands)

(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Net Income	$	31,196		$	24,471		$	42,136		$	34,934
Other comprehensive income (loss):
Interest rate derivatives:
Net change in fair value		—			(808	)		(713	)		(808	)
Reclassification into earnings		779			—			1,032			—
Income tax benefit (expense)		(279	)		293			(112	)		293
Foreign currency translation:
Translation adjustment		(80	)		(30	)		77			172
Income tax benefit (expense)		25			16			(16	)		(30	)

Other comprehensive income (loss)		445			(529	)		268			(373	)

Comprehensive Income		31,641			23,942			42,404			34,561
Less: Comprehensive income (loss) attributable to noncontrolling interests		316			619			(1,520	)		645

Comprehensive Income Attributable to Common Stockholders	$	31,325		$	23,323		$	43,924		$	33,916

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the Six Months Ended
	June 30, 2012			June 30, 2011
Operating Activities:
Net Income Attributable to Common Stockholders	$	43,687		$	34,364
Net income (loss) attributable to noncontrolling interests		(1,551	)		570

Net Income		42,136			34,934
Adjustments to reconcile Net Income to net cash provided by operating activities:
Depreciation and amortization		32,447			20,873
Accretion of debt securities discount		(4,373	)		(4,112	)
Provision for allowance for doubtful accounts		637			45
Loss on early extinguishment of debt		142			—
Gain on disposal of aircraft		(1,359	)		(301	)
Deferred taxes		25,872			3,824
Stock-based compensation expense		8,994			6,540
Changes in:
Accounts receivable		(5,681	)		(4,081	)
Prepaid expenses and other current assets		7,290			(15,525	)
Deposits and other assets		(12,964	)		(4,254	)
Accounts payable and accrued liabilities		(7,203	)		35,723

Net cash provided by operating activities		85,938			73,666
Investing Activities:
Capital expenditures		(18,443	)		(8,776	)
Purchase deposits and delivery payments for flight equipment		(161,477	)		(120,783	)
Investment in debt securities		(1,179	)		—
Proceeds from short-term investments		3,915			3,468
Proceeds from disposal of aircraft		2,515			770

Net cash used for investing activities		(174,669	)		(125,321	)
Financing Activities:
Proceeds from debt issuance		328,221			—
Proceeds from stock option exercises		—			4,429
Purchase of treasury stock		(3,249	)		(9,126	)
Excess tax benefit from stock-based compensation expense		544			2,946
Payment of debt issuance costs		(10,004	)		—
Payments of debt		(180,820	)		(73,435	)

Net cash provided by (used for) financing activities		134,692			(75,186	)
Net increase (decrease) in cash and cash equivalents		45,961			(126,841	)
Cash and cash equivalents at the beginning of period		187,111			588,852

Cash and cash equivalents at the end of period	$	233,072		$	462,011

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(Unaudited)


	Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity			Noncontrolling Interest		Total Equity
Balance at December 31, 2010	$	270	$	(32,248	)	$	505,297		$	458		$	572,666	$	1,046,443		$	3,647	$	1,050,090
Net Income		—		—			—			—			34,364		34,364			570		34,934
Other comprehensive income (loss)		—		—			—			(448	)		—		(448	)		75		(373	)

Comprehensive Income (Loss)		—		—			—			—			—		33,916			645		34,561
Stock option and restricted stock compensation		—		—			6,540			—			—		6,540			—		6,540
Purchase of 135,755 shares of treasury stock		—		(9,126	)		—			—			—		(9,126	)		—		(9,126	)
Exercise of 105,173 employee stock options		—		—			4,429			—			—		4,429			—		4,429
Issuance of 376,424 shares of restricted stock		4		—			(4	)		—			—		—			—		—
Tax benefit on restricted stock and stock options		—		—			2,946			—			—		2,946			—		2,946

Balance at June 30, 2011	$	274	$	(41,374	)	$	519,208		$	10		$	607,030	$	1,085,148		$	4,292	$	1,089,440


	Common Stock		Treasury Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
Balance at December 31, 2011	$	275	$	(41,499	)	$	525,670		$	(15,683	)	$	668,749	$	1,137,512		$	3,863		$	1,141,375
Net Income		—		—			—			—			43,687		43,687			(1,551	)		42,136
Other comprehensive income (loss)		—		—			—			237			—		237			31			268

Comprehensive Income (Loss)		—		—			—			—			—		43,924			(1,520	)		42,404
Stock option and restricted stock compensation		—		—			8,994			—			—		8,994			—			8,994
Purchase of 69,947 shares of treasury stock		—		(3,249	)		—			—			—		(3,249	)		—			(3,249	)
Issuance of 204,767 shares of restricted stock		2		—			(2	)		—			—		—			—			—
Tax benefit on restricted stock and stock options		—		—			544			—			—		544			—			544

Balance at June 30, 2012	$	277	$	(44,748	)	$	535,206		$	(15,446	)	$	712,436	$	1,187,725		$	2,343		$	1,190,068

See accompanying Notes to Unaudited Consolidated Financial Statements

Atlas Air Worldwide Holdings, Inc.

Notes to Unaudited Consolidated Financial Statements

June 30, 2012

1. Basis of Presentation

Our consolidated financial statements include the accounts of the holding company, Atlas Air Worldwide Holdings, Inc. (“AAWW”) and its consolidated subsidiaries. AAWW is the parent company of its principal operating subsidiary, Atlas Air, Inc. (“Atlas”), and of Polar Air Cargo LLC (“Old Polar”). AAWW is also the parent company of several subsidiaries related to our dry leasing services (collectively referred to as “Titan”). In addition, we are the primary beneficiary of Global Supply Systems Limited (“GSS”), a consolidated subsidiary. AAWW has a 51% equity interest and 75% voting interest in Polar Air Cargo Worldwide, Inc. (“Polar”). We record our share of Polar’s results under the equity method of accounting.

The terms “we,” “us,” “our,” and the “Company” mean AAWW and all entities included in its consolidated financial statements.

We provide outsourced aircraft and aviation operating services throughout the world, serving Africa, Asia, Australia, Europe, the Middle East, North America and South America through: (i) contractual service arrangements, including contracts through which we provide aircraft to customers and value-added services, including crew, maintenance and insurance (“ACMI”), as well as contracts through which we provide crew, maintenance and insurance, with the customer providing the aircraft (“CMI”); (ii) military charter services (“AMC Charter”); (iii) seasonal, commercial and ad-hoc charter services (“Commercial Charter”); and (iv) dry leasing or sub-leasing of aircraft and engines (“Dry Leasing” or “Dry Lease”).

The accompanying unaudited consolidated financial statements and related notes (the “Financial Statements”) have been prepared in accordance with the U.S. Securities and Exchange Commission (the “SEC”) requirements for quarterly reports on Form 10-Q, and consequently, exclude certain disclosures normally included in audited consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany accounts and transactions have been eliminated. The Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes included in the AAWW Annual Report on Form 10-K for the year ended December 31, 2011, which included additional disclosures and a summary of our significant accounting policies. In our opinion, the Financial Statements contain all adjustments, consisting of normal recurring items, necessary to fairly state the financial position of AAWW and its consolidated subsidiaries as of June 30, 2012, the results of operations for the three and six months ended June 30, 2012 and 2011, comprehensive income for the three and six months ended June 30, 2012 and 2011, cash flows for the six months ended June 30, 2012 and 2011, and shareholders’ equity as of and for the six months ended June 30, 2012 and 2011.

For interim accounting purposes, we recognize income taxes using an estimated annual effective tax rate.

Our quarterly results are subject to seasonal and other fluctuations, and the operating results for any quarter are therefore not necessarily indicative of results that may be otherwise expected for the entire year.

Except for per share data, all dollar amounts are in thousands unless otherwise noted.

Certain reclassifications have been made to the prior periods’ unaudited consolidated financial statement amounts and related note disclosures to conform to the current period’s presentation.

2. Recently Adopted Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board amended its guidance on the presentation of comprehensive income to increase the prominence of items reported in other comprehensive income. The new guidance requires that all components of comprehensive income in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new guidance was effective as of the beginning of 2012 and its adoption did not have any impact on our financial condition, results of operations or cash flows.

3. DHL Investment and Polar

Polar provides air cargo capacity to its customers, including DHL Network Operations (USA), Inc. (“DHL”), through a blocked-space agreement that began on October 27, 2008.

As of June 30, 2012, Polar operates six 747-400 freighter aircraft that are subleased from us. An additional two aircraft are operated by Atlas to support the Polar network and DHL through an alliance agreement whereby Atlas provides ACMI services to Polar. We also provide incremental charter capacity to Polar on an as-needed basis. Atlas and Polar have entered into various agreements under which we provide Polar with crew, maintenance and insurance for the subleased aircraft. Collectively, these service agreements and the subleases are referred to as “Express Network ACMI”. We provide Polar with certain management and administrative services under a shared services agreement. In addition, Polar and Atlas provide each other with sales and ground support services under a general sales and services agreement. The following table summarizes our transactions with Polar:


	For the Three Months Ended				For the Six Months Ended
Revenue and Expenses:	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
ACMI revenue from Polar	$	60,986	$	60,272	$	121,680	$	106,650
Other revenue from Polar	$	2,837	$	2,837	$	5,675	$	5,675
Ground handling and airport fees paid to Polar	$	1,188	$	312	$	2,186	$	559

Accounts receivable/payable as of:	June 30, 2012		December 31, 2011
Receivables from Polar	$	3,290	$	2,944
Payables to Polar	$	797	$	121

Aggregate Carrying Value of Polar Investment as of:	June 30, 2012		December 31, 2011
	$	4,870	$	4,870

4. Concentration of Credit Risk and Significant Customers

We are exposed to concentration of customer credit risk. The following table summarizes our significant exposure to Polar and the U.S. Military Air Mobility Command (“AMC”). We have not experienced credit issues with either of these customers. No other customer accounted for 10.0% or more of our Total Operating Revenue.


	For the Three Months Ended						For the Six Months Ended
Revenue as a % of Total Operating Revenue:	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
AMC		32.5	%		32.2	%		33.1	%		29.9	%
Polar		15.0	%		18.1	%		16.2	%		17.4	%

	For the Three Months Ended						For the Six Months Ended
Revenue as a % of Total ACMI Revenue:	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Polar		38.0	%		37.6	%		38.6	%		34.8	%

Accounts receivable as a % of Total Accounts receivable, net of allowance, as of:		June 30, 2012			December 31, 2011
AMC		19.2	%		23.1	%
Polar		3.1	%		3.2	%

5. Financial Instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Inputs used to measure fair value are classified in the following hierarchy:

Level 1

Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2

Other inputs that are observable directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, or inactive quoted prices for identical assets or liabilities in inactive markets;

Level 3

Unobservable inputs reflecting assumptions about the inputs used in pricing the asset or liability.

We endeavor to utilize the best available information in measuring fair value.

We maintain Cash and cash equivalents and Short-term investments, which include cash on hand, demand deposits, other cash investments that are highly liquid in nature and have original maturities of three months or less at acquisition, money market funds, certificates of deposit and the current portion of debt securities. The carrying value of Cash and cash equivalents and Short-term investments is based on cost, which approximates fair value.

Long-term investments consist of debt securities for which we have both the ability and the intent to hold until maturity. These investments are classified as held-to-maturity and reported at amortized cost. The fair value of our Long-term investments was based on a discounted cash flow analysis using the contractual cash flows of the investments and a discount rate derived from unadjusted quoted interest rates for debt securities of comparable risk. Such debt securities represent investments in Pass-Through Trust Certificates related to Enhanced Equipment Trust Certificates (“EETCs”) issued by Atlas in 1998, 1999 and 2000. Interest on debt securities and accretion of discounts using the effective interest method are included in Interest income.

The fair value of our EETCs was estimated based on Level 3 inputs. We obtained Level 2 inputs of quoted market prices of our equipment notes and used them as a basis for valuing the EETCs.

The fair values of our term loans and The Export-Import Bank of the United States (“Ex-Im Bank”) guaranteed notes were based on a discounted cash flow analysis using current borrowing rates for instruments with similar terms.

The fair value of our interest rate derivatives was based on Level 2 inputs utilized in expected cash flow models. The incorporated market inputs include the implied forward London InterBank Offered Rate (“LIBOR”) yield curve for the same period as the future interest swap settlements. These derivatives were designated as hedging instruments.

The following table summarizes the carrying amount, estimated fair value and classification of our financial instruments as of:



	June 30, 2012
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	233,072	$	233,072	$	233,072	$	—	$	—
Short-term investments		11,122		11,122		—		—		11,122
Long-term investments and accrued interest		134,609		166,383		—		—		166,383

	$	378,803	$	410,577	$	233,072	$	—	$	177,505

Liabilities
Term loans	$	446,097	$	462,560	$	—	$	—	$	462,560
Ex-Im Bank guaranteed notes		142,034		142,034		—		—		142,034
1998 EETCs		120,264		135,976		—		—		135,976
1999 EETCs		138,112		148,307		—		—		148,307
2000 EETCs		53,380		58,350		—		—		58,350

	$	899,887	$	947,227	$	—	$	—	$	947,227



	December 31, 2011
	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	187,111	$	187,111	$	187,111	$	—	$	—
Short-term investments		8,097		8,097		—		—		8,097
Long-term investments and accrued interest		135,735		167,765		—		—		167,765

	$	330,943	$	362,973	$	187,111	$	—	$	175,862

Liabilities
Interest rate derivatives	$	24,887	$	24,887	$	—	$	24,887	$	—
Term loans		420,436		420,436		—		—		420,436
1998 EETCs		128,974		145,418		—		—		145,418
1999 EETCs		145,410		156,430		—		—		156,430
2000 EETCs		55,196		60,502		—		—		60,502

	$	774,903	$	807,673	$	—	$	24,887	$	782,786

The following table presents the carrying value, gross unrealized gains and fair value of our long-term investments by contractual maturity as of:


	June 30, 2012						December 31, 2011
	Carrying Value		Gross Unrealized Gains		Fair Value		Carrying Value		Gross Unrealized Gains		Fair Value
Debt securities
Due after one but within five years	$	278	$	19	$	297	$	—	$	—	$	—
Due after five but within ten years	$	134,331	$	31,755	$	166,086	$	135,735	$	32,030	$	167,765

Total	$	134,609	$	31,774	$	166,383	$	135,735	$	32,030	$	167,765

Interest Rate Derivatives

We were exposed to changes in interest rates for two debt issuances related to the financing of two Boeing 747-8F aircraft that we purchased. We used forward-starting interest rate swaps to effectively fix the interest rate on two 747-8F financings in the fourth quarter of 2011. The use of forward-starting interest rate swaps effectively converted our floating-rate debt issuance to a fixed-rate.

In May 2011, we entered into two forward-starting interest rate swaps with a total notional value of $237.5 million to hedge the risk of changes in quarterly interest payments due to fluctuations in the forward 90-day LIBOR swap rate for debt issuances in the fourth quarter of 2011. We designated those forward-starting interest rate swaps as cash flow hedges.

As of December 31, 2011, the fair value of those forward-starting interest rate swaps was $24.9 million, offset by cash collateral of $19.9 million, resulting in a net carrying value of $5.0 million included within Accrued liabilities. We recorded unrealized pre-tax losses of $0.7 million and after-tax losses of $0.5 million in Other comprehensive loss for changes in the fair value of our forward-starting interest rate swaps for the six months ended June 30, 2012.

On January 12, 2012, we terminated both forward-starting interest rate swaps, which converted a previously unrealized loss of $25.6 million into a realized loss in Accumulated other comprehensive income (loss). There was no ineffectiveness associated with these hedges upon their termination. The two term loans associated with these hedges were converted to fixed-rate loans beginning after their first payment.

As of June 30, 2012, there was $24.6 million of unamortized realized loss related to the forward-starting interest rate swaps remaining in Accumulated other comprehensive income (loss). We recognized $0.8 million and $1.0 million of realized loss in earnings as a component of Interest expense for the three and six months ended June 30, 2012, respectively. Realized losses expected to be reclassified into earnings within the next 12 months are $3.1 million as of June 30, 2012.

6. Accrued Liabilities

Accrued liabilities consisted of the following as of:


	June 30, 2012		December 31, 2011
Maintenance	$	56,898	$	54,239
Salaries, wages and benefits		25,146		43,698
Aircraft fuel		22,940		25,583
Other		51,882		51,778

Accrued liabilities	$	156,866	$	175,298

7. Debt

Ex-Im Bank Guaranteed Notes

On January 30, 2012, we entered into a term loan facility for up to $864.8 million with Apple Bank for Savings, guaranteed by Ex-Im Bank to finance up to six 747-8F aircraft deliveries (the “Ex-Im Bank Facility”). The Ex-Im Bank Facility, when drawn, will consist of up to six separate term loans, each secured by a mortgage on a 747-8F aircraft. In connection with entry into the Ex-Im Bank Facility, we have agreed to pay usual and customary commitment and other fees associated with this type of financing. Borrowings under the Ex-Im Bank Facility will initially accrue interest at a variable rate, payable quarterly at LIBOR plus a margin. The Ex-Im Bank Facility provides options to refinance the loans through

the issuance of bonds in the capital markets or to convert the loans to a fixed rate. The Ex-Im Bank Facility contains customary covenants and events of default and is not cross-defaulted to any of our other debt facilities.

In addition, there are certain operating conditions under the Ex-Im Bank Facility that we must meet. Ex-Im Bank’s primary requirement is that any aircraft financed under the facility must be placed under an ACMI agreement with a customer that is not based in certain restricted countries, which are defined by Ex-Im Bank.

On May 29, 2012, we initially borrowed $142.0 million under the Ex-Im Bank Facility as a variable-rate loan secured by a mortgage against one 747-8F (aircraft tail number N850GT). On June 19, 2012, we refinanced the loan through the issuance of twelve-year fixed-rate notes in the amount of $142.0 million (the “First 2012 Ex-Im Guaranteed Notes”). The First 2012 Ex-Im Guaranteed Notes accrue interest at a fixed rate of 2.02% with principal and interest payable quarterly.

Term Loans

On March 30, 2012, we entered into a five-year term loan facility with CIT Bank. The facility is comprised of four separate term loans, in the aggregate amount of $35.7 million that are collectively referred to as the “First 2012 CIT Term Loans”. The First 2012 CIT Term Loans are secured by mortgages on two 747-400 (aircraft tail numbers N464MC and N465MC) and two 767-300ER (aircraft tail numbers N640GT and N641GT) passenger aircraft. The balances outstanding under the First 2012 CIT Term Loans accrue interest at a fixed interest rate of 6.91%, with principal and interest payable monthly. On May 15, 2012, we entered into a five-year term loan with CIT Bank for $8.5 million (the “Second 2012 CIT Term Loan”). The Second 2012 CIT Term Loan is secured by a mortgage on a 767-300ER (aircraft tail number N642GT) passenger aircraft. The balance outstanding under the Second 2012 CIT Term Loan accrues interest at a fixed interest rate of 6.89%, with principal and interest payable monthly. In connection with entry into the First and Second 2012 CIT Term Loans, we paid usual and customary fees. The First and Second 2012 CIT Term Loans contain customary covenants, events of default and are cross-defaulted and cross-collateralized. In addition, the First and Second CIT Term Loans are cross-defaulted to certain of our other debt facilities.

8. Segment Reporting

We have the following reportable segments: ACMI, AMC Charter, Commercial Charter and Dry Leasing. We use an economic performance metric (“Direct Contribution”) that shows the profitability of each segment after allocation of direct ownership costs. Direct Contribution consists of Income before income taxes and excludes the following: special charges, pre-operating expenses, nonrecurring items, gains on the disposal of aircraft, unallocated revenue and unallocated fixed costs. Direct ownership costs include crew costs, maintenance, fuel, ground operations, sales costs, aircraft rent, interest expense related to aircraft debt, interest income on debt securities and aircraft depreciation. Unallocated income and expenses include corporate overhead, non-aircraft depreciation, interest income, foreign exchange gains and losses, other revenue and other non-operating costs, including special charges, pre-operating expenses and nonrecurring items. Management uses Direct Contribution to measure segment profitability as it shows each segment’s contribution to unallocated fixed costs. Each segment has different operating and economic characteristics that are separately reviewed by our senior management.

Management allocates the costs attributable to aircraft operation and ownership among the various segments based on the aircraft type and activity levels in each segment. Depreciation and amortization expense, aircraft rent, maintenance expense, and other aircraft related expenses are allocated to segments based upon aircraft utilization because certain individual aircraft are utilized across segments interchangeably. In addition, certain ownership costs are directly apportioned to the ACMI segment. Other allocation methods are standard activity-based methods that are commonly used in the industry.

The ACMI segment provides aircraft, crew, maintenance and insurance services to customers. Also included in the ACMI segment are the results of operations for CMI. CMI provides crew, maintenance and insurance services, with the customer providing the aircraft. Under both services, customers guarantee a monthly level of operation at a predetermined rate for a defined period of time. The customer bears the commercial revenue risk and the obligation for other direct operating costs, including fuel. The Direct Contribution from Express Network ACMI flying is reflected as ACMI.

The AMC Charter segment primarily provides full planeload charter flights to the U.S. Military. In addition to cargo flights, the AMC Charter segment includes passenger flights, which we began providing in the second quarter of 2011. We also earn commissions on subcontracting certain flying of oversized cargo and less than full planeload missions, or in connection with flying cargo into areas of military conflict where we cannot perform the services on our own. Revenue from the AMC Charter business is typically derived from one-year contracts on a cost-plus basis with the AMC. Our current

AMC contract runs from January 1, 2012 through September 30, 2012. Although we are responsible for the direct operating costs of the aircraft, the price paid for fuel consumed during AMC flights is fixed by the U.S. Military. We receive reimbursement from the AMC each month if the price of fuel paid by us to vendors for AMC missions exceeds the fixed price. Alternatively, if the price of fuel paid by us is less than the fixed price, we pay the difference to the AMC each month.

The Commercial Charter segment provides full planeload air cargo and passenger aircraft charters to charter brokers, cruise-ship operators, freight forwarders, direct shippers and airlines. Charters are often paid in advance and we typically bear the direct operating costs.

The Dry Leasing segment provides for the leasing of aircraft and engines to customers.

Other represents revenue for services that are not allocated to any segment, including administrative and management support services and flight simulator training.

The following table sets forth Operating Revenue and Direct Contribution for our reportable business segments reconciled to Operating Income and Income before Income Taxes:


	For the Three Months Ended						For the Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Operating Revenue:
ACMI	$	160,421		$	160,442		$	315,124		$	306,477
AMC Charter		138,014			112,473			259,308			193,649
Commercial Charter		120,827			71,067			197,774			136,603
Dry Leasing		2,862			2,134			5,807			3,677
Other		2,581			3,458			5,996			6,775

Total Operating Revenue	$	424,705		$	349,574		$	784,009		$	647,181


Direct Contribution:
ACMI	$	40,793		$	37,963		$	64,948		$	60,765
AMC Charter		29,984			19,801			50,565			33,999
Commercial Charter		10,081			8,828			11,957			17,867
Dry Leasing		1,253			1,185			2,589			2,013

Total Direct Contribution for Reportable Segments		82,111			67,777			130,059			114,644


Add back (subtract):
Unallocated income and expenses		(33,030	)		(28,580	)		(63,000	)		(58,880	)
Loss on early extinguishment of debt		(142	)		—			(142	)		—
Gain on disposal of aircraft		1,163			181			1,359			301

Income before Income Taxes		50,102			39,378			68,276			56,065


Add back (subtract):
Interest income		(4,887	)		(5,080	)		(9,796	)		(10,196	)
Interest expense		15,631			9,912			29,594			20,208
Capitalized interest		(5,952	)		(6,185	)		(12,304	)		(11,602	)
Loss on early extinguishment of debt		142			—			142			—
Other (income) expense, net		1,082			(406	)		785			(364	)

Operating Income	$	56,118		$	37,619		$	76,697		$	54,111

9. Commitments and Contingencies

In 2006, we entered into an agreement with The Boeing Company (“Boeing”) providing for our purchase of 12 747-8F aircraft (the “Boeing 747-8F Agreement”). The Boeing 747-8F Agreement provided for deliveries of the aircraft to begin in 2010, with all 12 deliveries originally contractually scheduled for delivery by the end of 2011. In addition, the Boeing 747-8F Agreement provides us with rights to purchase up to an additional 13 747-8F aircraft.

Since entering the Boeing 747-8F Agreement, Boeing announced several delays in the delivery schedule of the 12 747-8F aircraft. In September 2011, after lengthy delays and performance considerations, we exercised our termination

rights in connection with three early build 747-8F aircraft, reducing our order to nine. In June 2012, we reached an agreement with Boeing on a revised delivery and payment schedule.

As of June 30, 2012, we have taken delivery of four of the nine aircraft on order. Estimated remaining expenditures under the Boeing 747-8F Agreement as of June 30, 2012, including estimated amounts for contractual price escalations and delivery payments, are $323.9 million for the remainder of 2012 and $213.8 million in 2013.

10. Legal Proceedings

Department of Justice Investigation and Related Litigation

In 2010, Old Polar entered into a plea agreement with the United States Department of Justice (the “DOJ”) relating to the previously disclosed DOJ investigation concerning alleged manipulation by cargo carriers of fuel surcharges and other rate components for air cargo services (the “DOJ Investigation”). Under the terms of the agreement, approved by the United States District Court for the District of Columbia, Old Polar will pay a fine of $17.4 million, payable in five annual installments, of which the first two payments have been made. The fine relates to an alleged agreement by Old Polar with respect to fuel surcharges on cargo shipped from the United States to Australia during the time period from January 2000 through April 2003.

As a result of the DOJ Investigation, the Company and Old Polar have been named defendants, along with a number of other cargo carriers, in several class actions in the United States arising from allegations about the pricing practices of a number of air cargo carriers that have now been consolidated for pre-trial purposes in the United States District Court for the Eastern District of New York. The consolidated complaint alleges, among other things, that the defendants, including the Company and Old Polar, manipulated the market price for air cargo services sold domestically and abroad through the use of surcharges, in violation of United States, state, and European Union antitrust laws. The suit seeks treble damages and injunctive relief.

In 2007, the Company and Old Polar commenced an adversary proceeding in bankruptcy court against each of the plaintiffs in this class action litigation seeking to enjoin the plaintiffs from prosecuting claims against the Company and Old Polar that arose prior to 2004, the date on which the Company and Old Polar emerged from bankruptcy. In 2007, the plaintiffs consented to the injunctive relief requested and the bankruptcy court entered an order enjoining plaintiffs from prosecuting Company claims arising prior to 2004.

The court in the antitrust class actions has heard and decided a number of procedural motions. Among those was the plaintiffs’ motion to join Polar Air Cargo Worldwide, Inc. as an additional defendant, which the court granted on April 13, 2011. There was substantial pre-trial written discovery and document production, and a number of depositions were taken. The case is currently in the class certification phase, with additional depositions occurring. The plaintiffs’ motion for class certification was filed on October 28, 2011, and the Company filed its response on May 25, 2012. We are unable to reasonably predict the court’s ruling on the motion or the ultimate outcome of the litigation.

The Company, Old Polar and a number of other cargo carriers have also been named as defendants in civil class action suits in the provinces of British Columbia, Ontario and Quebec, Canada that are substantially similar to the class action suits in the United States. The plaintiffs in the British Columbia case have indicated they do not intend to pursue their lawsuit against the Company and Old Polar. We are unable to reasonably predict the outcome of the litigation in Ontario and Quebec.

If the Company or Old Polar were to incur an unfavorable outcome in connection with one or more of the matters described above, such outcome is not expected to materially affect our business, financial condition, results of operations, and/or cash flows.

Brazilian Customs Claim

Old Polar was cited for two alleged customs violations in Sao Paulo, Brazil, relating to shipments of goods dating back to 1999 and 2000. Each claim asserts that goods listed on the flight manifest of two separate Old Polar scheduled service flights were not on board the aircraft upon arrival and therefore were improperly brought into Brazil. The two claims, which also seek unpaid customs duties, taxes and penalties from the date of the alleged infraction, are approximately $9.5 million and $5.2 million, respectively, plus interest based on June 30, 2012 exchange rates.

In both cases, we believe that the amounts claimed are substantially overstated due to a calculation error when considering the type and amount of goods allegedly missing, among other things. Furthermore, we may seek appropriate

indemnity from the shipper in each claim as necessary. In the pending claim for $9.5 million, we received an administrative decision dismissing the claim in its entirety, which remains subject to a mandatory appeal by the Brazil customs authorities. As required to defend such claims, we have made deposits pending resolution of these matters. The balances were $6.0 million as of June 30, 2012 and $6.5 million as of December 31, 2011, and are included in Deposits and other assets.

We are currently defending these and other Brazilian customs claims and the ultimate disposition of these claims, either individually or in the aggregate, is not expected to materially affect our financial condition, results of operations or cash flows.

Trademark Matters

Since 2005, we have been involved in ongoing litigation in Europe against Atlas Transport, an unrelated and unaffiliated entity, over the use of the name “Atlas”. Following application by us to register the mark “ATLAS AIR” in the European Union (“EU”), opposition from Atlas Transport and follow-up filings by us, the Office for Harmonization in the Internal Market (“OHIM”), which handles trademark matters in the EU, declared Atlas Transport’s own trademark “ATLAS” partially invalid because of the prior existence of our Benelux trademark registration. In 2008, OHIM’s First Board of Appeal upheld the lower panel’s decision, and Atlas Transport appealed that decision to the EU General Court (formally the Court of First Instance), which upheld the court’s decision on May 18, 2011. Atlas Transport appealed that ruling to the European Court of Justice (“ECJ”). On March 9, 2012, the ECJ denied the appeal, bringing to an end that aspect of the OHIM proceedings. On May 14, 2012, the Company filed a request for OHIM to resume another aspect of proceedings, which had been suspended.

In 2007, Atlas Transport also filed a lawsuit in the Netherlands challenging the validity of our Benelux trademark. In 2009, following completion of its proceedings, the court issued a judgment in favor of us. Atlas Transport has appealed that decision to the Dutch Court of Appeal, but the judgment took effect immediately upon entry.

In 2009, Atlas Transport instituted a trademark infringement lawsuit against us in the regional court in Hamburg, Germany. The amended complaint alleges that Atlas Air has been unlawfully using Atlas Transport’s trademark in Germany without permission and should be required to render information on the scope of use and pay compensation. In a supplementary motion, Atlas Transport asserts a cease and desist claim against Atlas Air, to be considered if the court denies the claim for compensation. On May 31, 2011, the court dismissed the case and Atlas Transport filed an appeal, which remains pending.

We believe that the ultimate disposition of these claims, either individually or in the aggregate, will not materially affect our financial condition, results of operations or cash flows.

Other

We have certain other contingencies incident to the ordinary course of business. Management believes that the ultimate disposition of such other contingencies is not expected to materially affect our financial condition, results of operations or cash flows.

11. Earnings Per Share

Basic earnings per share (“EPS”) represent net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represent net income attributable to common shareholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period. Anti-dilutive options that were out of the money for the three and six months ended June 30, 2012 and 2011 were de minimis and excluded.

The calculations of basic and diluted EPS were as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Numerator:
Net Income Attributable to Common Stockholders	$	30,852	$	23,847	$	43,687	$	34,364

Denominator:
Basic EPS weighted average shares outstanding		26,428		26,269		26,394		26,155
Effect of dilutive stock options and restricted stock		83		222		106		242

Diluted EPS weighted average shares outstanding		26,511		26,491		26,500		26,397


EPS:
Basic	$	1.17	$	0.91	$	1.66	$	1.31

Diluted	$	1.16	$	0.90	$	1.65	$	1.30

Diluted shares reflect the potential dilution that could occur from stock options and restricted shares using the treasury stock method. The calculation does not include restricted shares and units in which performance or market conditions were not satisfied of 0.4 million for the three and six months ended June 30, 2012 and 0.3 for the three and six months ended June 30, 2011.

12. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the components of Accumulated other comprehensive income (loss):


	Interest Rate Derivatives			Foreign Currency Translation			Total
Balance as of December 31, 2011	$	(15,853	)	$	170		$	(15,683	)
Net change in fair value		(713	)		—			(713	)
Reclassification into earnings		1,032			—			1,032
Translation adjustment		—			38			38
Tax effect		(112	)		(8	)		(120	)

Balance as of June 30, 2012	$	(15,646	)	$	200		$	(15,446	)

13. Income Taxes

Our effective income tax rates were 37.7% and 37.9% for the three months ended June 30, 2012 and 2011, respectively, and were 38.3% and 37.7% for the six months ended June 30, 2012 and 2011, respectively. The effective rates differ from the U.S. federal statutory rate due to the income tax impact of global operations, U.S. state income taxes, the non-deductibility of certain expenses for tax purposes, and the relationship of these items to our projected operating results for the year.

In June and July 2012, we resolved income tax examinations in Hong Kong for the periods 2001 through 2010. We expect the resolution of these income tax examinations to favorably impact the effective income tax rate during the third quarter and for the full year of 2012.

14. Subsequent Events

On July 24, 2012, we took delivery of our fifth 747-8F aircraft and initially borrowed $142.7 million under the Ex-Im Bank Facility, as a variable-rate loan secured by a mortgage against aircraft tail number N851GT. On July 31, 2012, we refinanced the loan through the issuance of twelve-year fixed-rate notes in the amount of $142.7 million (the “Second 2012 Ex-Im Bank Guaranteed Notes”). The Second 2012 Ex-Im Bank Guaranteed Notes accrue interest at a fixed rate of 1.73% with principal and interest payable quarterly.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our unaudited Financial Statements appearing in this report and our audited consolidated financial statements and related notes included in our 2011 Annual Report on Form 10-K.

Background

Certain Terms — Glossary

The following represents terms and statistics specific to the airline and cargo industries. They are used by management to evaluate and measure operations, results, productivity and efficiency.


Block Hour		The time interval between when an aircraft departs the terminal until it arrives at the destination terminal.

C Check		High-level or “heavy” airframe maintenance checks, which are more intensive in scope than line maintenance, are generally performed between 18 and 24 months depending on aircraft type.

D Check		High-level or “heavy” airframe maintenance checks, which are the most extensive in scope and are generally performed every six to nine years depending on aircraft type.

Heavy Maintenance		Scheduled maintenance activities, which are the most extensive in scope and are primarily based on time intervals, including but not limited to C Checks, D Checks and engine overhauls.

Line Maintenance		Unscheduled maintenance to rectify events occurring during normal day-to-day operations.

Non-heavy Maintenance		Discrete maintenance activities for the overhaul and repair of specific aircraft components.

Revenue Per Block Hour		An amount calculated by dividing Operating revenues by Block Hours.

Yield		The average amount a customer pays to fly one tonne of cargo one mile.

Business Overview

We are a leading global provider of outsourced aircraft and aviation operating services. As such, we manage and operate the world’s largest fleet of Boeing 747 freighters. We provide unique value to our customers by giving them access to highly reliable new production freighters that deliver the lowest unit cost in the marketplace combined with outsourced aircraft operating services that we believe lead the industry in terms of quality and global scale. Our customers include airlines, express delivery providers, freight forwarders, the U.S. military and charter brokers. We provide global services with operations in Africa, Asia, Australia, Europe, the Middle East, North America and South America.

Our primary service offerings encompass the following:

•

ACMI, whereby we provide outsourced aircraft operating solutions, including the provision of an aircraft, crew, maintenance and insurance, while customers assume fuel, demand and Yield risk;

•

CMI, which is also part of our ACMI business segment, whereby we provide cargo and passenger outsourced aircraft operating solutions including the provision of crew, maintenance and insurance, while customers provide the aircraft and assume fuel, demand and Yield risk;

•

Dry Leasing, whereby we provide aircraft and/or engine leasing solutions;

•

AMC Charter services, whereby we provide cargo and passenger charter services for the AMC. The AMC pays a fixed charter fee that includes fuel, insurance, landing fees, overfly and all other operational fees and costs; and

•

Commercial Charter, whereby we provide cargo and passenger aircraft charters to customers, including brokers, cruise-ship operators, freight forwarders, direct shippers and airlines. The customer pays a fixed charter fee that includes fuel, insurance, landing fees, overfly and all other operational fees and costs.

We look to achieve our growth plans to enhance stakeholder value by:

•

Delivering superior service quality to our valued customers;

•

Aggressively managing our fleet with a focus on leading-edge aircraft;

•

Diversifying our service offerings;

•

Focusing on securing long-term customer contracts;

•

Driving significant and ongoing efficiencies and productivity improvements;

•

Selectively pursuing and evaluating future acquisitions and alliances; and

•

Building our brand and increasing our market share.

See “Business Overview” and “Business Strategy” in our 2011 Annual Report on Form 10-K for additional information.

Business Developments

Our ACMI results for the first half of 2012, compared to the same period in 2011, were positively impacted by the following events:

•

In March 2011, we began ACMI flying two additional 747-400F aircraft for Polar and DHL to operate in Express Network ACMI. This increased the size of our Express Network ACMI flying for DHL from six to eight aircraft.

•

In November and December 2011, we took delivery of three 747-8F aircraft that we placed in service with British Airways under an ACMI agreement through GSS, which replaced three 747-400F aircraft.

•

Between March and June 2012, we began CMI flying the first three of five 767 freighters owned by DHL in its North American network. In July 2012, we began flying the fourth and expect the fifth to be placed in service by the fourth quarter of 2012.

•

In May 2012, we took delivery of a 747-8F aircraft that we placed in service with Panalpina Air & Ocean Ltd (“Panalpina”) under an ACMI agreement, which replaced a 747-400F aircraft.

•

In June 2012, we began ACMI flying a 747-400F aircraft for Etihad Airways (“Etihad”). Under the ACMI agreement, we provide Etihad with its first 747-400F aircraft in Etihad Cargo’s global network.

In June 2012, we signed an ACMI agreement with DHL for an additional 747-400F aircraft for Polar and DHL to operate in Express Network ACMI. This increased the size of our Express Network ACMI flying for DHL from eight to nine aircraft. The aircraft was placed in service in July 2012.

In July 2012, we took delivery of our fifth 747-8F aircraft that went into service with Panalpina under an ACMI agreement, which replaced a 747-400 aircraft.

In May 2011, we began flying passenger charters for the U.S. Military. These charters are similar to our existing AMC Charters in that the AMC pays a fixed charter fee that includes fuel, insurance, landing fees, overfly and all other operational fees and costs. In May 2012, we placed in service a third 767-300ER passenger aircraft. This increased the size of our passenger service for the AMC to two 747-400 and three 767-300ER passenger aircraft. AMC passenger Block Hours have shown strong growth as we continue to ramp up flying both domestic and international AMC missions.

The South American Commercial Charter markets have continued to show strong demand and, in March 2012, we added a second 747-400 aircraft in that market. In addition to providing passenger charters to the AMC, we are utilizing our new passenger aircraft for both public and private Commercial Charter passenger flights.

In July 2012, Titan purchased a Boeing 737-300 cargo aircraft that is being dry leased to a customer on a long-term basis.

Results of Operations

Three Months Ended June 30, 2012 and 2011

Operating Statistics

The following discussion should be read in conjunction with our Financial Statements and other financial information appearing and referred to elsewhere in this report.

The table below sets forth selected Operating Statistics for the three months ended June 30:


	2012		2011		Increase / (Decrease)			Percent Change
Block Hours
ACMI		25,737		26,188		(451	)		(1.7	)%
AMC Charter:
Cargo		2,680		4,747		(2,067	)		(43.5	)%
Passenger		3,389		177		3,212			NM
Commercial Charter		5,739		3,213		2,526			78.6	%
Other		197		216		(19	)		(8.8	)%

Total Block Hours		37,742		34,541		3,201			9.3	%

Revenue Per Block Hour
ACMI	$	6,233	$	6,127	$	106			1.7	%
AMC Charter:
Cargo	$	25,783	$	22,515	$	3,268			14.5	%
Passenger	$	20,335	$	31,610	$	(11,275	)		(35.7	)%
Commercial Charter	$	21,054	$	22,119	$	(1,065	)		(4.8	)%
Fuel
AMC
Average fuel cost per gallon	$	3.61	$	3.66	$	(0.05	)		(1.4	)%
Fuel gallons consumed (000s)		15,522		16,098		(576	)		(3.6	)%
Commercial Charter
Average fuel cost per gallon	$	3.31	$	3.48	$	(0.17	)		(4.9	)%
Fuel gallons consumed (000s)		18,590		11,913		6,677			56.0	%
Segment Operating Fleet (average aircraft equivalents during the period)
ACMI *
747-8F Cargo		3.3		—		3.3			NM
747-400 Cargo		16.2		21.0		(4.8	)		(22.9	)%
747-200 Cargo		—		0.1		(0.1	)		NM
767-200 Cargo		1.5		—		1.5			NM
747-400 Passenger		1.0		1.0		—			NM

Total		22.0		22.1		(0.1	)		(0.5	)%
AMC Charter
747-400 Cargo		2.9		1.2		1.7			141.7	%
747-200 Cargo		—		4.3		(4.3	)		NM
747-400 Passenger		1.6		0.5		1.1			220.0	%
767-300 Passenger		2.9		—		2.9			NM

Total		7.4		6.0		1.4			23.3	%


	2012		2011		Increase / (Decrease)			Percent Change
Commercial Charter
747-400 Cargo		6.0		1.7		4.3			252.9	%
747-200 Cargo		—		1.5		(1.5	)		NM
747-400 Passenger		0.2		—		0.2			NM
767-300 Passenger		0.1		—		0.1			NM

Total		6.3		3.2		3.1			96.9	%
Dry Leasing
757-200 Cargo		1.0		1.0		—			NM
737-800 Passenger		2.0		0.8		1.2			150.0	%

Total		3.0		1.8		1.2			66.7	%

Total Operating Aircraft		38.7		33.1		5.6			16.9	%

Out-of-service**		—		0.2		(0.2	)		NM

*	ACMI average fleet excludes spare aircraft provided by CMI customers.

**	All of our out-of-service aircraft are completely unencumbered. Permanently parked aircraft, all of which are also completely unencumbered, are not included in the operating statistics above.

Operating Revenue

The following table compares our Operating Revenue for the three months ended June 30 (in thousands):


	2012		2011		Increase / (Decrease)			Percent Change
Operating Revenue
ACMI	$	160,421	$	160,442	$	(21	)		NM
AMC Charter		138,014		112,473		25,541			22.7	%
Commercial Charter		120,827		71,067		49,760			70.0	%
Dry Leasing		2,862		2,134		728			34.1	%
Other		2,581		3,458		(877	)		(25.4	)%

Total Operating Revenue	$	424,705	$	349,574	$	75,131			21.5	%

ACMI revenue was relatively unchanged. ACMI Block Hours were 25,737 in the second quarter of 2012, compared to 26,188 in 2011, representing a decrease of 451 Block Hours, or 1.7%. The decrease in Block Hours was primarily driven by the return of two 747-400 cargo aircraft, one of which was redeployed to Etihad in June 2012 and the other was redeployed to Commercial Charter until placed in service with DHL in July 2012. Partially offsetting this decrease was the start-up of CMI flying of three 767 cargo aircraft for DHL during the second quarter of 2012. Revenue per Block Hour was $6,233 for the second quarter of 2012, compared to $6,127 for 2011, an increase of $106 per Block Hour, or 1.7%. The increase in Revenue per Block Hour primarily reflects the impact of higher rates for four 747-8F aircraft, which began flying during the fourth quarter of 2011 and the second quarter of 2012, partially offset by the impact of lower rates for the 767 CMI flying.

AMC Charter revenue increased $25.5 million, or 22.7%, primarily driven by $63.3 million of incremental AMC Charter Passenger revenue due to flying that began in May 2011, partially offset by a reduction in AMC Charter Cargo revenue. AMC Charter Block Hours were 6,069 in the second quarter of 2012 compared to 4,924 in 2011, an increase of 1,145 Block Hours, or 23.3%. The increase in AMC Charter Block Hours was due to 3,212 incremental AMC Charter Passenger Block Hours from flying four incremental passenger aircraft in 2012, partially offset by a decrease of 2,067 AMC Charter Cargo Block Hours driven by reduced cargo demand from the AMC. AMC Charter Revenue per Block Hour was relatively unchanged, reflecting a higher volume of lower-rate passenger flying, offset by an increase in AMC Charter Cargo Revenue per Block Hour from $22,515 for the second quarter of 2011 to $25,783 in 2012, an increase of $3,268 per Block Hour, or 14.5%. This increase was due to premiums earned on flying additional, more efficient 747-400 cargo aircraft during the second quarter of 2012 in place of less efficient 747-200 aircraft in 2011, partially offset by a decrease in the average “pegged” fuel price. For the second quarter of 2012, the AMC average “pegged” fuel price was $3.61 per gallon compared to an average “pegged” fuel price of $3.66 for 2011.

Commercial Charter revenue increased $49.8 million, or 70.0%, due to an increase in Block Hours, partially offset by a decrease in Revenue per Block Hour. Commercial Charter Block Hours were 5,739 in the second quarter of 2012, compared to 3,213 in 2011, representing an increase of 2,526 Block Hours, or 78.6%. The increase in Block Hours was primarily due to our deployment of an additional 747-400 cargo aircraft to support increased demand in South America and the redeployment of 747-400 cargo aircraft from ACMI into Commercial Charter during remarketing periods. In addition, we were able to utilize our passenger aircraft for private charters. Revenue per Block Hour was $21,054 in the second quarter of 2012, compared to $22,119 in 2011, a decrease of $1,065 per Block Hour, or 4.8%, which reflects the impact of lower fuel costs and lower Yields on increased Commercial Charter capacity during the second quarter of 2012 compared to 2011.

Dry Leasing revenue increased $0.7 million, or 34.1%, as a result of dry leasing one additional aircraft at the end of the second quarter of 2011.

Operating Expenses

The following table compares our Operating Expenses for the three months ended June 30 (in thousands):


	2012			2011			Increase / (Decrease)			Percent Change
Operating Expenses
Aircraft fuel	$	117,571		$	100,358		$	17,213			17.2	%
Salaries, wages and benefits		73,378			61,498			11,880			19.3	%
Maintenance, materials and repairs		43,371			46,860			(3,489	)		(7.4	)%
Aircraft rent		42,758			41,567			1,191			2.9	%
Passenger and ground handling services		18,618			7,275			11,343			155.9	%
Navigation fees, landing fees and other rent		15,882			12,603			3,279			26.0	%
Depreciation and amortization		13,877			8,775			5,102			58.1	%
Travel		14,823			9,922			4,901			49.4	%
Gain on disposal of aircraft		(1,163	)		(181	)		982			NM
Other		29,472			23,278			6,194			26.6	%

Total Operating Expenses	$	368,587		$	311,955

Aircraft fuel increased $17.2 million, or 17.2%, due to approximately $21.8 million in increased consumption, partially offset by $4.6 million in fuel price decreases. Commercial Charter fuel consumption increased by 6.7 million gallons, or 56.0%, primarily driven by the increase in Block Hours operated, partially offset by the use of more efficient 747-400 aircraft during the second quarter of 2012 in place of less efficient 747-200 aircraft in 2011. The average fuel price per gallon for the Commercial Charter business was $3.31 for the second quarter of 2012, compared to $3.48 in 2011, a decrease of 4.9%. AMC fuel consumption decreased by 0.6 million gallons, or 3.6%, primarily reflecting the use of more efficient 747-400 aircraft during the second quarter of 2012 in place of less efficient 747-200 aircraft in 2011, partially offset by the increase in Block Hours operated. The average fuel price per gallon for the AMC Charter business was $3.61 in the second quarter of 2012, compared to $3.66 in 2011, a decrease of 1.4%. We do not incur fuel expense in our ACMI or Dry Leasing businesses as the cost of fuel is borne by the customer.

Salaries, wages and benefits increased $11.9 million, or 19.3%, primarily driven by increased wages for crewmembers, higher Block Hours and hiring additional employees to support our new aircraft.

Maintenance, materials and repairs decreased $3.5 million, or 7.4%, driven by a reduction in maintenance expense of $8.9 million for 747-200 aircraft, partially offset by increases of $2.0 million for 747-400 aircraft and $3.4 million for other aircraft. Heavy Maintenance expense on 747-400 aircraft increased approximately $1.5 million due to an increase in engine overhaul expense, partially offset by a reduction in C Checks and D Checks compared to 2011. Heavy Maintenance expense on 747-200 aircraft decreased approximately $5.5 million due to the retirement of this fleet during the first quarter of 2012. Non-heavy Maintenance expense on 747-400 aircraft decreased $1.3 million primarily driven by lower rates on Non-heavy Maintenance events on these aircraft compared to 2011. Line Maintenance expense increased $1.8 million for 747-400 aircraft and $3.4 million for 747-8F and 767 aircraft driven by an increase in Block Hours flown. Line Maintenance expense decreased $3.4 million on 747-200 aircraft due to the retirement of this fleet during the first quarter of 2012. Heavy airframe maintenance events and engine overhauls for the three months ended June 30 were:


	2012		2011		Increase / (Decrease)
Heavy Maintenance Events
747-400 C Checks		2		3		(1	)
747-400 D Checks		—		1		(1	)
747-200 C Checks		—		2		(2	)
CF6-80 engine overhauls		6		3		3

Aircraft rent increased $1.2 million, or 2.9%, primarily due to subcontracting certain Commercial Charter flights with our ACMI customers during the second quarter of 2012, partially offset by the return of a 747-400 passenger aircraft in December 2011.

Passenger and ground handling services increased $11.3 million, or 155.9%, primarily due to passenger catering and contract services for flight attendants related to increased passenger flying during the second quarter of 2012. During the current period, we reclassified passenger catering and contract services for flight attendants from Other operating expenses to Passenger and ground handling services and reclassified previously reported amounts to conform to the current period’s presentation.

Navigation fees, landing fees and other rent increased $3.3 million, or 26.0%, primarily due to increased flying during the second quarter of 2012.

Depreciation and amortization increased $5.1 million, or 58.1%, due to additional aircraft in 2012.

Travel increased $4.9 million, or 49.4%, primarily due to increased travel for flight attendants and crew related to increased flying during the second quarter of 2012.

Gain on disposal of aircraft resulted from the sale of retired 747-200 airframes and engines during 2012.

Other increased $6.2 million, or 26.6%, primarily due to increases in commissions for higher AMC Charter Revenue, increased insurance due to additional aircraft and increased flight simulator training for our 767 crew.

Non-operating Expenses (Income)

The following table compares our Non-operating Expenses (Income) for the three months ended June 30 (in thousands):


	2012			2011			Increase / (Decrease)			Percent Change
Non-operating Expenses (Income)
Interest income	$	(4,887	)	$	(5,080	)	$	(193	)		(3.8	)%
Interest expense		15,631			9,912			5,719			57.7	%
Capitalized interest		(5,952	)		(6,185	)		(233	)		(3.8	)%
Loss on early extinguishment of debt		142			—			142			NM
Other (income) expense, net		1,082			(406	)		(1,488	)		NM

Interest expense increased $5.7 million, or 57.7%, primarily from an increase in our average debt balances related to financing three 747-8F aircraft in the fourth quarter of 2011 and one 747-8F aircraft in the second quarter of 2012.

Other (income) expense, net decreased $1.5 million, primarily due to an unrealized loss on a foreign currency denominated deposit in Brazil. See Note 10 for further discussion.

Income taxes . Our effective income tax rates were 37.7% for the three months ended June 30, 2012 and 37.9% for the three months ended June 30, 2011.

Segments

The following table compares the Direct Contribution of our reportable segments (see Note 8 to our Financial Statements for the reconciliation to Operating income) for the three months ended June 30 (in thousands):


	2012		2011		Increase / (Decrease)		Percent Change
Direct Contribution:
ACMI	$	40,793	$	37,963	$	2,830		7.5	%
AMC Charter		29,984		19,801		10,183		51.4	%
Commercial Charter		10,081		8,828		1,253		14.2	%
Dry Leasing		1,253		1,185		68		5.7	%

Total Direct Contribution	$	82,111	$	67,777	$	14,334		21.1	%


Unallocated income and expenses	$	33,030	$	28,580	$	4,450		15.6	%

ACMI Segment

Direct Contribution related to the ACMI segment increased $2.8 million, or 7.5%, primarily due to the higher rates per Block Hour and lower maintenance expense for new 747-8F aircraft flown during the second quarter of 2012. Partially offsetting these improvements was an increase in crew costs.

AMC Charter Segment

Direct Contribution related to the AMC Charter segment increased $10.2 million, or 51.4%, primarily due to increased Block Hours and lower Heavy Maintenance expense from the deployment of more efficient 747-400 aircraft into this segment in place of less efficient 747-200 aircraft that were flown during the second quarter of 2011. The increase in AMC Charter Block Hours was primarily due to flying four incremental passenger aircraft in 2012. Partially offsetting these items were increases in crew costs, volume-driven operating expenses, and aircraft ownership costs from the deployment of 747-400 aircraft into this segment in place of 747-200 aircraft and the additional passenger aircraft in 2012.

Commercial Charter Segment

Direct Contribution related to the Commercial Charter segment increased $1.3 million, or 14.2%, primarily due to increased Block Hours, partially offset by a decrease in Revenue per Block Hour. The increase in Block Hours was primarily due to our deployment of an additional 747-400 cargo aircraft to support increased demand in South America and the redeployment of 747-400 cargo aircraft from ACMI during remarketing periods. In addition, we were able to utilize our passenger aircraft for private charters. Offsetting the increase in revenue were increases in volume-driven operating expenses, crew costs and aircraft ownership costs from the deployment of 747-400 aircraft into this segment in place of 747-200 aircraft.

Dry Leasing Segment

Direct Contribution related to the Dry Leasing segment was relatively unchanged.

Unallocated income and expenses

Unallocated income and expenses increased $4.5 million, or 15.6%, primarily due to incremental employee costs related to the retirement of our 747-200 fleet and an unrealized loss on a foreign currency denominated deposit.

Six Months Ended June 30, 2012 and 2011

Operating Statistics

The following discussion should be read in conjunction with our Financial Statements and notes thereto and other financial information appearing and referred to elsewhere in this report.

The table below sets forth selected Operating Statistics for the six months ended June 30:


	2012		2011		Increase / (Decrease)			Percent Change
Block Hours
ACMI		50,246		49,887		359			0.7	%
AMC Charter:
Cargo		5,869		8,877		(3,008	)		(33.9	)%
Passenger		5,240		177		5,063			NM
Commercial Charter		9,429		6,378		3,051			47.8	%
Other		631		432		199			46.1	%

Total Block Hours		71,415		65,751		5,664			8.6	%

Revenue Per Block Hour
ACMI	$	6,272	$	6,143	$	129			2.1	%
AMC Charter:
Cargo	$	25,295	$	21,184	$	4,111			19.4	%
Passenger	$	21,155	$	31,610	$	(10,455	)		(33.1	)%
Commercial Charter	$	20,975	$	21,418	$	(443	)		(2.1	)%
Fuel
AMC
Average fuel cost per gallon	$	3.57	$	3.34	$	0.23			6.9	%
Fuel gallons consumed (000s)		29,551		29,463		88			0.3	%
Commercial Charter
Average fuel cost per gallon	$	3.38	$	3.27	$	0.11			3.4	%
Fuel gallons consumed (000s)		31,621		23,249		8,372			36.0	%
Segment Operating Fleet (average aircraft equivalents during the period)
ACMI*
747-8F Cargo		3.2		—		3.2			NM
747-400 Cargo		16.7		20.3		(3.6	)		(17.7	)%
747-200 Cargo		—		0.2		(0.2	)		NM
767-200 Cargo		0.9		—		0.9			NM
747-400 Passenger		1.1		1.0		0.1			10.0	%

Total		21.9		21.5		0.4			1.9	%
AMC Charter
747-400 Cargo		3.3		1.0		2.3			230.0	%
747-200 Cargo		0.3		4.1		(3.8	)		(92.7	)%
747-400 Passenger		1.7		0.3		1.4			NM
767-300 Passenger		2.0		—		2.0			NM

Total		7.3		5.4		1.9			35.2	%
Commercial Charter
747-400 Cargo		4.9		1.9		3.0			157.9	%
747-200 Cargo		0.4		1.5		(1.1	)		(73.3	)%
747-400 Passenger		0.2		—		0.2			NM
767-300 Passenger		0.2		—		0.2			NM

Total		5.7		3.4		2.3			67.6	%
Dry Leasing
757-200 Cargo		1.0		1.0		—			NM
737-800 Passenger		2.0		0.4		1.6			NM

Total		3.0		1.4		1.6			114.3	%

Total Operating Aircraft		37.9		31.7		6.2			19.6	%

Out-of-service**		—		0.5		(0.5	)		NM

*	ACMI average fleet excludes spare aircraft provided by CMI customers.

**	All of our out-of-service aircraft are completely unencumbered. Permanently parked aircraft, all of which are also completely unencumbered, are not included in the operating statistics above.

Operating Revenue

The following table compares our Operating Revenue for the six months ended June 30 (in thousands):


	2012		2011		Increase / (Decrease)			Percent Change
Operating Revenue
ACMI	$	315,124	$	306,477	$	8,647			2.8	%
AMC Charter		259,308		193,649		65,659			33.9	%
Commercial Charter		197,774		136,603		61,171			44.8	%
Dry Leasing		5,807		3,677		2,130			57.9	%
Other		5,996		6,775		(779	)		(11.5	)%

Total Operating Revenue	$	784,009	$	647,181	$	136,828			21.1	%

ACMI revenue increased $8.6 million, or 2.8%, due to an increase in Revenue per Block Hour and Block Hours. ACMI Revenue per Block Hour was $6,272 in 2012, compared to $6,143 in 2011, an increase of $129 per Block Hour, or 2.1%. The increase in Revenue per Block Hour primarily reflects the impact of higher rates for 747-8F aircraft, which began flying during the fourth quarter of 2011 and the second quarter of 2012, partially offset by the impact of lower rates for CMI flying of three 767 cargo aircraft during the first half of 2012 for DHL. ACMI Block Hours were 50,246 during the first half of 2012, compared to 49,887 in 2011, an increase of 359 Block Hours, or 0.7%. The increase in Block Hours was primarily driven by flying two incremental 747-400 cargo aircraft for DHL beginning in March 2011 and the 767 CMI flying. Partially offsetting this increase was the return of two 747-400 cargo aircraft in the second quarter of 2012, one of which was redeployed to Etihad in June 2012 and the other was redeployed to Commercial Charter until placed in service with DHL in July 2012.

AMC Charter revenue increased $65.7 million, or 33.9%, primarily driven by $105.3 million of incremental AMC Charter Passenger revenue due to flying that began in May 2011. AMC Charter Block Hours were 11,109 in 2012 compared to 9,054 in 2011, an increase of 2,055 Block Hours, or 22.7%. The increase in AMC Charter Block Hours was due to 5,063 incremental AMC Charter Passenger Block Hours from flying four incremental passenger aircraft in 2012, partially offset by a decrease of 3,008 AMC Charter Cargo Block Hours driven by reduced cargo demand from the AMC. AMC Charter Revenue per Block Hour was $23,342 in 2012 compared to $21,388 in 2011, an increase of $1,954 per Block Hour, or 9.1%, primarily due to premiums earned on flying additional, more efficient 747-400 cargo aircraft during the first half of 2012 in place of less efficient 747-200 aircraft in 2011 and an increase in the “pegged” fuel price in 2012. For the first half of 2012, the AMC average “pegged” fuel price was $3.57 per gallon compared to an average “pegged” fuel price of $3.34 in 2011. Partially offsetting these rate increases was a decrease in Revenue per Block Hour reflecting a higher volume of lower-rate passenger flying.

Commercial Charter revenue increased $61.2 million, or 44.8%, primarily due to an increase in Block Hours, partially offset by a decrease in Revenue per Block Hour. Commercial Charter Block Hours were 9,429 in 2012, compared to 6,378 in 2011, representing an increase of 3,051 Block Hours, or 47.8%. The increase in Block Hours was primarily due to our deployment of an additional 747-400 cargo aircraft to support increased demand in South America and the redeployment of 747-400 cargo aircraft from ACMI into Commercial Charter during remarketing periods. In addition, we were able to utilize our passenger aircraft for sporting event, concert tour and other private charters. Revenue per Block Hour was $20,975 in the first half of 2012, compared to $21,418 in 2011, a decrease of $443 per Block Hour, or 2.1%, which reflects the impact of lower fuel costs and lower Yields on increased Commercial Charter capacity during the first half of 2012 compared to 2011.

Dry Leasing revenue increased $2.1 million, or 57.9%, as a result of dry leasing two additional aircraft in the second quarter of 2011.

Operating Expenses

The following table compares our Operating Expenses for the six months ended June 30 (in thousands):


	2012			2011			Increase / (Decrease)			Percent Change
Operating Expenses
Aircraft fuel	$	212,334		$	174,525		$	37,809			21.7	%
Salaries, wages and benefits		144,254			123,262			20,992			17.0	%
Maintenance, materials and repairs		96,351			96,929			(578	)		(0.6	)%
Aircraft rent		82,176			79,921			2,255			2.8	%
Passenger and ground handling services		31,389			13,502			17,887			132.5	%
Navigation fees, landing fees and other rent		28,937			23,943			4,994			20.9	%
Depreciation and amortization		28,180			17,105			11,075			64.7	%
Travel		27,443			19,044			8,399			44.1	%
Gain on disposal of aircraft		(1,359	)		(301	)		1,058			NM
Other		57,607			45,140			12,467			27.6	%

Total Operating Expenses	$	707,312		$	593,070

Aircraft fuel increased $37.8 million, or 21.7%, due to approximately $28.0 million in increased consumption and $9.8 million in fuel price increases. Commercial Charter fuel consumption increased by 8.4 million gallons, or 36.0%, primarily driven by the increase in Block Hours operated, partially offset by the use of more efficient 747-400 aircraft during the first half of 2012 in place of less efficient 747-200 aircraft in 2011. The average fuel price per gallon for the Commercial Charter business was $3.38 for 2012, compared to $3.27 in 2011, an increase of 3.4%. AMC fuel consumption increased by 0.1 million gallons, or 0.3%, reflecting the increase in Block Hours operated, partially offset by the use of more efficient 747-400 aircraft during the first half of 2012 in place of less efficient 747-200 aircraft in 2011. The average fuel price per gallon for the AMC Charter business was $3.57 in 2012, compared to $3.34 in 2011, an increase of 6.9%. We do not incur fuel expense in our ACMI or Dry Leasing businesses as the cost of fuel is borne by the customer.

Salaries, wages and benefits increased $21.0 million, or 17.0%, primarily driven by increased wages for crewmembers, higher Block Hours and hiring additional employees to support our new aircraft.

Maintenance, materials and repairs decreased by $0.6 million, or 0.6%, driven by a reduction in maintenance expense of $18.3 million for 747-200 aircraft, partially offset by increases of $11.5 million for 747-400 aircraft and $6.2 million for other aircraft. Heavy Maintenance expense on 747-400 aircraft increased approximately $4.6 million due to an increase in the number of C Checks and additional maintenance expense on engines, partially offset by a reduction in D Checks compared to 2011. Heavy Maintenance expense on 747-200 aircraft decreased approximately $11.1 million due to the retirement of this fleet during the first quarter of 2012. Non-heavy Maintenance expense on 747-400 aircraft increased $1.9 million primarily driven by the timing of events. Line Maintenance expense increased $5.0 million for 747-400 aircraft and $6.2 million for 747-8F and 767 aircraft driven by an increase in Block Hours flown compared to 2011. Line Maintenance expense decreased $7.2 million on 747-200 aircraft due to the retirement of this fleet during the first quarter of 2012. Heavy airframe maintenance events and engine overhauls for the first six months ended June 30 were:


Heavy Maintenance Events	2012		2011		Increase / (Decrease)
747-400 C Checks		9		4		5
747-400 D Checks		2		4		(2	)
747-200 C Checks		—		2		(2	)
CF6-80 engine overhauls		11		8		3
CF6-50 engine overhauls		—		2		(2	)

Aircraft rent increased $2.3 million, or 2.8%, primarily due to subcontracting certain Commercial Charter flights with our ACMI customers during the second quarter of 2012, partially offset by the return of a 747-400 passenger aircraft in December 2011.

Passenger and ground handling services increased $17.9 million, or 132.5%, primarily due to increased passenger catering and contract services for flight attendants related to increased passenger flying which began in May 2011. During

the current period, we reclassified passenger catering and contract services for flight attendants from Other operating expenses to Passenger and ground handling services and reclassified previously reported amounts to conform to the current period’s presentation.

Navigation fees, landing fees and other rent increased $5.0 million, or 20.9%, primarily due to increased flying during 2012.

Depreciation and amortization increased $11.1, or 64.7%, primarily due to additional aircraft in 2012.

Travel increased $8.4 million, or 44.1%, primarily due to increased travel for flight attendants and crew related to increased flying during 2012.

Gain on disposal of aircraft resulted from the sale of retired 747-200 airframes and engines during 2012.

Other increased $12.5 million, or 27.6%, primarily due to increases in commissions for higher AMC Charter Revenue, increased insurance for the larger fleet and increased flight simulator training for our 767 crew.

Non-operating Expenses (Income)

The following table compares our Non-operating Expenses (Income) for the six months ended June 30 (in thousands):


	2012			2011			Increase / (Decrease)			Percent Change
Non-operating Expenses (Income)
Interest income	$	(9,796	)	$	(10,196	)	$	(400	)		(3.9	)%
Interest expense		29,594			20,208			9,386			46.4	%
Capitalized interest		(12,304	)		(11,602	)		702			6.1	%
Loss on early extinguishment of debt		142			—			142			NM
Other (income) expense, net		785			(364	)		(1,149	)		NM

Interest expense increased $9.4 million, or 46.4%, primarily from an increase in our average debt balances related to the financing of three 747-8F aircraft during the fourth quarter of 2011 and one 747-8F aircraft during the first half of 2012.

Other (income) expense, net decreased $1.1 million, or 315.7%, primarily due to an unrealized loss on a foreign currency denominated deposit in Brazil. See Note 10 for further discussion.

Income taxes . Our effective income tax rates were 38.3% for the six months ended June 30, 2012 and 37.7% for the six months ended June 30, 2011. In June and July 2012, we resolved income tax examinations in Hong Kong for the periods 2001 through 2010. We expect the resolution of these income tax examinations to favorably impact the effective income tax rate during the third quarter and for the full year of 2012.

Segments

The following table compares the Direct Contribution for our reportable segments (see Note 8 to our Financial Statements for the reconciliation to Operating income) for the six months ended June 30 (in thousands):


	2012		2011		Increase / (Decrease)			Percent Change
Direct Contribution:
ACMI	$	64,948	$	60,765	$	4,183			6.9	%
AMC Charter		50,565		33,999		16,566			48.7	%
Commercial Charter		11,957		17,867		(5,910	)		(33.1	)%
Dry Leasing		2,589		2,013		576			28.6	%

Total Direct Contribution	$	130,059	$	114,644	$	15,415			13.4	%


Unallocated income and expenses	$	63,000	$	58,880	$	4,120			7.0	%

ACMI Segment

Direct Contribution related to the ACMI segment increased $4.2 million, or 6.9%, primarily due to the higher rates per Block Hour and lower maintenance expense for new 747-8F aircraft flown during the first half of 2012. Partially offsetting these improvements was an increase in crew costs.

AMC Charter Segment

Direct Contribution related to the AMC Charter segment increased $16.6 million, or 48.7%, primarily due to increases in Block Hours and Revenue per Block Hour. The increase in AMC Charter Block Hours was due to 5,063 incremental AMC Charter Passenger Block Hours from flying four incremental passenger aircraft in 2012, partially offset by a decrease of 3,008 AMC Charter Cargo Block Hours driven by reduced cargo demand from the AMC. Revenue per Block Hour was driven by premiums earned on flying additional, more efficient 747-400 aircraft in this segment, which replaced less efficient 747-200 aircraft that were flown during the first half of 2011 and an increase in the “pegged” fuel price in 2012. Partially offsetting these increases was a decrease in Revenue per Block Hour due to the increase in lower-rate passenger flying. Partially offsetting these items were increases in crew costs, volume-driven operating expenses and aircraft ownership costs from the deployment of 747-400 cargo aircraft into this segment in place of 747-200 cargo aircraft and the flying of four incremental passenger aircraft in 2012.

Commercial Charter Segment

Direct Contribution related to the Commercial Charter segment decreased $5.9 million, or 33.1%, primarily due to increases in crew costs, Line Maintenance costs and aircraft ownership costs from the deployment of 747-400 aircraft into this segment in place of 747-200 aircraft. In addition, Commercial Charter Direct Contribution was negatively impacted by the higher cost of operating an inefficient 747-200 fleet size during the first quarter of 2012. Partially offsetting these drivers was an increase in Block Hours. The increase in Block Hours was primarily due to our deployment of an additional 747-400 cargo aircraft to support increased demand in South America and the reallocation of 747-400 aircraft from ACMI during remarketing periods. In addition, we were able to utilize our passenger aircraft for sporting event, concert tour and other private charters.

Dry Leasing Segment

Direct Contribution related to the Dry Leasing segment increased primarily due to dry leasing two additional aircraft in the second quarter of 2011.

Unallocated income and expenses

Unallocated income and expenses increased $4.1 million, or 7.0%, primarily due to incremental employee costs related to the retirement of our 747-200 fleet and an unrealized loss on a foreign currency denominated deposit.

Reconciliation of GAAP to non-GAAP Financial Measures

To supplement our Financial Statements presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), we present certain non-GAAP financial measures to assist in the evaluation of our business performance. These non-GAAP measures include Adjusted Net Income Attributable to Common Stockholders and Adjusted Diluted EPS, which exclude certain items that impact year-over-year comparisons of our results. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

We use these non-GAAP financial measures in assessing the performance of our ongoing operations and in planning and forecasting future periods. We believe that these adjusted measures provide meaningful information to assist investors and analysts in understanding our business results and assessing our prospects for future performance.

The following is a reconciliation of Net Income Attributable to Common Stockholders and Diluted EPS to the corresponding non-GAAP measures (in thousands, except per share data):


	For the Three Months Ended
	June 30, 2012			June 30, 2011			Percent Change
Net Income Attributable to Common Stockholders	$	30,852		$	23,847			29.4	%
After-tax impact from:
Fleet retirement costs*		1,043			—
Pre-operating expenses**		—			2,301
Loss on early extinguishment of debt		90			—
Gain on disposal of aircraft		(741	)		(115	)

Adjusted Net Income Attributable to Common Stockholders	$	31,244		$	26,033			20.0	%


Diluted EPS	$	1.16		$	0.90			28.9	%
After-tax impact from:
Fleet retirement costs*		0.04			—
Pre-operating expenses**		—			0.09
Gain on disposal of aircraft		(0.03	)		—

Adjusted Diluted EPS	$	1.18	†	$	0.98	†		20.4	%


	For the Six Months Ended
	June 30, 2012			June 30, 2011			Percent Change
Net Income Attributable to Common Stockholders	$	43,687		$	34,364			27.1	%
After-tax impact from:
Fleet retirement costs*		1,968			—
Pre-operating expenses**		—			4,543
Loss on early extinguishment of debt		90			—
Gain on disposal of aircraft		(866	)		(192	)

Adjusted Net Income Attributable to Common Stockholders		44,879			38,715			15.9	%


Diluted EPS	$	1.65		$	1.30			26.9	%
After-tax impact from:
Fleet retirement costs*		0.07			—
Pre-operating expenses**		—			0.17
Gain on disposal of aircraft		(0.03	)		(0.01	)

Adjusted Diluted EPS		1.69			1.47	†		15.0	%

†	Items do not sum due to rounding.

*	Fleet retirement costs in 2012 included incremental employee costs related to the retirement of our 747-200 fleet.

**	Pre-operating expenses in 2011 were related to the introduction of new aircraft types and include incremental costs incurred as a result of aircraft delivery delays.

Liquidity and Capital Resources

Significant liquidity events in the first half of 2012 were as follows:

In January 2012, we entered into the Ex-Im Bank Facility for up to $864.8 million to finance up to six 747-8F aircraft deliveries. The Ex-Im Bank Facility, when drawn, will consist of up to six separate term loans each secured by a mortgage on a 747-8F aircraft. In May 2012, we borrowed $142.0 million under the Ex-Im Bank Facility to finance the delivery of our fourth 747-8F aircraft. Under the Ex-Im Bank Facility, the aircraft was initially financed as a floating-rate loan and was refinanced in June 2012 by issuance of the fixed-rate First 2012 Ex-Im Bank Guaranteed Notes.

In March 2012, we entered into the First CIT Term Loans in the aggregate amount of $35.7 million to finance two 747-400 and two 767-300ER passenger aircraft. In May 2012, we entered into the Second CIT Term Loan for $8.5 million to finance a third 767-300ER passenger aircraft.

Operating Activities. Net cash provided by operating activities for the first half of 2012 was $85.9 million, compared to $73.7 million for the first half of 2011. The increase primarily reflects higher earnings and lower income taxes paid in the first half of 2012 compared to 2011.

Investing Activities. Net cash used for investing activities was $174.7 million for the first half of 2012, consisting primarily of $161.5 million of purchase deposit and delivery payments for flight equipment, which included $12.3 million of capitalized interest on our 747-8F aircraft order, and $18.4 million of capital expenditures, partially offset by $3.9 million of proceeds from short-term investments. During the first half of 2012, we purchased one 747-8F cargo aircraft and one 767-300ER passenger aircraft. Capital expenditures for the first half of 2012 were funded through working capital, except for the two aircraft financed as discussed above. Net cash used for investing activities was $125.3 million for the first half of 2011, consisting primarily of $120.8 million of purchase deposit and delivery payments for flight equipment, which included $11.6 million of capitalized interest on our 747-8F aircraft order and $8.8 million of capital expenditures, partially offset by $3.5 million of proceeds from short-term investments.

Financing Activities. Net cash provided by financing activities was $134.7 million for the first half of 2012, which primarily reflected the proceeds from debt issuance of $328.2 million, partially offset by $180.8 million of payments on debt obligations and $10.0 million of debt issuance costs. The proceeds from debt issuance and payments of debt obligations reflect the refinancing of the $142.0 million term loan under the Ex-Im Bank Facility with the First 2012 Ex-Im Bank Guaranteed Notes. Net cash used for financing activities was $75.2 million for the first half of 2011, which primarily reflected $73.4 million of payments on debt obligations.

We consider Cash and cash equivalents, Short-term investments and Net cash provided by operating activities to be sufficient to meet our debt and lease obligations and to fund capital expenditures for 2013. Capital expenditures for the remainder of 2012 are expected to be approximately $30.5 million, which excludes aircraft and capitalized interest. Our estimated 747-8F aircraft delivery payment requirements for the remainder of 2012 are approximately $323.9 million. We expect our Cash and cash equivalents, pre-delivery financing facility and the Ex-Im Bank Facility to be sufficient to fund our 747-8F aircraft delivery payment requirements for 2012.

We may access external sources of capital from time to time depending on our cash requirements, assessments of current and anticipated market conditions, and the after-tax cost of capital. To that end, we filed a shelf registration statement with the SEC in 2012 that enables us to sell a yet to be determined amount of debt and/or equity securities over the subsequent three years, depending on market conditions, our capital needs and other factors. Our access to capital markets can be adversely impacted by prevailing economic conditions and by financial, business and other factors, some of which are beyond our control. Additionally, our borrowing costs are affected by market conditions and may be adversely impacted by a tightening in credit markets.

We can claim bonus tax depreciation equal to 100% of the cost of qualified assets placed in service during 2011 or 2012 and 50% of the cost of qualified assets placed in service during 2013. Two 747-8F aircraft delivered to us in 2011 qualify for 100% bonus tax deprecation. In addition, we expect four 747-8F aircraft to be delivered in 2012 to qualify for 100% bonus tax deprecation and two 747-8F aircraft to be delivered in 2013 to qualify for 50% bonus tax depreciation. As a result, we do not expect to pay any significant U.S. federal income tax until 2016 or later, and we expect to receive a refund of approximately $24.5 million of income tax for 2010. Furthermore, our business operations are subject to income tax in several non-U.S. jurisdictions. We expect our U.K. subsidiary to pay cash income taxes commensurate with its earnings. We do not expect to pay cash income taxes in any other jurisdiction for at least several years.

Contractual Obligations and Debt Agreements

See Note 7 to our Financial Statements for a description of our new debt obligations; the Ex-Im Bank Facility, the First 2012 Ex-Im Bank Guaranteed Notes, the First 2012 CIT Term Loans and the Second 2012 CIT Term Loan. See our 2011 Annual Report on Form 10-K for a tabular disclosure of our contractual obligations as of December 31, 2011 and a description of our debt obligations and amendments thereto.

Off-Balance Sheet Arrangements

Fifteen of our thirty-six operating aircraft are under operating leases (this excludes aircraft provided by CMI customers). Five are leased through trusts established specifically to purchase, finance and lease aircraft to us. These leasing entities meet

the criteria for variable interest entities. All fixed-price options were restructured to reflect a fair market value purchase option, and as such, we are not the primary beneficiary of the leasing entities. We are generally not the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and the leases do not include a residual value guarantee, fixed-price purchase option or similar feature that would obligate us to absorb decreases in value or entitle us to participate in increases in the value of the aircraft. We have not consolidated any additional aircraft in the related trusts upon application of accounting for consolidations, because we are not the primary beneficiary based on the fact that all fixed-price options were restructured to reflect a fair market value purchase option. In addition, we reviewed the other ten Atlas aircraft that are under operating leases but not financed through a trust and determined that none of them would be consolidated upon the application of accounting for consolidations. Our maximum exposure under all operating leases is the remaining lease payments, which amounts are reflected in future lease commitments described in Note 10 to the audited consolidated financial statements in our 2011 Annual Report on Form 10-K.

There were no material changes in our off-balance sheet arrangements during the three months ended June 30, 2012.

Recent Accounting Pronouncements

See Note 2 to our Financial Statements for a discussion of recent accounting pronouncements.

Other Matters

As previously reported, General Duncan J. McNabb, USAF (Ret.), was elected to our Board of Directors on July 23, 2012. He was also elected to the Atlas Board of Directors on such date. General McNabb retired from the Air Force in December 2011 as the Commander of the United States Transportation Command (“USTRANSCOM”), the single largest logistics provider for air, land and sea transportation for the Department of Defense (“DOD”). As DOD’s Distribution Process Owner, USTRANSCOM directs and oversees the execution of DOD’s strategic distribution system in support of the global and regional combatant commands.

For additional information concerning General McNabb and his election to our Board of Directors, reference is made to our current report on Form 8-K, dated July 23, 2012.

Forward Looking Statements

This Quarterly Report on Form 10-Q (this “Report”), as well as other reports, releases and written and oral communications issued or made from time to time by or on behalf of AAWW, contain statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements are based on management’s beliefs, plans, expectations and assumptions, and on information currently available to management. Generally, the words “will,” “may,” “should,” “expect,” “anticipate,” “intend,” “plan,” “continue,” “believe,” “seek,” “project,” “estimate” and similar expressions used in this Report that do not relate to historical facts are intended to identify forward-looking statements.

The forward-looking statements in this Report are not representations or guarantees of future performance and involve certain risks, uncertainties and assumptions. Such risks, uncertainties and assumptions include, but are not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2011. Many of such factors are beyond AAWW’s control and are difficult to predict. As a result, AAWW’s future actions, financial position, results of operations and the market price for shares of AAWW’s common stock could differ materially from those expressed in any forward-looking statements. Readers are therefore cautioned not to place undue reliance on forward-looking statements. AAWW does not intend to publicly update any forward-looking statements that may be made from time to time by, or on behalf of, AAWW, whether as a result of new information, future events or otherwise, except as required by law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For additional discussion of our exposure to market risk, refer to Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” included in our 2011 Annual Report on Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer, or CEO, and Chief Financial Officer, or CFO, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2012. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our CEO and CFO, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

With respect to the fiscal quarter ended June 30, 2012, the information required in response to this Item is set forth in Note 10 to our Financial Statements and such information is incorporated herein by reference. Such description contains all of the information required with respect hereto.

ITEM 1A. RISK FACTORS

For an update of a risk factor that is set forth in Item 1A – Risk Factors of our 2011 Annual Report on Form 10-K, please refer to Item 1A — Risk Factors of our quarterly report for the period ended March 31, 2012 on Form 10-Q. For additional risk factors that may cause actual results to differ materially from those anticipated, please refer to our 2011 Annual Report on Form 10-K.

ITEM 5. OTHER INFORMATION

Information regarding borrowings under the Ex-Im Bank Facility and the issuance of certain fixed-rate notes to refinance such borrowings is set forth in Notes 7 and 14 to our Financial Statements and such information is incorporated by reference herein. Such description contains all of the information required with respect hereto.

ITEM 6. EXHIBITS

a. Exhibits

See accompanying Exhibit Index included after the signature page of this report for a list of exhibits filed or furnished with this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Atlas Air Worldwide Holdings, Inc.

Dated: August 2, 2012		/s/ William J. Flynn
		William J. Flynn
		President and Chief Executive Officer



Dated: August 2, 2012		/s/ Spencer Schwartz
		Spencer Schwartz
		Senior Vice President and Chief Financial Officer

EXHIBIT INDEX


Exhibit Number		Description
4.1		Indenture dated as of May 1, 2012, by and among Helios Leasing I LLC, Apple Bank For Savings, Wilmington Trust Company, not in its individual capacity but solely as Indenture Trustee, Wells Fargo Bank Northwest, National Association, and Export-Import Bank of the United States.

4.2		Secured Fixed Rate Global Note dated June 19, 2012.

4.3		Secured Fixed Rate Global Note dated July 31, 2012.

10.1		Atlas Air, Inc. 401(k) Restoration and Voluntary Deferral Plan.

31.1		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer, furnished herewith.

31.2		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer, furnished herewith.

32.1		Section 1350 Certifications, furnished herewith.

101.INS		XBRL Instance Document. *

101.SCH		XBRL Taxonomy Extension Schema Document. *

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document. *

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document. *

101.LAB		XBRL Taxonomy Extension Labels Linkbase Document. *

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document. *

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011, (iii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and 2011, (iv) Consolidated Statements of Cash Flows for the three and six months ended June 30, 2012 and 2011, (v) Consolidated Statement of Stockholders’ Equity for the three and six months ended June 30, 2012 and 2011 and (vi) Notes to Unaudited Consolidated Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Exhibit 4.1

INDENTURE

dated as of May 1, 2012

by and among

HELIOS LEASING I LLC

as Issuer

APPLE BANK FOR SAVINGS

as Initial Guaranteed Lender

APPLE BANK FOR SAVINGS

as Calculation Agent

WILMINGTON TRUST COMPANY

not in its individual capacity, except as expressly provided herein, but solely as Indenture Trustee

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION

as Security Trustee

and

EXPORT-IMPORT BANK OF THE UNITED STATES

Six (6) Boeing Model 747-87UF Aircraft

Ex-Im Bank Guarantee No. AP086438XX — Atlas Air, Inc.

TABLE OF CONTENTS


		Page

ARTICLE I DEFINITIONS AND INTERPRETATION			2

Section 1.01.	Definitions		2
Section 1.02.	Acts of Noteholders		2

ARTICLE II THE NOTES			3

Section 2.01.	Types of Notes; Execution and Denomination		3
Section 2.02.	Bank Notes		3
Section 2.03.	Conversion of Floating Rate Bank Notes to Fixed Rate Bank Notes		7
Section 2.04.	Additional Procedures for Conversion		8
Section 2.05.	Exchange of Bank Notes for Global Notes		9
Section 2.06.	The Global Notes		11
Section 2.07.	Definitive Notes		17
Section 2.08.	Use of Proceeds		19
Section 2.09.	Cancellation of the Notes		19
Section 2.10.	Mutilated, Destroyed, Lost or Stolen Notes		19
Section 2.11.	Payments of Transfer Taxes		20
Section 2.12.	Registrar and Paying Agent		20
Section 2.13.	Statements to Holders		22
Section 2.14.	CUSIP Numbers		22
Section 2.15.	Authentication		23
Section 2.16.	Persons Deemed Owners		23
Section 2.17.	Appointment of Custodian		23

ARTICLE III PAYMENTS; APPLICATION; BUSINESS DAYS			23

Section 3.01.	Payment by Issuer		23
Section 3.02.	Application of Receipts		24
Section 3.03.	Business Days		25
Section 3.04.	Certificate Conclusive and Binding		25

ARTICLE IV TAXES; INDEMNITY; ADDITIONAL AMOUNTS			26

Section 4.01.	Taxes; Indemnities		26
Section 4.02.	Grossing Up of Indemnity Provisions		26
Section 4.03.	Definitions		27
Section 4.04.	Survival		27

TABLE OF CONTENTS

(continued)


		Page

ARTICLE V COVENANTS			27

ARTICLE VI EVENTS OF DEFAULT			27

Section 6.01.	Events of Default		27
Section 6.02.	Remedies		29

ARTICLE VII THE INDENTURE TRUSTEE			30

Section 7.01.	Notice of Defaults		30
Section 7.02.	Certain Rights of Indenture Trustee		31
Section 7.03.	Not Responsible for Recitals or Issuance of Notes		33
Section 7.04.	May Hold Notes		33
Section 7.05.	Money Held in Trust		33
Section 7.06.	Indemnity		33
Section 7.07.	Resignation and Removal of Indenture Trustee; Appointment of Successor		33
Section 7.08.	Persons Eligible for Appointment as Indenture Trustee		35
Section 7.09.	Acceptance of Appointment by Successor Indenture Trustee		35
Section 7.10.	Merger, Conversion, Consolidation or Succession to Business		36
Section 7.11.	Representations and Warranties of Indenture Trustee		36
Section 7.12.	Documents Furnished to Noteholders and Guaranteed Lenders		36
Section 7.13.	Appointment		36
Section 7.14.	Certain Ex-Im Bank Guarantee Covenants		37

ARTICLE VIII NOTEHOLDERS’ LISTS AND REPORTS			38

Section 8.01.	Noteholders’ and Guaranteed Lenders’ Lists and Preservation of Information		38

ARTICLE IX SUPPLEMENTAL INDENTURES			38

Section 9.01.	Supplemental Indentures Without Consent of the Guaranteed Lenders or Noteholders		38
Section 9.02.	Supplemental Indentures with Consent of the Guaranteed Lenders and the Noteholders		39
Section 9.03.	Documents Affecting Immunity or Indemnity		40
Section 9.04.	Execution of Supplemental Indentures		40
Section 9.05.	Effect of Supplemental Indentures		40
Section 9.06.	Reference in Notes to Supplemental Indentures		41
Section 9.07.	Solicitation of Noteholders		41

TABLE OF CONTENTS

(continued)


		Page

ARTICLE X SATISFACTION AND DISCHARGE			41

Section 10.01.	Satisfaction and Discharge of Indenture		41

ARTICLE XI MISCELLANEOUS PROVISIONS			42

Section 11.01.	No Waiver		42
Section 11.02.	Notices		42
Section 11.03.	Governing Law		45
Section 11.04.	Severability		45
Section 11.05.	Captions		45
Section 11.06.	Successors and Assigns		45
Section 11.07.	Assignments and Participations		45
Section 11.08.	Counterparts		47
Section 11.09.	Jurisdiction; Service of Process		47
Section 11.10.	Waiver of Jury Trial		47
Section 11.11.	Expenses, Etc		47
Section 11.12.	Guaranteed Lender		47
Section 11.13.	Intercreditor Arrangements		48
Section 11.14.	Noteholders and Guaranteed Lenders		48
Section 11.15.	Amendments, Etc		48
Section 11.16.	Entire Agreement		48
Section 11.17.	Limitation on Liability		48
Section 11.18.	Trust Indenture Act		48


Schedule 1	–	List of Documents and Evidence
Schedule 2	–	Form of Floating Rate Bank Note
Schedule 3	–	Form of Fixed Rate Bank Note
Schedule 4	–	Form of Floating Rate Global Note
Schedule 5	–	Form of Fixed Rate Global Note
Schedule 6	–	Form of Floating Rate Definitive Note
Schedule 7	–	Form of Fixed Rate Definitive Note
Schedule 8	–	Form of Conversion Notice
Schedule 9	–	Form of Transfer Certificate (Exchange Date)
Schedule 10	–	Form of Transfer Certificate (Bank Notes)

Appendix A	–	Definitions

iii

THIS INDENTURE is made as of May 1, 2012 by and among HELIOS LEASING I LLC , a limited liability company formed under the laws of the State of Delaware (the “ Issuer ”), APPLE BANK FOR SAVINGS , as the initial guaranteed lender (the “ Initial Guaranteed Lender ” and together with any other beneficial owner of a Bank Note, the “ Guaranteed Lenders ”), APPLE BANK FOR SAVINGS , as the calculation agent pursuant to Section 2.02(c)(vii) hereof (the “ Calculation Agent ”), WILMINGTON TRUST COMPANY not in its individual capacity, except as expressly provided herein, but solely as indenture trustee on behalf of the Guaranteed Lenders and the Noteholders and/or as custodian and agent pursuant to Section 2.07(b)(ii) (in either such capacity, together with its successors, the “ Indenture Trustee ”), WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION , as security trustee (in such capacity, together with its successors, the “ Security Trustee ”), and EXPORT-IMPORT BANK OF THE UNITED STATES (“ Ex-Im Bank ”).

W I T N E S S E T H :

WHEREAS , the Issuer intends to acquire each Aircraft and further intends upon the acquisition thereof to lease such Aircraft to the Lessee pursuant to the Lease;

WHEREAS , the proceeds of the issuance of the Bank Notes will be used by the Issuer to (i) finance the Ex-Im Bank Eligible Amount of the Aircraft and (ii) refinance 100% of the related ASU Premium;

WHEREAS , subject to the terms and conditions of the Operative Documents, Ex-Im Bank is prepared to issue to the Indenture Trustee, on behalf of the Guaranteed Lenders and the Noteholders, its guarantee of the principal of, and certain interest on, each Note in an amount equal to the Guaranteed Amount in respect of such Note, all as set forth in the Ex-Im Bank Guarantee;

WHEREAS , the Notes will be secured as provided in the Security Documents;

WHEREAS , the transactions contemplated hereby will facilitate exports between the United States of America and each of the countries in which the ACMI Lessee of an Aircraft is based;

WHEREAS , the Issuer, the Security Trustee, the Initial Guaranteed Lender, the Indenture Trustee, the Calculation Agent and Ex-Im Bank are entering into this Indenture, and the Indenture Trustee is accepting the trusts created hereby, for good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by each party hereto; and

WHEREAS , all things necessary to make this Indenture a valid agreement of the Issuer in accordance with its terms have been completed.

NOW, THEREFORE , in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

[Indenture]

ARTICLE I

DEFINITIONS AND INTERPRETATION

Section 1.01. Definitions . Unless the context requires otherwise, capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned thereto in Part I of Appendix A hereto for all purposes of this Indenture and this Indenture shall be interpreted in accordance with the rules of construction set forth in Part II of Appendix A hereto.

Section 1.02. Acts of Noteholders .

(a) Any Direction or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Indenture Trustee and, where it is expressly required, by the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “ Act ” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a written appointment of any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 1.02. For the purposes of directing any action or casting any vote or giving any consent, waiver or instruction hereunder any Noteholder may allocate, in such Noteholder’s sole discretion, any fractional portion of the principal amount of such Note in favor of or in opposition to any such action, vote, consent, waiver or instruction.

(b) The fact and date of the execution by any Person of any instrument or writing may be proved in any reasonable manner which the Indenture Trustee deems sufficient.

(c) In determining whether the Noteholders of the requisite aggregate Outstanding Amount of Outstanding Notes have given any direction, consent, request, demand, authorization, notice or waiver (a “ Direction ”), under this Indenture, any portion of a Note owned by the Issuer, the Lessee or any of their Affiliates shall be disregarded and deemed not to be Outstanding under this Indenture for purposes of any such determination (it being agreed that such Direction shall be disregarded in the event the Issuer, the Lessee or any of their Affiliates collectively own 100% of such Note). In determining whether the Indenture Trustee shall be protected in relying upon any such Direction, only the portion of such Note which a Responsible Officer of the Indenture Trustee actually knows to be so owned shall be so disregarded.

(d) The Issuer may at its option by delivery of an Officer’s Certificate to the Indenture Trustee set a record date to determine the Noteholders entitled to give any Direction.

(e) Any Direction or other action by any Noteholder of any Note shall bind such Noteholder of such Note issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Note.

(f) Notices to be given by any Noteholder to the Indenture Trustee shall be in writing and given by forwarding the same to the Indenture Trustee. While any Notes are

[Indenture]

represented by a Global Note, such notice may be given by the Depositary or in such manner as the Indenture Trustee and the Depositary may approve for this purpose.

ARTICLE II

THE NOTES

Section 2.01. Types of Notes; Execution and Denomination .

(a) On the Issuance Date for each Aircraft, the Issuer shall, on and subject to the terms and conditions set forth in the Participation Agreement, issue a single Floating Rate Bank Note to the Indenture Trustee in accordance with the provisions of Section 2.02 hereof. Floating Rate Bank Notes may be converted to Fixed Rate Bank Notes in accordance with Section 2.03 hereof. Thereafter, on an Exchange Date, the Issuer may, on and subject to the terms and conditions set forth in Section 2.05 hereof, exchange any or all of the then Outstanding Floating Rate Bank Notes for a single Global Note of the Issuer in the then aggregate Outstanding Amount of the Bank Notes that will be subject to such exchange. Definitive Notes may be issued in exchange for the Global Notes only in the limited circumstances specified in Section 2.07 hereof.

(b) Each Note shall be executed on behalf of the Issuer by one of its authorized officers or attorneys in fact. Notes bearing the manual signature of individuals who were at any time authorized officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes. No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the form provided for in the schedules hereto executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. The Notes shall be issued in registered form only, without interest coupons.

Section 2.02. Bank Notes .

(a) Issuance . On the Issuance Date for an Aircraft, but in no event later than the Final Issuance Date for such Aircraft, the Issuer shall issue and deliver to the Indenture Trustee a Floating Rate Bank Note in a principal amount not exceeding (A) 100% of the relevant ASU Premium related to the Floating Rate Bank Note for such Aircraft plus (B) the Ex-Im Bank Eligible Amount for such Aircraft as approved by Ex-Im Bank; provided, that in no event shall the aggregate original principal amount of the Floating Rate Bank Notes exceed the Ex-Im Bank Commitment. Each Floating Rate Bank Note shall (i) be registered in the name of the Indenture Trustee for the benefit of the Guaranteed Lenders, (ii) be dated the date of its issue, (iii) be in a principal amount equal to the lesser of (x) the Ex-Im Bank Eligible Amount for the related Aircraft plus the related ASU Premium and (y) the remaining unutilized Ex-Im Bank Commitment, (iv) be payable as to principal and interest in accordance with its terms and the applicable provisions of this Indenture, including, without limitation, Section 2.02(b) and (c) hereof, (v) designate the Aircraft in respect of which it has been issued, (vi) subject to the terms

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and conditions of the Participation Agreement, Section 2.02 hereof and the Ex-Im Bank Guarantee, be duly endorsed with the Guarantee Legend of Ex-Im Bank in the form provided in the Ex-Im Bank Guarantee, (vii) be duly authenticated by the Indenture Trustee in the manner provided herein, and (viii) be otherwise issued and completed in conformity with the terms of this Indenture. At no time shall there be outstanding more than one (1) Bank Note with respect to each Aircraft.

(b) Principal . The principal amount of each Bank Note shall be payable in quarterly installments on each of the Payment Dates for such Bank Note and the related Aircraft (computed on a mortgage style level payment basis of installments of principal and interest utilizing (x) in the case of a Floating Rate Bank Note, the seven (7) year swap rate determined by the Initial Guaranteed Lender, after consultation with Ex-Im Bank and Lessee, for the applicable Floating Rate on the date that is two (2) Business Days prior to the related Issuance Date, and (y) in the case of a Fixed Rate Bank Note, the Fixed Rate for such Bank Note), each such installment to be in an amount equal to the principal amount set forth for such Payment Date in Annex A to such Bank Note, provided, that the amount payable on the Final Maturity Date of a Bank Note shall in all cases be in an amount equal to the then outstanding principal balance of such Bank Note together with accrued and unpaid interest thereon and all other amounts then owing hereunder or under the other Operative Documents with respect to such Bank Note.

(i) The Issuer shall pay to the Indenture Trustee, for the account of the Guaranteed Lenders, interest on the unpaid principal amount of each Bank Note for the period from and including the Issuance Date thereof to but excluding the date such Bank Note shall be paid in full, at a rate per annum for each Interest Period relating thereto equal to the Applicable Rate for such Interest Period.

(ii) The Issuer shall pay to the Indenture Trustee, for the account of the Guaranteed Lenders (other than Ex-Im Bank), interest at the applicable Post-Default Rate on any principal of any Bank Note and on any interest thereon and any other amount payable by the Issuer to any Guaranteed Lender (other than Ex-Im Bank) that shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full.

(iii) Accrued interest on the principal amount of each Bank Note shall be payable in arrears on each Payment Date for such Bank Note and upon the payment or prepayment thereof (but only on the principal amount so paid or prepaid), except that interest payable at the applicable Post-Default Rate shall be payable from time to time on demand.

(iv) Notwithstanding Section 2.02(c)(i) hereof, if Ex-Im Bank shall have made a claim payment under the Ex-Im Bank Guarantee with respect to a demand under any Floating Rate Bank Note, then, beginning on the date of such claim payment, the unpaid principal amount of such Floating Rate Bank Note shall bear interest at a rate

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per annum equal to Special LIBOR plus the Applicable Margin for all purposes, including, without limitation, Section 2.02(c)(v) hereof.

(v) Notwithstanding Section 2.02(c)(ii) hereof, if Ex-Im Bank shall have made a claim payment under the Ex-Im Bank Guarantee with respect to a demand under any Bank Note, then, beginning on the date of such claim payment, if any amount of principal of or accrued interest on such Bank Note then owing to Ex-Im Bank is not paid in full when due, whether at stated maturity, by acceleration or otherwise, the Issuer shall pay to Ex-Im Bank on demand interest on such unpaid amount for the period from and including the date such amount was due to Ex-Im Bank to but excluding the date such amount is paid in full at an interest rate equal to one percent (1%) per annum above the interest rate otherwise then applicable under Section 2.02(c)(i) hereof (as modified, if required, by Section 2.02(c)(iv) hereof).

(vi) Except as otherwise provided in Section 2.02(c)(v) with respect to the amounts of principal and accrued interest, if, at any time, any other amount owing to Ex-Im Bank under this Indenture or any Bank Note is not paid in full when due, the Issuer shall pay to Ex-Im Bank on demand interest on such unpaid amount for the period from the date such amount was due (the “ Payment Default Date ”) until such amount shall have been paid in full at an interest rate per annum equal to one percent (1%) per annum above the U.S. Treasury Rate for six-month (180-day) Treasury Bills which is in effect on the Payment Default Date.

(vii) The Issuer hereby appoints Apple Bank for Savings, as initial calculation agent (the “ Calculation Agent ”) for the Floating Rate Bank Notes and Apple Bank for Savings hereby accepts such appointment. With respect to any Interest Period during which interest will be due and payable under a Floating Rate Bank Note, the Calculation Agent will, as soon as practicable after 11:00 a.m. (London time) on the relevant Quotation Date, determine the Applicable Rate therefor and calculate the amount of interest which will accrue in respect of the following Interest Period (the “ Interest Amount ”). Promptly following the determination of the Applicable Rate for such Interest Period, the Calculation Agent shall notify the Issuer, the Lessee, the Guaranteed Lenders and Ex-Im Bank of such Applicable Rate and the Interest Amount in writing with reasonable details as to the basis and calculation of such amounts; provided, that the Calculation Agent’s failure to so notify the Issuer, the Lessee, the Guaranteed Lenders or Ex-Im Bank shall not relieve the Issuer of its obligation to pay interest payable hereunder or under any Floating Rate Bank Note or the Lessee of any obligation under any Operative Document nor shall it give rise to any claim against the Calculation Agent. The determination of any Applicable Rate and any Interest Amount by the Calculation Agent will (in the absence of manifest error) be final and binding on all parties and no liability will (in the absence of willful misconduct or bad faith) attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions.

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(d) Prepayments .

(i) Voluntary . Subject to no Material Default or Event of Default having occurred and being continuing, the Issuer (acting solely at the direction of Lessee) may prepay any Bank Note in full or in part on any Payment Date, without premium or penalty (except as otherwise provided in the Issuer Indemnity Agreement), provided that (i) the Issuer (acting solely at the direction of the Lessee) shall give the Indenture Trustee, the Security Trustee, Ex-Im Bank and the Guaranteed Lenders not less than five (5) Business Days’, but not more than six (6) months’, prior irrevocable written notice of such prepayment as provided in Section 2.02(d)(iv) hereof and (ii) partial prepayments may be made only in an amount at least equal to Ten Million Dollars ($10,000,000) (or if the Outstanding Amount of such Bank Note at such time is less than Ten Million Dollars ($10,000,000), then such Outstanding Amount) and in integral multiples of One Million Dollars ($1,000,000), or in any such smaller denomination as is necessary to permit prepayment of any smaller Outstanding Amount. As of the date of such prepayment the Issuer shall pay the principal amount of the Bank Note to be prepaid, all accrued and unpaid interest thereon and all other amounts then owing to Ex-Im Bank and the Guaranteed Lenders under the Operative Documents (including, without limitation, all amounts payable under the Issuer Indemnity Agreement). The Issuer may not voluntarily prepay any Bank Note, in whole or in part, except in accordance with the express terms of this Section 2.02(d)(i) or (iii).

(ii) Mandatory . (A) The Issuer shall prepay the Bank Note with respect to an Aircraft in full (together with accrued and unpaid interest thereon and all other amounts then owing by the Issuer hereunder and under the other Operative Documents (including, without limitation, all amounts payable under the Issuer Indemnity Agreement) relating to such Aircraft) (1) prior to or contemporaneously with the termination of the Lease with respect to such Aircraft, or (2) on the Settlement Date relating to an Event of Loss with respect to such Aircraft unless a Replacement Aircraft is substituted for such Aircraft in accordance with the terms of the Lease, and the Guaranteed Lenders hereby acknowledge that the Security Trustee may require that any funds held by the Security Trustee be applied to any prepayment of such Bank Note in respect thereof.

(B) Subject to the last paragraph of Section 2.05 on each Exchange Date, the Issuer shall prepay the Bank Notes being exchanged for a Global Note on such Exchange Date in a principal amount equal to, if any, the difference between the principal amount of such Global Note and the aggregate principal amount of the related Bank Notes.

(C) In the event the Lessee becomes obliged pursuant to Section 3(i) of the Lease to pay the Issuer the Termination Values for an Aircraft, the Issuer shall prepay the Bank Note relating to such Aircraft in full (together with accrued and unpaid interest thereon and all other amounts then owing by the Issuer hereunder and under the other Operative Documents (including, without limitation, all amounts payable under the

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Issuer Indemnity Agreement)) on the ACMI Termination Date for such Aircraft.

(iii) If the Issuer becomes obliged to pay any Guaranteed Lender any additional amount pursuant to Section 6 of the Issuer Indemnity Agreement, then the Issuer, acting solely at the direction of the Lessee, may, if it has given to the Guaranteed Lenders, the Indenture Trustee and Ex-Im Bank at least ten (10) Business Days written notice (or such shorter period as the Guaranteed Lender and the Issuer (acting solely at the direction of the Lessee) may agree in the case of an Illegality Event) of such prepayment as provided in Section 2.02(d)(iv) hereof, prepay such Guaranteed Lender’s ratable share of the applicable Bank Note together with all accrued and unpaid interest thereon and all other amounts then due and owing to such Guaranteed Lender and Ex-Im Bank hereunder and under the other Operative Documents.

(iv) Notice of Prepayment. Any notice of prepayment given by the Issuer pursuant to this Section 2.02(d) shall be irrevocable, shall specify the date upon which such prepayment is to be made and the amount of such prepayment, in the case of paragraph (iii) above shall identify the Guaranteed Lenders whose share of the Bank Note is to be prepaid and shall oblige the Issuer to make such prepayment on such date. If a prepayment under Section 2.02(d)(i) or (iii) is not made in full for any reason, notwithstanding the giving of notice pursuant to Section 2.02(d)(i) or (iii), this Indenture and the obligations of the Issuer hereunder and under the Bank Notes shall continue in full force and effect and no Default or Event of Default shall arise or be deemed to arise by reason thereof, and the relevant prepayment notice shall be deemed rescinded.

(v) Any prepayment pursuant to this Section 2.02(d) shall satisfy pro tanto the Issuer’s obligations in relation to the applicable Bank Note (or portion thereof, in the case of any partial prepayment pursuant to this Section 2.02(d)(i), (d)(ii)(B) or (d)(iii)).

(vi) Any partial prepayment pursuant to Section 2.02(d)(i) or (d)(ii)(B) shall be applied to the remaining principal installments of the applicable Bank Note in the inverse chronological order of their maturities.

(vii) Any partial prepayment pursuant to Section 2.02(d)(iii) shall be applied in reduction of the remaining principal installments of the applicable Bank Note pro rata with respect to such Guaranteed Lender’s portion of such Bank Note.

(viii) Any amount prepaid under this Indenture may not be reborrowed.

(ix) The Issuer may not voluntarily prepay any Bank Note, in whole or in part, except in accordance with the express terms of this Section 2.02(d).

Section 2.03. Conversion of Floating Rate Bank Notes to Fixed Rate Bank Notes .

(a) Subject to no Event of Default or Event of Loss having occurred and being continuing and subject to the conditions set forth in Part 1 of Schedule 1 hereto having been satisfied or waived on or prior to a proposed Conversion Date (which shall coincide with a

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Payment Date after the Cut-Off Date), the Issuer, acting on the instructions of the Lessee, may by notice substantially in the form of Schedule 8 hereto (the “ Conversion Notice ”) delivered to Ex-Im Bank, the Indenture Trustee and the Guaranteed Lenders, not later than 10:00 a.m. (New York time) on the tenth (10th) Business Day preceding such Conversion Date, with respect to one or more of the Floating Rate Bank Notes, request that on such Conversion Date the designated Floating Rate Bank Notes be exchanged for the issuance of Fixed Rate Bank Notes.

(b) If a notice has been delivered by the Issuer as contemplated by Section 2.03(a), then a rate fixing call (the “ Conversion Rate Fixing Call ”) shall be held between the Guaranteed Lender, the Lessee and up to four of the Guaranteed Lender’s swap counterparties selected by the Guaranteed Lender and reasonably acceptable to the Lessee. The Conversion Rate Fixing Call shall be held at 10:00 a.m. New York time two (2) Business Days prior to the proposed Conversion Date. During the Conversion Rate Fixing Call, the Guaranteed Lender shall obtain quotes for a fixed rate (the “ Swap Rate ”) from each of the Guaranteed Lender’s swap counterparties. The Swap Rate shall be the fixed rate required to be paid by the Guaranteed Lender to the Guaranteed Lender’s swap counterparty in return for payment by that counterparty to the Guaranteed Lender of three-month U.S. Dollar LIBOR (or alternative rate the Guaranteed Lender would otherwise receive as a floating rate). The Guaranteed Lender shall cause the swap counterparty to offer the Swap Rate based on the remaining amortization schedule with respect to the relevant Bank Note and the amortization of the notional swap amount will match the amortization of such Bank Note. The payment dates of the swap will match the payment dates of the relevant Bank Note and the day count for interest calculation on the fixed rate payment leg of the swap will be the same as on the Bank Note (i.e. 30/360 day convention). The floating rate payments will be calculated using an actual/360 day convention. The Guaranteed Lender will enter into the matching swap with the counterparty offering the lowest Swap Rate. Following the award of the swap to the counterparty, the Fixed Rate will be equal to the awarded Swap Rate plus a margin of 1.00% per annum. For purposes of clarification, the Conversion Rate Fixing Call may either be a conference call, or may be performed through a Blooomberg chat room that is broadcast to both the Guaranteed Lender and Lessee simultaneously.

Section 2.04. Additional Procedures for Conversion . Not later than 10:00 a.m. (New York time) on the Conversion Date, the Issuer shall issue and deliver to the Indenture Trustee in exchange for each Floating Rate Bank Note to be converted a duly executed Fixed Rate Bank Note substantially in the form of Schedule 3 hereto, and thereupon the Indenture Trustee shall authenticate such Fixed Rate Bank Notes and deliver to Ex-Im Bank the outstanding Floating Rate Bank Notes to be converted for cancellation of the Guarantee Legends thereon together with a Request for Guarantee Legend accompanied by the Fixed Rate Bank Notes. On and subject to the terms and conditions of Section 2.03 and this Section 2.04 and the Ex-Im Bank Guarantee, Ex-Im Bank shall endorse its Guarantee Legend on the Fixed Rate Bank Notes in the form provided in the Ex-Im Bank Guarantee and return the same to the Indenture Trustee, together with the affected Floating Rate Bank Notes, with its Guarantee Legends thereon cancelled. Upon its receipt thereof, the Indenture Trustee shall cancel each such Floating Rate Bank Note and promptly thereafter return the same to the Issuer. Each Fixed Rate Bank Note so endorsed shall (i) be registered in the name of the Indenture Trustee for the benefit of the Guaranteed Lenders, (ii) be dated the Conversion Date, (iii) be in a principal amount equal to the Outstanding Amount on the Conversion Date of the corresponding surrendered Floating Rate

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Bank Note (but after giving effect to payments of principal thereon made on such date), (iv) be payable as to principal and interest in accordance with its terms and the applicable provisions of this Indenture, including, without limitation, Sections 2.02(b) and (c), (v) designate the Aircraft in respect of which it has been issued, (vi) be duly authenticated by the Indenture Trustee in the manner provided herein, (vii) be subject to prepayment in accordance with Section 2.02(d) and (viii) be otherwise in conformity with the terms of this Indenture. Notwithstanding the foregoing and anything herein or in any other Operative Document to the contrary, the Fixed Rate shall under no circumstances become applicable (nor shall a Conversion occur) unless the conditions to such Conversion set forth herein and in Section 3.05 of the Ex-Im Bank Guarantee have been satisfied or waived. In the event a Conversion does not become effective for any reason notwithstanding the giving of notice pursuant to Section 2.03, this Indenture and the obligations of the Issuer hereunder and under the affected Floating Rate Bank Notes shall continue in full force and effect, no Default or Event of Default shall arise or be deemed to arise by reason thereof, LIBOR for the applicable Interest Period shall be determined as of the scheduled Conversion Date, and the Conversion Notice shall be deemed rescinded.

Section 2.05. Exchange of Bank Notes for Global Notes .

(a) The Issuer, acting solely on the instructions of the Lessee, shall have the right, so long as no Default or Event of Default shall have occurred and be continuing, to elect, on one or more occasions, by written notice (an “ Exchange Notice ”) to Ex-Im Bank, the Indenture Trustee, the Security Trustee, the Guaranteed Lenders and the Initial Purchasers, to exchange any or all of the Outstanding Floating Rate Bank Notes for a single Global Note (or, if the Outstanding Amount of such Global Note would exceed $500,000,000, two Global Notes) of the Issuer on any Business Day falling on or prior to the relevant Cut-Off Date, determined in consultation with the Initial Purchasers, occurring not less than seven (7) nor more than twenty (20) Business Days (or such other period as the Guaranteed Lender, Ex-Im Bank and the Issuer (acting solely at the direction of the Lessee) may agree) after the date of such notice (such Business Day, as it relates to the Floating Rate Bank Notes to be exchanged on such date, the “ Exchange Date ” for such Floating Rate Bank Notes). On each Exchange Date, the then Outstanding Floating Rate Bank Notes that will be subject to such exchange on such Exchange Date shall be so exchanged for a single Global Note (or, if the Outstanding Amount of such Global Note would exceed $500,000,000, two Global Notes) in a principal amount not in excess of the then Outstanding Amount of the Floating Rate Bank Notes being exchanged (after giving effect to payments, if any, of principal thereon made on such date) in accordance with the provisions of Section 2.06 hereof and subject to satisfaction of the following conditions precedent:

(i) no Default or Event of Default or Event of Loss (with respect to the Aircraft to be covered by such Global Note) shall have occurred and be continuing on such Exchange Date;

(ii) such Exchange Date shall fall on or prior to the relevant Cut-Off Date (unless otherwise agreed by the Guaranteed Lenders, Ex-Im Bank and the Initial Purchasers);

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(iii) on the relevant Pricing Date, the Issuer, the Lessee and the Initial Purchasers shall have entered into a Note Purchase Agreement for such Global Note and the conditions precedent referred to therein shall have been satisfied or waived (as determined by the Initial Purchasers) on or before such Exchange Date;

(iv) on the relevant Pricing Date, the Indenture Trustee, the Guaranteed Lenders and the Initial Purchasers shall have executed and delivered a Transfer Certificate substantially in the form of Schedule 9 hereto under which the Indenture Trustee (as registered holder) and the Guaranteed Lenders (as beneficial owners) agree to sell, and the Initial Purchasers agree to buy on such Exchange Date, all of their respective right, title and interest in and to the Outstanding Floating Rate Bank Notes being exchanged on such Exchange Date for a purchase price not in excess of the then unpaid principal amount of such Floating Rate Bank Notes (but after giving effect to payments of principal thereon made on such Exchange Date);

(v) on the relevant Pricing Date, (A) the Applicable Rate for such Global Note shall have been established by the Initial Purchasers and approved by the Lessee and Ex-Im Bank, (B) the amortization schedule for each Tranche of such Global Note shall have been computed by the Initial Purchasers and approved by Ex-Im Bank, so as to provide for quarterly approximate mortgage style payments of principal and interest, payable on each of the then remaining Payment Dates for such Global Note (computed (x) if such Global Note is a Floating Rate Global Note, utilizing the then closest or interpolated swap rate corresponding to the average remaining life of the Floating Rate Bank Notes being exchanged on such Exchange Date, as determined by the Initial Purchasers, after consultation with Ex-Im Bank and the Lessee and (y) if such Global Note is a Fixed Rate Global Note, utilizing a rate determined by the Initial Purchasers and approved by the Lessee and Ex-Im Bank), (C) each of the Issuer and the Lessee shall have confirmed to the Initial Purchasers, Ex-Im Bank and the Indenture Trustee their acceptance of such rate and such amortization schedules as the applicable interest rate and amortization schedules for such Global Note by executing the related Note Purchase Agreement and (D) the Issuer, the Lessee and the Initial Purchasers shall have agreed on the amount of any Prepayment Premium or Premium Over Treasuries, if applicable, and the circumstances under which any Make Whole Amount or Prepayment Premium, if applicable, will be payable in each case to the extent applicable to such Global Note;

(vi) on or before 11:00 a.m., New York time, on such Exchange Date, and substantially simultaneously, (w) the Issuer shall have paid all amounts required to be paid on such Exchange Date, including, without limitation, accrued and unpaid interest on the Outstanding Floating Rate Bank Notes being exchanged on such Exchange Date to but excluding such date and any amounts payable by it in respect of such Outstanding Floating Rate Bank Notes pursuant to Section 2.02(d)(ii)(B) hereof and all amounts due and payable under the Issuer Indemnity Agreement, (x) the Initial Purchasers shall have purchased, and the Guaranteed Lenders shall have sold, all of their respective right, title and interest in and to, the then Outstanding Floating Rate Bank Notes being exchanged on such Exchange Date in accordance with the provisions of the related Transfer Certificate, (y) such Floating Rate Bank Notes shall have been exchanged for the related Global Note in the manner provided in Section 2.06 hereof, and (z) the conditions to the

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Initial Purchasers acquiring the Beneficial Interests in such Global Note therein in accordance with the provisions of the related Note Purchase Agreement shall have been satisfied or waived (as determined by the Initial Purchasers); and

(vii) the additional conditions precedent to the exchange specified in Part 2 of Schedule 1 hereto shall have been satisfied or waived.

In the event the above conditions precedent to the exchange of Notes are not satisfied (or waived) on or before the related Exchange Date, the then Outstanding Floating Rate Bank Notes that were to be exchanged on such Exchange Date shall not be exchanged on such Exchange Date for a Global Note or Global Notes as provided in Section 2.06 hereof, but rather shall remain outstanding and shall continue to be payable in accordance with the terms thereof and the applicable provisions of this Indenture (for which purpose LIBOR for the then current Interest Period shall be determined as of the scheduled Exchange Date) and without any adjustments of the original amortization schedules therefor. Upon the exchange of all Floating Rate Bank Notes as contemplated by this Section 2.05, and if no additional Floating Rate Bank Notes are capable of being issued and if no Fixed Rate Bank Notes are Outstanding, (x) the Issuer Indemnity Agreement shall cease to apply (except as otherwise expressly provided therein) to the extent any Claims (as such term is defined in the Issuer Indemnity Agreement) are asserted on the basis of events occurring or conditions existing after the issuance of the Global Notes, and (y) notwithstanding anything to the contrary herein or in any of the Operative Documents, the Guaranteed Lenders shall have no obligations or liabilities hereunder or under any other Operative Document other than any such obligations or liabilities arising prior to or relating to the period prior to the exchange of all Floating Rate Bank Notes and any obligations pertaining to the exercise of any retained rights or privileges.

Section 2.06. The Global Notes .

(a) Issuance . On each Exchange Date, and subject to the satisfaction or waiver of the conditions set forth in Section 2.05 hereof, the Issuer shall issue and deliver to the Indenture Trustee a single book-entry Global Note in registered form without interest coupons (or, if the Outstanding Amount of such Global Note would exceed $500,000,000, two Global Notes) substantially in the form of either Schedule 4 or 5 hereto, as applicable. Upon its receipt thereof, the Indenture Trustee shall authenticate such Global Note or Global Notes and deliver to Ex-Im Bank the Floating Rate Bank Notes to be exchanged for cancellation of the Guarantee Legends thereon together with a Request for Guarantee Legend accompanied by such Global Note or Global Notes. On and subject to the terms and conditions of Section 2.05 hereof and the Ex-Im Bank Guarantee, Ex-Im Bank shall endorse its Guarantee Legend on such Global Note or Global Notes in the form provided in the Ex-Im Bank Guarantee, and return the same to the Indenture Trustee, together with each Outstanding Floating Rate Bank Note being exchanged on such Exchange Date with its Guarantee Legend thereon cancelled. Upon its receipt thereof, the Indenture Trustee shall cancel each such Floating Rate Bank Note and promptly thereafter return the same to the Issuer. Each Global Note so endorsed shall (i) be registered in the Register by the Registrar in the name of Cede & Co., as nominee of the Depositary, (ii) be dated the relevant Exchange Date, (iii) be (together with any required second Global Note as provided above) in a principal amount not in excess of the aggregate Outstanding Amount of the Floating Rate Bank Notes being exchanged on such Exchange Date (but after giving effect to payments of principal,

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if any, made thereon on such Exchange Date), (iv) be payable as to principal in accordance with its terms and the applicable provisions of this Indenture, (v) bear interest at the Applicable Rate as provided therein and in Section 2.06(c) hereof, (vi) (I) be divided into Tranches, and each such Tranche shall correspond to the relevant Floating Rate Bank Note being exchanged on such Exchange Date and (II) each such Tranche shall be in a principal amount not in excess of the Outstanding Amount of the related Floating Rate Bank Note (but after giving effect to payments of principal, if any, made thereon on such Exchange Date), (vii) have attached as annexes thereto separate amortization schedules for each Tranche in respect of each related Aircraft, each such amortization schedule for each Tranche relating to an Aircraft as identified on such annex, (viii) be duly authenticated by the Indenture Trustee in the manner provided herein and (ix) be otherwise issued and completed in conformity with the terms of this Indenture.

The Indenture Trustee shall retain possession of each Global Note as custodian for the Depositary, and the Indenture Trustee shall cause the Registrar to record in the Register that Cede & Co., as nominee of the Depositary, is the registered Holder of each Global Note. The Depositary will credit, on its internal system, the respective principal amounts of individual Beneficial Interests to the accounts of persons who have accounts with the Depositary in accordance with the Applicable Procedures of the Depositary. Ownership of Beneficial Interests will be limited to Depositary Participants or persons who hold Beneficial Interests through Depositary Participants. Ownership of Beneficial Interests will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depositary (with respect to interests of Depositary Participants) and the records of Depositary Participants (with respect to interests of persons other than Depositary Participants) in accordance with the Applicable Procedures. No holder of any Beneficial Interest will receive a definitive note evidencing its interest in any Global Note. By their respective acceptance thereof, each Beneficial Owner, the Depositary and Cede & Co., as nominee of the Depositary and registered Holder of each Global Note, shall be deemed to have instructed and authorized the Indenture Trustee to make demands for payment of each Global Note against the Issuer, the Lessee and Ex-Im Bank in accordance with the provisions of this Indenture, the Ex-Im Bank Guarantee and the other Operative Documents and in furtherance thereof each Beneficial Owner and Cede & Co., as nominee of the Depositary and registered Holder of each Global Note, expressly authorizes the Indenture Trustee to execute and deliver for and on its behalf each assignment of each Global Note and take such other actions under and as required by the Ex-Im Bank Guarantee.

None of the Depositary Participants or any Beneficial Owner shall have any rights either under this Indenture or any other Operative Document or under any Global Note held on their behalf by the Indenture Trustee, as custodian for the Depositary. Cede & Co., as nominee of the Depositary, as Holder of each Global Note, may be treated by the Issuer, Ex-Im Bank, the Indenture Trustee and any agent of the Issuer, Ex-Im Bank or the Indenture Trustee as the absolute owner of each Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, Ex-Im Bank or the Indenture Trustee or any agent of the Issuer, Ex-Im Bank or the Indenture Trustee from giving effect to any written certification, proxy or other authorization furnished by Cede & Co., as nominee of the Depositary, as a Holder, or impair, as between Cede & Co., as nominee of the Depositary, as a Holder, and the Depositary and its Depositary Participants, the operation of customary practices of such Depositary governing the exercise of the rights of a Beneficial Owner of a Beneficial Interest in any Global Note. Cede & Co., as nominee of the Depositary, as the Holder, may grant proxies and

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otherwise authorize any person, including the Depositary and the Depositary Participants and persons that may hold interests through Depositary Participants, to take any action which a Holder is entitled to take under this Indenture or any Global Note. The Beneficial Interest in each Global Note will be in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except that one Beneficial Interest may be in a different denomination.

(b) Principal . The principal amount of each Global Note shall be payable in quarterly installments on each of the then remaining Payment Dates for such Global Note, each such installment to be in an amount equal to the principal amount set forth for such Payment Date in Annex A to such Global Note, except that the amount payable on the Final Maturity Date of such Global Note shall in all cases be an amount equal to the then outstanding principal balance thereof together with accrued and unpaid interest thereon and all other amounts then owing hereunder or under the other Operative Documents with respect thereto.

(i) The Issuer shall pay to the Indenture Trustee, for the account of the applicable Noteholders, interest on the unpaid principal amount of each Global Note for the period from and including the relevant Exchange Date to but excluding the date such Global Note shall be paid in full, at a rate per annum for each Interest Period relating thereto equal to the Applicable Rate for such Global Note for such Interest Period.

(ii) The Issuer shall pay to the Indenture Trustee, for the account of the applicable Noteholders, interest at the relevant Applicable Rate on any principal of any Global Note and on any interest thereon and any other amount payable by the Issuer to any Noteholder that shall not be paid in full when due (whether at stated maturity, by acceleration or otherwise), for the period from and including the due date thereof to but excluding the date the same is paid in full.

(iii) Accrued interest on the principal amount of each Global Note shall be payable in arrears on each Payment Date for such Global Note and upon the payment or prepayment thereof (but only on the principal amount so paid or prepaid), except that interest payable at the applicable Post-Default Rate shall be payable from time to time on demand.

(iv) Notwithstanding Section 2.06(c)(i) hereof, if Ex-Im Bank shall have made a claim payment under the Ex-Im Bank Guarantee with respect to a demand under a Floating Rate Global Note, then, beginning on the date of such claim payment, the unpaid principal amount of such Floating Rate Global Note shall bear interest at a rate per annum equal to Special LIBOR plus the Applicable Margin for all purposes, including, without limitation, Section 2.06(c)(v) hereof.

(v) Notwithstanding Section 2.06(c)(ii), if Ex-Im Bank shall have made a claim payment under the Ex-Im Bank Guarantee with respect to a demand under a Global Note, then, beginning on the date of such claim payment, if any amount of principal or accrued interest on such Global Note then owing to Ex-Im Bank is not paid in full when due, whether at stated maturity, by acceleration or otherwise, the Issuer shall

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pay to Ex-Im Bank on demand interest on such unpaid amount for the period from and including the date such amount was due to Ex-Im Bank but excluding the date such amount is paid in full at an interest rate equal to one percent (1%) per annum above the interest rate otherwise then applicable under Section 2.06(c)(i) hereof (as modified, if required by Section 2.06(c)(iv) hereof).

(vi) Except as otherwise provided in Section 2.06(c)(v) with respect to the amounts of principal and accrued interest, if, at any time, any other amount owing to Ex-Im Bank under this Indenture or any Global Note is not paid in full when due, the Issuer shall pay to Ex-Im Bank on demand interest on such unpaid amount for the period from the due date thereof (the “ Due Date ”) until such amount shall have been paid in full at an interest rate per annum equal to one percent (1%) per annum above the U.S. Treasury Rate for six-month (180-day) Treasury Bills which is in effect on the Due Date.

(vii) Notwithstanding anything in this Section 2.06(c) to the contrary, so long as Ex-Im Bank is not the Holder of a Global Note, the interest at the Applicable Rate for such Global Note on amounts not paid in full when due that shall accrue on such Global Note, when combined with the principal and interest of such Global Note covered by the Ex-Im Bank Guarantee, shall not exceed the Guaranteed Amount under the Ex-Im Bank Guarantee with respect to such Global Note.

(d) Redemptions .

(i) Voluntary .

(1) Subject to no Material Default or Event of Default having occurred and being continuing, the Issuer shall have the right to redeem any Fixed Rate Global Note or any Tranche thereof in full (but not in part) on any Business Day, together with accrued and unpaid interest thereon, the applicable Make-Whole Amount, if any, and all other amounts then owing by the Issuer hereunder and under the other Operative Documents, provided that the Issuer (acting solely at the direction of the Lessee) shall give the Indenture Trustee, the Security Trustee and Ex-Im Bank not less than thirty (30) Business Days’ but not more than sixty (60) Business Days’ prior written notice of such redemption as provided in Section 2.06(d)(iii) hereof. Any notice of redemption given by the Issuer pursuant to this Section 2.06(d)(i)(1) shall be revocable and may be subject to one or more conditions precedent specified by the Issuer (acting solely at the direction of the Lessee). As of the date of such redemption, the Issuer shall pay the principal amount of the Fixed Rate Global Note or Tranche thereof to be redeemed, all accrued and unpaid interest thereon, the applicable Make-Whole Amount, if any, and all other amounts then owing to Ex-Im Bank and the Noteholders under the Operative Documents with respect to such Fixed Rate Global Note or Tranche thereof, as applicable.

(2) Subject to no Material Default or Event of Default having occurred and being continuing, the Issuer shall have the right in respect of any Floating Rate Global Note or any Tranche thereof on or after the expiry of the No

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Redemption Period(s) (if any) for such Floating Rate Global Note to redeem such Floating Rate Global Note or any Tranche thereof in full (but not in part) on any Business Day, together with accrued and unpaid interest thereon, the applicable Prepayment Premium, if any, and all other amounts then owing by the Issuer hereunder and under the other Operative Documents, provided that the Issuer (acting solely at the direction of the Lessee) shall give the Indenture Trustee, the Security Trustee and Ex-Im Bank not less than thirty (30) Business Days’ but not more than sixty (60) Business Days’ prior written notice of such redemption as provided in Section 2.06(d)(iii) hereof. Any notice of redemption given by the Issuer pursuant to this Section 2.06(d)(i)(2) shall be revocable and may be subject to one or more conditions precedent specified by the Issuer (acting solely at the direction of the Lessee). As of the date of such redemption, the Issuer shall pay the principal amount of the Floating Rate Global Note or Tranche thereof to be redeemed, all accrued and unpaid interest thereon, the applicable Prepayment Premium, if any, and all other amounts then owing to Ex-Im Bank and the Noteholders under the Operative Documents with respect to such Floating Rate Global Note or Tranche thereof, as applicable.

(ii) Mandatory .

(1) The Issuer shall redeem the outstanding principal amount of the Tranche of the Global Note related to the affected Aircraft in full (together with accrued and unpaid interest thereon, and in the case of clause (x) below, the Make-Whole Amount calculated on the principal amount payable to the Holders for a Fixed Rate Global Note (if any) or the Prepayment Premium for a Floating Rate Global Note (if any), as applicable, and all other amounts then owing by the Issuer hereunder and under the other Operative Documents with respect to such Aircraft): (x) prior to or contemporaneously with the early termination of the Lease with respect to such Aircraft, or (y) on the Settlement Date relating to an Event of Loss with respect to such Aircraft unless a Replacement Aircraft is substituted for such Aircraft in accordance with the terms of the Lease, and the Indenture Trustee hereby acknowledges that the Security Trustee may require that any funds held by the Security Trustee be applied to any redemption of such Tranche or such Global Note. The Issuer (acting solely at the direction of the Lessee) shall give the Indenture Trustee and Ex-Im Bank not less than ten (10) Business Days notice of any such redemption; provided however, that failure to give such notice shall not affect the obligation of the Issuer to make such redemption payment.

(2) In the event the Lessee becomes obliged pursuant to Section 3(i) of the Lease to pay the Issuer the Termination Value for an Aircraft, the Issuer shall redeem the Global Note, or Tranche thereof, relating to such Aircraft in full (together with accrued and unpaid interest thereon, Make-Whole Amount or Prepayment Premium (if applicable) and all other amounts then owing by Issuer hereunder and under the other Operative Documents) on the ACMI Termination Date for such Aircraft. The Issuer (acting solely at the direction of the Lessee) shall give the Indenture Trustee and Ex-Im Bank not less than ten

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(10) Business Days’ notice of any such redemption; provided however, that failure to give such notice shall not affect the obligation of the Issuer to make such redemption payment.

(iii) Notice of Redemption . Any notice of redemption given by the Issuer pursuant to this Section 2.06(d) shall specify the date upon which such redemption is to be made and the amount of such redemption. If a redemption under Section 2.06(d) is not made in full for any reason, notwithstanding the giving of notice pursuant to Section 2.06(d), this Indenture and the obligations of the Issuer hereunder and under the Notes shall continue in full force and effect and, solely in the case of a redemption under Section 2.06(d)(i), no Default or Event of Default shall arise or be deemed to arise by reason thereof.

(iv) Any redemption pursuant to this Section 2.06(d) shall satisfy pro tanto the Issuer’s obligations in relation to the applicable Global Note (or Tranche thereof, in the case of any redemption of a Tranche pursuant to Section 2.06(d)(i) or 2.06(d)(ii)).

(v) Any redemption of one or more Tranches of any Global Note pursuant to this Section 2.06(d)(i) or 2.06(d)(ii) shall be applied to the applicable Tranches and be applied to the remaining principal installments of such Global Note pro rata. In connection with any mandatory redemption of a Global Note pursuant to Section 2.06(d)(ii), if the Issuer fails to redeem the Global Note or Tranche thereof, as applicable, in full, such partial redemption shall be applied to the remaining principal installments of the relevant Tranche or Tranches of such Global Note in inverse chronological order of their maturities.

(vi) Any amount redeemed under this Indenture may not be reissued.

(vii) Notice of redemption shall be given by the Indenture Trustee to each Holder of any Global Note to be redeemed, as soon as reasonably practicable, at the address appearing in the Register.

(viii) Following any redemption of any Tranche of a Global Note in full, Annex A to such Note shall be amended such that each installment payable on a Payment Date is equal to the sum of the Tranches for such Note that have not been redeemed. Thereafter, all payments of principal and interest under such Note shall be made in accordance with Annex A to such Note, as so amended.

(e) Transfer of Beneficial Interests in and Exchanges of the Global Notes . The transfer of Beneficial Interests in a Global Note shall be effected through the Depositary, in accordance with the provisions of this Indenture and the Applicable Procedures of the Depositary therefor. A Global Note may not be exchanged for another Note other than as provided in Section 2.07(b) and Section 2.10 hereof.

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Section 2.07. Definitive Notes .

(a) Issuance . Each Global Note shall only be transferred in the circumstances described in this Indenture. Each Global Note may be exchanged by the Issuer for a Definitive Note in definitive fully registered form without interest coupons bearing the same interest rate as the Global Note being exchanged and issued to the Indenture Trustee as custodian and agent for the Beneficial Owners, rather than Cede & Co., if (i) the Depositary advises the Indenture Trustee in writing that the Depositary is no longer willing or able to properly discharge its responsibilities as depositary and the Issuer (directed solely by Lessee) is unable to appoint a successor depositary acceptable to the Indenture Trustee (acting reasonably) within ninety (90) days of such notice or (ii) after the occurrence of an Event of Default with respect to a Global Note, the Indenture Trustee has assigned such Global Note to Ex-Im Bank in connection with and as a condition to its demand for payment under the Ex-Im Bank Guarantee and Ex-Im Bank has requested the issuance of a Definitive Note. The Indenture Trustee will promptly notify the Lessee, the Issuer and Ex-Im Bank of the receipt of any notice by the Depositary described in part (i) of this Section 2.07(a). Neither the Issuer nor the Indenture Trustee shall be liable if the Indenture Trustee or the Issuer is unable to appoint a successor Depositary. For the avoidance of doubt, the payment and redemption terms of this Indenture applicable to each Global Note shall equally apply to any Definitive Note issued in exchange therefor as provided herein. The Beneficial Interests in any Definitive Note will be in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except that one Beneficial Interest may be in a different denomination.

(b) Exchange .

(i) Upon the occurrence of any of the events specified in Section 2.07(a) hereof, the Indenture Trustee shall request and, upon receipt of written notice and a list from the Depositary of the Depositary Participants who are, or who act on behalf of, the Beneficial Owners of each applicable Global Note, shall be required to notify, at the expense of the Issuer, each Depositary Participant on such list of the issuance of a Definitive Note representing such Global Note, and/or of its assignment of such Global Note to Ex-Im Bank in connection with and as a condition to its demand for payment under the Ex-Im Bank Guarantee.

(ii) If a Global Note is to be exchanged for a Definitive Note under the circumstances described in Section 2.07(a)(i) hereof (A) the Issuer shall promptly after receiving written notice thereof and request therefor from the Indenture Trustee, execute and deliver (x) if a Fixed Rate Global Note is being exchanged, a Fixed Rate Definitive Note or (y) if a Floating Rate Global Note is being exchanged, a Floating Rate Definitive Note, and in each case, the Indenture Trustee shall authenticate such Definitive Note, (B) the Indenture Trustee shall deliver such Global Note to Ex-Im Bank for cancellation of the Guarantee Legend thereon, together with a Request for Guarantee Legend accompanied by the Definitive Note of the Issuer, and (C) on and subject to the terms and conditions of Section 2.07 hereof and the Ex-Im Bank Guarantee, Ex-Im Bank shall endorse its Guarantee Legend on such Definitive Note in the form provided in the Ex-Im Bank Guarantee, and return the same to the Indenture Trustee together with such Global Note with its Guarantee Legend thereon cancelled. Upon its receipt thereof, the

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Indenture Trustee shall cancel such Global Note and promptly thereafter return the same to the Issuer. Each Definitive Note so endorsed shall (I) be registered in the name of the Indenture Trustee until a replacement Depositary is appointed or such Note has been assigned to Ex-Im Bank, (II) be dated the applicable date of issuance, (III) be in a principal amount equal to the Outstanding Amount of the correspondingly surrendered Global Note as of the date of issuance of such Definitive Note and be payable as to principal and interest in accordance with its terms and the provisions of this Indenture, including, without limitation, Sections 2.06(b) and (c) as if such Note were a Global Note, (IV) have a final maturity date equal to the correspondingly surrendered Global Note, (V) bear interest at the Applicable Rate for the corresponding Global Note as provided therein and in Section 2.06(c) hereof, (VI) be subject to redemption in accordance with Section 2.06(d) as if such Note were a Global Note and (VII) be otherwise issued and completed in conformity with the terms of this Indenture. Upon the issuance of a Definitive Note, the applicable Beneficial Owners shall be deemed to have appointed and instructed the Indenture Trustee in whose name the Definitive Note representing the related Global Note shall have been issued to act as custodian and agent for the Depositary Participants who are, or who act on behalf of, the Beneficial Owners and to accept delivery of such Definitive Note on behalf of such Depositary Participants, to act as custodian and agent of such Definitive Note for such Depositary Participants who are, or who act on behalf of, the Beneficial Owners and to make demands for payment thereof against the Issuer, the Lessee and Ex-Im Bank as set forth in this Indenture, the Ex-Im Bank Guarantee and the other Operative Documents. Neither Depositary Participants nor Beneficial Owners will be entitled to physical delivery of any Definitive Note and each Definitive Note will at all times, unless delivered to Ex-Im Bank in connection with a demand for payment under the Ex-Im Bank Guarantee, be in the possession of the Indenture Trustee as custodian and agent for Depositary Participants who are, or who act on behalf of, Beneficial Owners. The Indenture Trustee may from time to time establish in its discretion such rules and procedures relating to the rights of Depositary Participants or Beneficial Owners of the Definitive Notes as it may see fit in its sole discretion (and such rules and procedures shall be the Indenture Trustee’s procedures in its capacity as agent and custodian, the “ Indenture Trustee’s Procedures ”), including a decision to allow only Depositary Participants to be treated as if they were the Holders of the Definitive Notes or interests in the Definitive Notes or to treat Beneficial Owners as if they were the Holders of the Definitive Notes and, in any such case, accord such Depositary Participants or Beneficial Owners the same rights and obligations that Holders of the Definitive Notes have under the Indenture.

(iii) Following the assignment of a Global Note to Ex-Im Bank under the Ex-Im Bank Guarantee, Ex-Im Bank as the new Holder shall have the right to exchange such Global Note for one or more Definitive Notes registered in its name. If it shall elect to exercise such right, Ex-Im Bank shall so notify the Lessee, the Issuer and the Indenture Trustee and thereupon (A) the Issuer shall promptly after receiving written notice of such election, execute and deliver to the Indenture Trustee (x) if a Fixed Rate Global Note is being exchanged, a Fixed Rate Definitive Note or (y) if a Floating Rate Global Note is being exchanged, a Floating Rate Definitive Note and upon its receipt, the Indenture Trustee shall authenticate such Definitive Note or Notes and deliver such Definitive Note or Notes to Ex-Im Bank, (B) the Registrar shall register such Definitive

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Note in the Register in the name of Ex-Im Bank, and (C) Ex-Im Bank shall surrender the related Global Note (with its Guarantee Legend thereon cancelled) to the Indenture Trustee, and upon its receipt thereof, the Indenture Trustee shall cancel such Global Note and return the same to the Issuer.

(iv) Following the issuance of any Definitive Note as provided in this Section 2.07, the Indenture Trustee shall recognize the Person in whose name the Definitive Note is registered in the Register as the Holder thereof.

Section 2.08. Use of Proceeds . The Issuer will apply the proceeds of the Bank Note to be issued on each Issuance Date pursuant to Section 2.02(a) hereof solely and exclusively towards (x) financing the purchase of the Aircraft to be financed on such Issuance Date and (y) reimbursement of the payment of the related ASU Premium; provided, however, that the failure of the Issuer to comply with this Section 2.08 shall not prejudice the rights of the Security Trustee, Ex-Im Bank, the Indenture Trustee, the Guaranteed Lenders and the Noteholders or any of them under this Indenture or any other Operative Document.

Section 2.09. Cancellation of the Notes . No Note may be cancelled under this Indenture unless and until the Guarantee Legend thereon has been cancelled. The Indenture Trustee shall cancel any such Note in accordance with its customary practices in effect from time to time. The Issuer may not issue a new Note to replace a Note that it has redeemed, paid or delivered to the Indenture Trustee for cancellation except as otherwise expressly provided in this Indenture.

Section 2.10. Mutilated, Destroyed, Lost or Stolen Notes .

(a) If any Note shall become mutilated, destroyed, lost or stolen, the Issuer shall, upon the written request of the Indenture Trustee, acting on behalf of the Holders thereof, or the Guaranteed Lenders, as applicable, and presentation of such Note or satisfactory evidence of destruction, loss or theft thereof to Ex-Im Bank, issue a substitute Note, and upon the delivery thereof to Indenture Trustee, the Indenture Trustee shall authenticate and deliver as applicable in exchange therefor or in replacement thereof, such Note, payable to the Indenture Trustee (or Ex-Im Bank in the case of a Definitive Note issued to Ex-Im Bank) in the same principal amount, of the same maturity, with the same payment schedule(s), bearing the same interest rate and dated the date of its authentication. The Indenture Trustee shall thereupon request Ex-Im Bank to endorse its Guarantee Legend thereon in accordance with the provisions of the Ex-Im Bank Guarantee. If the Note being replaced has become mutilated, such Note shall be surrendered to Ex-Im Bank for cancellation of its Guarantee Legend thereon, and thereupon delivered by Ex-Im Bank to the Indenture Trustee for cancellation hereunder. Upon its receipt thereof, the Indenture Trustee shall cancel any such Note and promptly thereafter return the same to the Issuer. If the Note being replaced has been destroyed, lost or stolen, the Indenture Trustee, as Holder thereof, shall furnish to the Lessee, the Issuer and Ex-Im Bank (a) such security or indemnity as may be required by them to save the Lessee, the Issuer and Ex-Im Bank harmless from any actual loss on the purportedly destroyed, lost or stolen Note and (b) evidence satisfactory to the Lessee, the Issuer and Ex-Im Bank of the destruction, loss or theft of such Note and of the ownership thereof, together with an officer’s certificate of the Issuer certifying and warranting as to the due authorization, execution and delivery of such new Note, and (if requested by Ex-Im Bank in its

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reasonable discretion) an opinion of the Issuer’s counsel (at the expense of the Lessee or, if such Note is mutilated, lost, stolen or destroyed by reason of gross negligence or willful misconduct of the Indenture Trustee at the expense of the Indenture Trustee, in its individual capacity) as to the due authorization, execution and delivery of such new Note, and the legality, validity, binding nature and enforceability thereof. The Guaranteed Lenders or the Holder(s), as applicable, will be required to pay any tax or other governmental charge imposed in connection with such exchange or replacement and any other expenses (including the fees and expenses of the Indenture Trustee and Ex-Im Bank) connected therewith.

(b) In case any mutilated, defaced, destroyed, stolen or lost Note has matured and no default has been made in the payment of principal or interest, the Issuer shall, or if such Note is about to mature, the Issuer may, pay or authorize the payment of the same (without surrender thereof but otherwise in accordance with Section 3.01) instead of issuing a substitute Note, provided security or indemnity is furnished as required in Section 2.10(a).

(c) Every substitute Note issued pursuant to the provisions of this Section 2.10 by virtue of the fact that any Note is mutilated, defaced, destroyed, stolen or lost shall constitute an additional contractual obligation of the Issuer, whether or not the mutilated, defaced, destroyed, stolen or lost Note shall at any time be enforceable by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

Section 2.11. Payments of Transfer Taxes . Upon the transfer of any Definitive Note pursuant to Section 2.12(b) hereof, the Issuer or the Indenture Trustee may require from the party requesting such new Definitive Note payment of a sum to reimburse the Issuer or the Indenture Trustee for, or to provide funds for the payment of, any transfer tax or similar governmental charge payable in connection therewith.

Section 2.12. Registrar and Paying Agent .

(a) Register . The Issuer hereby appoints the Indenture Trustee (who hereby accepts such appointment) for the purpose of maintaining (i) its office or agency in the location referenced in Section 11.02(a) hereof where Notes may be presented or surrendered for registration of transfer or for exchange (the “ Registrar ”), (ii) its office or agency in the location referenced in Section 11.02(a) hereof, where Notes of any type may, to the extent required hereunder, be presented for payment (the “ Paying Agent ”) and (iii) an office or agency where notices and demands in respect of the payment of the Notes may be served. The Indenture Trustee shall keep a register of each Note, which register shall include (w) the name and address of each current and previous Holder of such Note, (x) each Guaranteed Lender’s interest in a Bank Note and each Holder’s interest in a Definitive Note, (y) the date of any transfer or assignment of any of the Holders’ or Guaranteed Lenders’ interest in a Note or Holder’s interest in a Definitive Note and the amount of such transfer or assignment, and (z) the date and amount of each payment made by or on behalf of the Issuer in respect of the Notes (the “ Register ”). The Indenture Trustee will keep the Register at its offices and otherwise in compliance with the terms of Section 5.01 of the Ex-Im Bank Guarantee and shall deliver a copy thereof to Ex-Im Bank as and to the extent required by said Section 5.01. Written notice of any change of location of such office or agency shall be given by the Indenture Trustee to the Issuer, Ex-Im Bank, the Lessee,

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the Holders and the Guaranteed Lenders. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Indenture Trustee, who shall act as the Registrar.

(b) Transfer of Notes and Beneficial Interests in Notes . A Guaranteed Lender or a Holder, as the case may be, may only transfer a Note in accordance with Section 2.04, 2.05 or 2.07(b) hereof. A Guaranteed Lender or Depositary Participant holding a beneficial interest in a Definitive Note may transfer its beneficial interest in a Note only by written request to the Registrar stating the name of the proposed transferee and otherwise complying with the terms of this Indenture. Any request to transfer a Bank Note shall be accompanied by a transfer certificate substantially in the form of Schedule 9 or Schedule 10 hereto as applicable. No transfer by a Guaranteed Lender or a Depositary Participant holding a beneficial interest in a Definitive Note (whether or not with the consent of the Issuer) of any interest in this Indenture or the Notes or in the rights to receive any payments hereunder or thereunder (other than any transfer to Ex-Im Bank) shall be effective unless a book entry of such transfer is made upon the Register and such transfer is effected in compliance with the terms of this Indenture. No such transfer (other than to Ex-Im Bank) shall be effective until, and such transferee shall succeed to the rights of the transferor Guaranteed Lender or Depositary Participant, as the case may be, only upon final acceptance and entry by the Registrar into the Register of the transfer pursuant hereto. In the case of a transfer to Ex-Im Bank, such transfer shall be effective upon the execution by the Indenture Trustee of an assignment in the form of Annex C to the Ex-Im Bank Guarantee. The Indenture Trustee’s execution of an assignment in the form of Annex C to the Ex-Im Bank Guarantee shall serve as notice to the Registrar of such transfer (which transfer the Registrar shall be required to note in the Register). Prior to the entry into the Register of any transfer by the transferring Guaranteed Lender or Depositary Participant holding a beneficial interest in a Definitive Note as provided above, the Issuer, the Indenture Trustee and each other Person shall be entitled to deem and treat each Person reflected in the Register as owner of a portion of this Indenture or the Notes, or the rights to receive any payments hereunder or thereunder as the owner thereof for all purposes. The Issuer agrees that the Register shall be conclusive and binding on the Issuer absent manifest error. The Issuer irrevocably instructs the Registrar to enter into the Register any such transfer if all of the requirements set forth in this Indenture for an effective transfer by a Guaranteed Lender or a Depositary Participant holding a beneficial interest in a Definitive Note of any interest in the Notes shall then have been satisfied. The Indenture Trustee shall promptly notify the Issuer and the Lessee of each request for a registration of transfer of a beneficial interest in a Note. Neither the Issuer nor the Registrar shall be required to register the transfer of any beneficial interest in a Note as above provided during the fifteen (15) day period preceding the Final Maturity Date of any such Note or during the period after the first mailing of any notice of redemption of Notes to be redeemed. Further, neither the Issuer nor the Registrar shall be required to register the transfer of any beneficial interest in any Notes that have been selected, called or are being called for redemption except, in the case of any Notes where notice has been given that such Notes are to be redeemed in part, the portion thereof not so to be redeemed. Anything in this Section 2.12(b) to the contrary notwithstanding, the Registrar shall be obligated to and shall register any exchange of (i) any Floating Rate Bank Notes for Fixed Rate Bank Notes upon satisfaction of the conditions specified in Section 2.04, (ii) any Floating Rate Bank Note for a Global Note upon satisfaction of

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the conditions specified in Section 2.06 hereof and (iii) a Global Note for a Definitive Note upon satisfaction of the conditions specified in Section 2.07(b) hereof.

(c) Payment Certificate . In the event any Payment Certificate is issued under the Ex-Im Bank Guarantee in respect of any Fixed Rate Global Note and/or any Fixed Rate Definitive Note, the provisions of this Section 2.12 shall apply equally to the Payment Certificate in respect thereof.

Section 2.13. Statements to Holders .

(a) Method of Notice . Following each Payment Date and any other date specified in this Indenture for distribution of any payments with respect to the Notes (including on any Payment Certificate issued under the Ex-Im Bank Guarantee in respect thereof), the Indenture Trustee shall cause notice thereof to be given (i) with respect to any Bank Note, by written notice to the Guaranteed Lenders at the addresses provided pursuant to Section 11.02(a) hereof for the Guaranteed Lenders or such other address as shall be provided to the Indenture Trustee in accordance with the provisions thereof, (ii) so long as any Global Note is registered in the name of the Depositary, by delivery of the relevant notice to the Depositary for communication by it to the Beneficial Owners in accordance with its Applicable Procedures, and (iii) with respect to any Definitive Note, by written notice to the Holder (and, if not Ex-Im Bank, for communication by it to the Beneficial Owners of the Definitive Notes in accordance with the Indenture Trustee’s Procedures) at such address as the Holder thereof may so specify in writing to the Indenture Trustee in accordance with the provisions of Section 11.02(a) or Section 11.02(b) hereof.

(b) Alternative Method of Notice . The Indenture Trustee shall be at liberty to sanction some other method of giving notice to the Guaranteed Lenders or the Holders of any Notes if, in its opinion, such other method is reasonable, having regard to the number and identity of the Guaranteed Lenders or the Holders of such Notes and/or to market practice then prevailing, is in the best interests of the Guaranteed Lenders or the Holders of such Notes, and any such notice shall be deemed to have been given on such date as the Indenture Trustee may approve; provided that notice of such method is given to the Guaranteed Lenders or the Holders of such Notes, as applicable, in such manner as the Indenture Trustee shall require.

Section 2.14. CUSIP Numbers . The Issuer in issuing any Global Note (or any Definitive Note issued in exchange therefor as provided in Section 2.07) may use “CUSIP” or other identification numbers (if then generally in use) to identify such Notes and the Ex-Im Bank Guarantee and Payment Certificate (if any), and if so, the Indenture Trustee shall use CUSIP numbers or other identification numbers, as the case may be, in notices of redemption or exchange as a convenience to Holders thereof; provided that any such notice shall state that no representation is made as to the correctness of such numbers either as printed on any such Notes or as contained in any notice of redemption or exchange and that reliance may be placed only on the other identification numbers printed on such Notes; provided further, that failure to use “CUSIP” or other identification numbers in any notice of redemption or exchange shall not affect the validity or sufficiency of such notice.

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Section 2.15. Authentication . All Notes (whether a Global Note, a Bank Note, a Definitive Note or any Note issued in exchange therefor) shall, upon written request of the Issuer, be authenticated on behalf of the Indenture Trustee by any Responsible Officer of the Indenture Trustee by manual signature of a certificate of authentication substantially in the form provided in the schedules hereto, and no Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless it shall have been so authenticated by or on behalf of the Indenture Trustee and any such signature shall be conclusive evidence that such Note has been duly authenticated and delivered under this Indenture.

Section 2.16. Persons Deemed Owners . Prior to due presentation of a Note for registration of transfer or exchange, the Lessee, the Issuer, Ex-Im Bank, the Indenture Trustee, the Registrar and the Paying Agent shall treat the Person in whose name any Note is registered (as of the day of determination) as the owner of such Note for the purpose of receiving payments as provided in this Indenture and for all other purposes whatsoever, and neither the Issuer, the Lessee, Ex-Im Bank, the Indenture Trustee, the Registrar nor the Paying Agent shall be affected by nor rely upon any notice to the contrary. The Issuer, Ex-Im Bank or the Indenture Trustee may request, accept and rely on a certificate signed by or on behalf of the Depositary to the effect that at any particular time or throughout any particular period any particular person is, was or will be shown in its records as entitled to receive a particular payment in respect of any Global Note.

Section 2.17. Appointment of Custodian . The Issuer and the Holder of each Global Note hereby appoints the Indenture Trustee as, and the Indenture Trustee hereby accepts its appointment as, custodian for each Global Note and each Definitive Note.

ARTICLE III

PAYMENTS; APPLICATION; BUSINESS DAYS

Section 3.01. Payment by Issuer .

(a) Time . All payments of principal, interest and other amounts to be made by the Issuer under any Note (other than to Ex-Im Bank) shall be made in Dollars, in immediately available funds, without deduction, set off or counterclaim, to the account of the Indenture Trustee at Wilmington Trust Company, Attn: Corporate Trust Administration, ABA No. 0311 00092, Account No. 100872-000 (Reference: Atlas Air, Inc.) (or such other account in the continental United States as the Indenture Trustee may designate, in writing, by not less than ten (10) Business Days’ notice to the Lessee and Ex-Im Bank), not later than 11:00 a.m. New York time on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). With respect to any amounts due to Ex-Im Bank, all payments shall be made at the Federal Reserve Bank of New York for credit to Ex-Im Bank’s account: Bank: TREAS NYC/CTR/U.S. Treasury Department, Bank Routing #: 021030004, Beneficiary Account: 4984 Beneficiary Name: EXPORT-IMPORT BANK REF: Ex-Im Bank Guarantee No. AP086438XX (Atlas Air, Inc.).

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(b) Calculation of Interest . Interest on the Notes (other than scheduled interest on a Fixed Rate Note), including Post-Default Rate interest shall be computed on the basis of a year of 360 days and the actual number of days elapsed, including the first day but excluding the last day, and scheduled interest on the Fixed Rate Notes shall be computed on the basis of a year of 360 days and twelve (12) thirty-day months. All percentages resulting from any calculation of the Applicable Rate will be rounded to four decimal points (e.g., 6.87645% (or .0687645) would be rounded to 6.8765% (or .068765)), and all dollar amounts used in or resulting from the calculation of interest on any Note will be rounded to the nearest cent (with one-half cent being rounded upward).

(c) Method . Each payment received by the Indenture Trustee hereunder for account of the Guaranteed Lenders (other than Ex-Im Bank) or a Noteholder (other than Ex-Im Bank) shall be paid promptly, in immediately available funds, (i) in the case of any Bank Note, to the Guaranteed Lenders by wire transfer, or as otherwise instructed by the Guaranteed Lenders, to the account of the Guaranteed Lender at Apple Bank for Savings, New York, ABA No. 226-070-584, Account Name: Undistributed Receivable, Account No. 2380982010, Ref: Loan 99041 – Atlas MSN# , or such other account as such Guaranteed Lenders shall specify in writing to the Indenture Trustee, (ii) in the case of any Global Note, to the Depositary by wire transfer, or as otherwise instructed by the Depositary, to such account as the Depositary shall specify in writing to the Indenture Trustee and (iii) in the case of any Definitive Note, to each Beneficial Owner of record of such Definitive Note as of the applicable Record Date (in the case of any Definitive Note registered in the name of the Indenture Trustee) or to the Holder of record of such Definitive Note as of the applicable Record Date (in the case of a Definitive Note otherwise registered) by check mailed to such Beneficial Owners or Holders, as the case may be, at their addresses appearing in the Register. Alternatively, the Holders of a Definitive Note having an aggregate principal amount of not less than $1,000,000, upon application in writing to the Indenture Trustee, not later than the applicable Record Date, may have such payment made by wire transfer to an account designated by such Holder at a financial institution in the continental United States. In the event and to the extent receipt of any payment is not confirmed by the Indenture Trustee by 1:00 p.m. (New York City time), distribution thereof shall be made on the Business Day following the Business Day such payment is received. Payments received (if any) by the Indenture Trustee for the account of Ex-Im Bank before 11:00 a.m. (New York time) at any place of payment for Ex-Im Bank shall be remitted to Ex-Im Bank on that same day and any payments received after 11:00 a.m. (New York time) shall be remitted on the following Business Day.

(d) Any amount required to be paid by the Issuer under a Note shall be deemed to have been paid when such amount is received by the Indenture Trustee at the account set forth in this Section 3.01.

Section 3.02. Application of Receipts .

(a) All payments by the Issuer hereunder or under any Note shall, except as otherwise expressly provided herein or in Section 9 of the Intercreditor Agreement or as otherwise required under Section 5.04 of the Ex-Im Bank Guarantee, be made to the Indenture Trustee and shall be allocated towards principal, interest and/or other sums owing hereunder in the following order:

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(1) First , in or towards payment of all interest due on such Note pursuant to Section 2.02(c)(ii) or Section 2.06(c)(ii) hereof, as applicable, which is accrued, due and unpaid, but only to the extent such amounts are included in the Guaranteed Amount;

(2) Second , in or towards payment of all ASU Commitment Fees or Premium Holding Fees, as the case may be, the related ASU Premium and all other amounts due to Ex-Im Bank hereunder or under such Note (including, without limitation, all interest amounts due pursuant to Section 2.02(c) or Section 2.06(c) hereof, as applicable) and the other Operative Documents which are accrued, due and unpaid and which are not otherwise provided for under clause “First” or “Third” of this Section 3.02(a);

(3) Third , in or towards payment of all interest due on such Note pursuant to Section 2.02(c)(i) or Section 2.06(c)(i) hereof, as applicable, which is accrued, due and unpaid;

(4) Fourth , in or towards payment of all amounts of principal payable on such Note hereunder which is due and unpaid; and

(5) Fifth , on a pro rata basis, in or towards payment of all other amounts, including any fees and expenses payable hereunder which are due and unpaid and not otherwise provided for under this Section 3.02(a).

(b) Any sum received from Ex-Im Bank under the Ex-Im Bank Guarantee (including any Payment Certificate issued thereunder) in respect of the principal of or interest on any Note shall be applied by the Indenture Trustee to the installment of principal and/or interest (including under such Payment Certificate) in respect of which such sum shall have been so received in the manner provided in Section 3.01(c)(i), (ii) or (iii), as applicable.

Section 3.03. Business Days . Whenever any payment (other than of principal of a Note or interest thereon) shall become due on a day which is not a Business Day, or if any such payment is payable on demand and demand is made on a Business Day outside of normal banking hours of the recipient of such demand, the due date for such payment shall be the next succeeding Business Day and if such payment includes any payment of interest the amount of interest payable shall be adjusted accordingly.

Section 3.04. Certificate Conclusive and Binding . Where any provision of this Indenture provides that a Guaranteed Lender, a Holder, the Indenture Trustee, the Calculation Agent, Ex-Im Bank or the Security Trustee may certify or determine an amount or rate payable by the Issuer, a certificate by such Guaranteed Lender, such Holder, the Indenture Trustee, the Calculation Agent, Ex-Im Bank or the Security Trustee as to such amount or rate and specifying in reasonable detail the basis of computation of the relevant amount, shall be conclusive and binding on the Issuer in the absence of manifest error.

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ARTICLE IV

TAXES; INDEMNITY; ADDITIONAL AMOUNTS

Section 4.01. Taxes; Indemnities . Without duplication of any indemnity due under Section 10 of the Participation Agreement or under the Issuer Indemnity Agreement, the Issuer covenants and agrees that, whether or not any Note is issued hereunder: (a) all payments by the Issuer to Ex-Im Bank, the Indenture Trustee, any Guaranteed Lender or any Noteholder (each, an “ Indemnitee ”) under or in respect of this Indenture or any Note, including amounts payable under clause (b) of this sentence, shall be made free and clear of and without reduction by reason of any Taxes, all of which will be paid by the Issuer to the appropriate taxing authority at the time and in the manner prescribed by Applicable Law; (b) in the event that the Issuer or the Indenture Trustee is required by Applicable Law to deduct or withhold any Taxes from any amounts payable to an Indemnitee on, under or in respect of this Indenture or any Note, the Issuer shall pay, on demand of an Indemnitee, to such Indemnitee, such additional amount or amounts as may be required in order that the amount received after deduction or withholding shall equal the full amount stated to be payable under this Indenture or such Note, as applicable, as if such deduction or withholding had not been required; (c) the Issuer shall promptly furnish to the relevant Indemnitee satisfactory official tax receipts in respect of any payment of Taxes; and (d) the covenants and agreements of the Issuer under this Section 4.01 shall survive the repayment of the Notes. Without prejudice to the obligations of the Issuer under the foregoing sentence, in the event and to the extent that the Issuer is required by Applicable Law to deduct or withhold any Tax from any payment due hereunder to an Indemnitee in respect of this Indenture or any Note, then the Issuer agrees to withhold from each such payment due hereunder such withholding Taxes at the appropriate rate, and will, on a timely basis and in the manner required by Applicable Law, deposit such amounts with an authorized depositary or other relevant Government Body and make such reports, filings and other reports in connection therewith. The Issuer shall promptly furnish to the relevant Indemnitee (but in no event later than the date thirty (30) days after the due date thereof) the completed relevant form or forms and/or official tax receipts indicating the payment in full of any Tax withheld from any payments by the Issuer for account of the relevant Indemnitee, together with all such other information and documents reasonably requested by the relevant Indemnitee’s counsel. If the Issuer fails to pay any such Taxes when due or fails to remit to an Indemnitee the required receipts or other required documentary evidence, the Issuer shall indemnify and reimburse on demand such Indemnitee on an After Tax Basis for any Taxes, interest, additions, fines or penalties that may become payable as a result of any such failure.

Section 4.02. Grossing Up of Indemnity Provisions . Where in this Indenture the Issuer has an obligation to indemnify or reimburse an Indemnitee in respect of any loss or payment (including, without limitation, obligations of the Issuer to make a payment to or reimburse an Indemnitee in respect of Taxes, expenses or indemnities) the amount payable shall include the amount necessary to hold such Indemnitee harmless on an After-Tax Basis (computed by taking into account the credit or deduction with respect to such loss or payment available to such Indemnitee in its reasonable determination without such Indemnitee being under any obligation to utilize any credit or deduction for any particular purpose), so as to leave such Indemnitee in the same after-tax position as it would have been in had the indemnity or reimbursement payment made to such Indemnitee not given rise to any liability for any Tax.

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Section 4.03. Definitions . The terms “Tax” and “Taxes” as used in this Article IV shall have the meaning given to such terms in Appendix A hereto; provided, however, that other than with respect to an obligation to gross-up indemnities and any other payments on an After-Tax Basis, the terms “Tax” and “Taxes” shall not include any Tax imposed by the jurisdiction in which an Indemnitee is incorporated or, in the case of a Guaranteed Lender, in which the Guaranteed Lender’s Lending Office is located, in each case that is measured by or based on the overall net income, profits or gains howsoever computed of an Indemnitee.

Section 4.04. Survival . Notwithstanding anything to the contrary contained herein, the agreements in this Article IV shall survive the termination or cancellation of this Indenture and the payment of the Notes and all other amounts due hereunder.

ARTICLE V

COVENANTS

The covenants and agreements of the Issuer set forth in Section 9 of the Participation Agreement are hereby incorporated herein by reference thereto as fully and to the same extent as if set forth in full herein.

ARTICLE VI

EVENTS OF DEFAULT

Section 6.01. Events of Default . The following events shall constitute “Events of Default” hereunder (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or Government Body in the United States or any other jurisdiction, or the administration or interpretation thereof) and each such Event of Default shall be deemed to exist and continue so long as, but only so long as, it shall not have been remedied by or on behalf of the Issuer or waived by the Instructing Group:

(a) the Issuer shall fail to pay when due any principal of or interest on any Note (including for this purpose any additional amounts required to be paid under Article IV hereof) in the manner provided herein and such failure shall continue unremedied for three (3) Business Days; provided that this grace period shall not be applicable to more than one scheduled payment during any twelve (12) month period;

(b) the Issuer shall fail to pay when due any other amount payable (whether at stated maturity, by acceleration or otherwise) by it to the Indenture Trustee, the Security Trustee, Ex-Im Bank, any Guaranteed Lender or any Noteholder hereunder or under any other Operative Document to which it is a party, and such failure shall continue unremedied for five (5) Business Days after demand for payment has been given by the Security Trustee, any Guaranteed Lender, the Indenture Trustee or Ex-Im Bank to the Issuer;

(c) any representation, warranty or certification made or deemed made by the Issuer herein or in any other Operative Document to which it is a party or any certificate furnished to the Indenture Trustee, Ex-Im Bank, any Guaranteed Lender or the Security Trustee

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pursuant to the provisions hereof or thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished;

(d) the Issuer shall fail to perform, in any material respect, any of its obligations, covenants or agreements under this Indenture or any other Operative Document to which it is a party (and not constituting an Event of Default under any other clause of this Section 6.01), and, if capable of being remedied, such failure shall continue unremedied for a period of thirty (30) days after the earlier of (i) the Issuer obtaining actual knowledge of such failure or (ii) notice thereof being given to the Issuer by the Security Trustee, the Indenture Trustee, Ex-Im Bank or any Guaranteed Lender;

(e) any of the Security Documents to which Issuer is a party ceases or shall cease to constitute a duly perfected and enforceable security interest over the Collateral referred to therein free and clear of all Liens (other than Permitted Liens);

(f) the Issuer shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due;

(g) the Issuer shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the bankruptcy law of the relevant jurisdiction, (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the bankruptcy law of the relevant jurisdiction, or (vi) take any limited liability company action for the purpose of effecting any of the foregoing;

(h) a proceeding or case shall be commenced, without the application or consent of the Issuer, in any court of competent jurisdiction seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like for the Issuer or for all or any substantial part of its assets, or (iii) similar relief in respect of the Issuer under any law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect for a period of sixty (60) or more days; or an order for relief against the Issuer shall be entered in an involuntary case under the bankruptcy law of the relevant jurisdiction and such order shall remain in effect, undismissed, unstayed or unvacated for a period of sixty (60) or more days;

(i) any Lease Event of Default shall occur and be continuing;

(j) any Government Body (i) shall have condemned, seized or appropriated all or substantially all of the property of the Issuer or (ii) shall have taken any other action which, in the opinion of Ex-Im Bank, adversely affects the Issuer’s ability to pay any Indebtedness hereunder;

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(k) a judgment for the payment of money in excess of $50,000 shall be rendered against the Issuer and the same shall remain undischarged for a period of thirty (30) calendar days during which neither execution of such judgment shall be effectively stayed nor adequate bonding fully covering such judgment shall exist;

(l) the Issuer shall do or cause to be done any act or thing evidencing or establishing its intention to repudiate this Indenture, any Note or any other Operative Document to which it is a party;

(m) Lessor Parent shall cease to hold good legal title to all of the Membership Interests of the Issuer subject only to the Lien of the Membership Interest Pledge Agreement; and/or

(n) there shall have occurred and be continuing an “event of default” under any Related Operative Document or Other Operative Document.

Section 6.02. Remedies . Upon the occurrence of any Event of Default and so long as such Event of Default is continuing, (i) the Instructing Group may, by notice to the Issuer and Lessee (unless such notice is prohibited by Applicable Law), cancel the Guaranteed Lenders’ commitment to purchase any Bank Note and/or declare the aggregate principal amount then outstanding of, and the accrued and unpaid interest on, any or all of the Notes and all other amounts payable by the Issuer hereunder and under the other Operative Documents (including, without limitation, any amount payable under the Issuer Indemnity Agreement) to be forthwith due and payable, whereupon such amounts shall be immediately due and payable without presentment, demand (except as aforesaid), protest or other formalities of any kind, all of which are hereby expressly waived by the Issuer and (ii) in the case of the occurrence of an Event of Default referred to in clause (f), (g) or (h) of Section 6.01 hereof with respect to the Issuer or any Event of Default under Section 13(g)-(k) (inclusive) of the Lease with respect to the Lessee, the Guaranteed Lenders’ commitment to purchase any Bank Note shall automatically be cancelled and the aggregate principal amount then outstanding of, and the accrued and unpaid interest on, all of the Notes and all other amounts payable by the Issuer hereunder and under the other Operative Documents (including, without limitation, any amount payable under the Issuer Indemnity Agreement) shall automatically become immediately due and payable without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Issuer (unless, subsequent to such automatic acceleration, such automatic acceleration is waived by the Instructing Group). In addition, upon the acceleration of any or all of the Global Notes or Definitive Notes, the Issuer shall pay to the Indenture Trustee for the account of the Noteholders (other than Ex-Im Bank) the Make-Whole Amount (if any) or the Prepayment Premium (if any), as applicable, in respect of the principal amount of any such Note or Notes that is either not covered by a Payment Certificate or shall not be paid (or was not paid) by Ex-Im Bank pursuant to the Accelerated Payment Method (as defined in the Ex-Im Bank Guarantee), as applicable. If (x) Ex-Im Bank as the Instructing Group shall have accelerated the Notes hereunder and (y) a claim shall be made on Ex-Im Bank under the Ex-Im Bank Guarantee and Ex-Im Bank shall have issued a Payment Certificate, then, upon demand by Ex-Im Bank, the Issuer shall pay to Ex-Im Bank the Ex-Im Bank Make-Whole Amount, if any.

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ARTICLE VII

THE INDENTURE TRUSTEE

Section 7.01. Notice of Defaults .

(a) As promptly as practicable, and in any event within ten (10) Business Days, after either (i) the occurrence of an Event of Default under Section 6.01(a) hereof of which the Indenture Trustee has actual knowledge or (ii) a Responsible Officer of the Indenture Trustee has received written notice from the Issuer, Ex-Im Bank or any Noteholder or Guaranteed Lender of the occurrence of any other Event of Default hereunder, the Indenture Trustee shall give notice of such Event of Default to the Issuer, the Lessee, the Noteholders, the Guaranteed Lenders and Ex-Im Bank.

(b) The Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee.

(c) In the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; provided that in the case of any such certificates or opinions which by any provision hereof or thereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, and shall promptly notify the party delivering the same if such certificate or opinion does not conform. If a corrected form shall not have been delivered to the Indenture Trustee within fifteen (15) days after such notice from the Indenture Trustee, the Indenture Trustee shall so notify the Noteholders and Guaranteed Lenders.

(d) In case an Event of Default known to the Indenture Trustee has occurred and is continuing, the Indenture Trustee shall, prior to the receipt of directions pursuant to this Section, if any, from the Controlling Party (as defined below), exercise such rights and powers vested in it by this Indenture and the other Operative Documents, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. Any permissive right of the Indenture Trustee enumerated in this Indenture or any other Operative Document shall not be construed as a duty. In taking or omitting to take any action hereunder, the Indenture Trustee shall be entitled to rely upon, and act in accordance with, the direction of (i) prior to the issuance of any Global Note, the Majority Guaranteed Lenders and (ii) on and after the issuance of any Global Note, the Majority Noteholders (such party being the “ Controlling Party ”); provided that in taking any action with respect to any Bank Note or amounts owed to the Guaranteed Lenders or any action under or with respect to the Ex-Im Bank Guarantee solely with respect to any Bank Note, the Indenture Trustee shall act in accordance with the direction of the Applicable Majority Guaranteed Lenders for such Bank Note and, in taking any action with respect to any Global Note or Definitive Note or amounts owed to the Noteholders, the Indenture Trustee shall act in accordance with the direction of the Applicable Majority Noteholders for such Global Note or Definitive Note.

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(e) No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own grossly negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1) this subsection shall not be construed to limit the effect of subsection (b) of this Section;

(2) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless the Indenture Trustee was grossly negligent in ascertaining the pertinent facts;

(3) the Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Noteholders and/or the Majority Guaranteed Lenders, as applicable (or such larger percentage as may be required by the terms hereof) relating to the time, method and place of conducting any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture or any other Operative Document; and

(4) no provision of this Indenture shall be construed as requiring the Indenture Trustee to incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not assured to it.

(f) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this Section 7.01.

Section 7.02. Certain Rights of Indenture Trustee .

(a) The Indenture Trustee may conclusively rely and shall be protected in acting or refraining from acting in good faith in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties.

(b) Whenever in the administration of this Indenture, the Indenture Trustee shall (in its reasonable opinion) deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith or gross negligence, negligent failure to act or willful misconduct on its part, rely upon an Officer’s Certificate and an Opinion of Counsel of the Issuer.

(c) The Indenture Trustee may consult with counsel of its choice and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

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(d) The Indenture Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture or any other Operative Document at the request or direction of any of the Noteholders or the Guaranteed Lenders pursuant to this Indenture, unless the Noteholders and/or the Guaranteed Lenders, as applicable, shall have offered to the Indenture Trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(e) Subject to Section 7.01(c) hereof, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document.

(f) The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees and the Indenture Trustee shall not be responsible, for any misconduct or negligence on the part of, or for the supervision of, any agent, attorney, custodian or nominee appointed with due care by it hereunder.

(g) The Indenture Trustee shall not be required to expend or risk its own funds in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk is not assured to it.

(h) The Indenture Trustee shall not be personally liable for any action taken or suffered or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture or any other Operative Document, unless the Indenture Trustee was grossly negligent, has negligently failed to act, or has willfully misconducted in ascertaining the pertinent facts.

(i) The Indenture Trustee, in its capacity as Paying Agent and Registrar hereunder, shall have the rights and protections afforded to the Indenture Trustee pursuant to this Article VII (including, without limitation, Sections 7.01(c) and 7.06 hereof).

(j) The Indenture Trustee shall not be charged with knowledge of an Event of Default (other than under Section 6.01(a) hereof) unless a Responsible Officer obtains actual knowledge of such event or the Indenture Trustee receives written notice of such event from the Issuer, Ex-Im Bank or any Noteholder or Guaranteed Lender.

(k) The Indenture Trustee shall execute, deliver and perform the other Operative Documents to which it is a party and shall take such actions as are directed by Ex-Im Bank, the Noteholders, the Guaranteed Lenders, this Indenture or such other Operative Document, in each case, subject to the provisions of this Article VII and the other provisions of this Indenture and such other Operative Documents, as applicable.

(l) Without limiting its rights under bankruptcy law, when the Indenture Trustee incurs expenses or renders services in connection with the insolvency or bankruptcy of any party hereto, such reasonable expenses (including the reasonable fees and expenses of its

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counsel) and the compensation for such services are intended to constitute expenses of administration under any bankruptcy or insolvency law.

Section 7.03. Not Responsible for Recitals or Issuance of Notes . The recitals contained herein shall not be taken as the statements of the Indenture Trustee, and the Indenture Trustee assumes no responsibility for their correctness. Except as set forth in Section 7.11 hereof or as set forth in any certificate of authentication, the Indenture Trustee makes no representations as to the validity or sufficiency of this Indenture or any Note.

Section 7.04. May Hold Notes . The Indenture Trustee, the Paying Agent, the Registrar or any of their respective Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of a Note and may otherwise deal with the Issuer with the same rights it would have if it were not Indenture Trustee, Paying Agent, Registrar or such other agent.

Section 7.05. Money Held in Trust . Money held by the Indenture Trustee or the Paying Agent in trust hereunder need not be segregated from other funds except to the extent required herein or by law and neither the Indenture Trustee nor the Paying Agent shall have any liability for interest upon any such moneys.

Section 7.06. Indemnity . The Issuer agrees:

(a) to indemnify, or cause to be indemnified, the Indenture Trustee for, and to hold it harmless against, any loss, liability or expense incurred on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of the Operative Documents to which it is a party in accordance with the terms thereof, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties; provided, that the Issuer shall not be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Indenture Trustee. The Indenture Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity. This indemnity shall survive the resignation or removal of the Indenture Trustee and the satisfaction and discharge or termination of this Indenture and the other Operative Documents; and

(b) no direction by any Noteholder, the Majority Noteholders, any Guaranteed Lender, the Majority Guaranteed Lenders or the Instructing Group shall affect the right of the Indenture Trustee to collect amounts owed to it under this Indenture.

Section 7.07. Resignation and Removal of Indenture Trustee; Appointment of Successor .

(a) The Indenture Trustee, or any successor Indenture Trustee, may resign at any time without cause by giving at least thirty (30) days’ prior written notice to the Lessee, the Issuer, each Noteholder, each Guaranteed Lender and Ex-Im Bank. Such resignation shall be effective upon the acceptance of the trusteeship by a successor Indenture Trustee eligible under Section 7.08 hereof reasonably satisfactory to Ex-Im Bank and, provided no Material Default or Event of Default shall have occurred and be continuing, the Lessee. Upon receiving such notice of resignation, the Controlling Party shall promptly appoint a successor Indenture Trustee

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eligible under Section 7.08 hereof reasonably satisfactory to the Guaranteed Lenders, so long as any Bank Note is outstanding, Ex-Im Bank and, provided no Material Default or Event of Default shall have occurred and be continuing, the Lessee, by written instrument, in duplicate, one original copy of which shall be delivered to the Indenture Trustee so resigning and one original copy to the successor Indenture Trustee together with notice to the Lessee, the Issuer, each Noteholder, each Guaranteed Lender and Ex-Im Bank, in accordance with Section 11.02 hereof. The Indenture Trustee may be removed (x) by the Majority Noteholders, at any time, with or without cause, or (y) by the Applicable Majority Noteholders or the Applicable Majority Guaranteed Lenders, as applicable, if the Indenture Trustee has not made a claim on Ex-Im Bank under the Ex-Im Bank Guarantee as required by Section 6.02 or Section 7.14 hereof, in each case, by notice delivered to the other Noteholders, the Guaranteed Lenders, the Indenture Trustee, the Lessee, the Issuer and Ex-Im Bank, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee reasonably satisfactory to the Guaranteed Lenders, so long as any Bank Note is outstanding, Ex-Im Bank and, provided no Material Default or Event of Default shall have occurred and be continuing, the Lessee. In the case of the removal of the Indenture Trustee, the Majority Noteholders, the Applicable Majority Noteholders or the Applicable Majority Guaranteed Lenders, as the case may be, may appoint a successor Indenture Trustee eligible under Section 7.08 hereof and reasonably satisfactory to the Guaranteed Lenders, so long as any Bank Note is outstanding, Ex-Im Bank and, provided no Material Default or Event of Default shall have occurred and be continuing, the Lessee by an instrument signed by the Majority Noteholders, the Applicable Majority Noteholders or the Applicable Majority Guaranteed Lenders, as applicable (whose fees, provided no Event of Default shall have occurred and be continuing shall be reasonably acceptable to the Lessee). If a successor Indenture Trustee shall not have been appointed within (x) thirty (30) calendar days after such notice of resignation or removal or (y) five (5) Business Days after such notice of resignation or removal if a claim is required under and in accordance with Section 2.07 of the Ex-Im Bank Guarantee, the Issuer, the Indenture Trustee, any Guaranteed Lender or any Noteholder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee eligible under Section 7.08 hereof to act until such time, if any, as a successor shall have been appointed as above provided. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor Indenture Trustee meeting the requirements of Section 7.08 hereof, which removal and appointment shall become effective upon written acceptance of appointment by the successor Indenture Trustee as provided in Section 7.09 hereof.

(b) If at any time the Indenture Trustee becomes incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver, conservator, administrator, trustee, custodian liquidator or similar official of the Indenture Trustee or of its property shall be appointed, or any public officer takes charge or control of the Indenture Trustee or of its property or affairs for the purposes of administration, conservatorship or liquidation, then (i) the Majority Noteholders or the Majority Guaranteed Lenders may remove the Indenture Trustee and the Majority Noteholders or the Majority Guaranteed Lenders may appoint a successor Indenture Trustee reasonably satisfactory to the Guaranteed Lenders, so long as any Bank Note is outstanding, Ex-Im Bank and, provided no Material Default or Event of Default shall have occurred and be continuing, the Lessee, and that is eligible under Section 7.08 by an Act delivered to the other Noteholders, the Guaranteed Lenders, the Indenture Trustee so removed, the successor Indenture Trustee, the Issuer and Ex-Im Bank or (ii) any Noteholder or Guaranteed Lender may petition

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any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee and such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor Indenture Trustee eligible under Section 7.08 hereof, which removal and appointment shall become effective upon written acceptance of appointment by the successor Indenture Trustee as provided in Section 7.09 hereof.

Section 7.08. Persons Eligible for Appointment as Indenture Trustee . Any successor Indenture Trustee, however appointed, shall be a bank or trust company organized and doing business under the laws of the United States or any state thereof, shall be authorized under such laws to exercise corporate trust power, shall be subject to supervision or examination by federal or state authority, shall have a total shareholder equity aggregating at least US$1,000,000,000 and shall maintain a corporate trust department.

Section 7.09. Acceptance of Appointment by Successor Indenture Trustee . Any successor Indenture Trustee appointed as provided in Section 7.07 hereof shall execute and deliver to the Lessee, the Issuer and to its predecessor Indenture Trustee an instrument accepting such appointment and thereupon the resignation or removal of the predecessor Indenture Trustee shall become effective and the appointment of such successor Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor as if such successor Indenture Trustee were originally named as Indenture Trustee hereunder and under the other Operative Documents. Notwithstanding the foregoing, on the written request of the successor Indenture Trustee, the Indenture Trustee ceasing to act shall, upon payment of its charges then unpaid to which it is entitled to reimbursement or payment hereunder, pay over to the successor Indenture Trustee all moneys at the time held by it in trust hereunder and shall execute and deliver an instrument transferring to such successor Indenture Trustee all rights, powers, duties and obligations hereunder and under the other Operative Documents. Upon request of any such successor Indenture Trustee, the predecessor Indenture Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights and powers. Any Indenture Trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such Indenture Trustee hereunder to secure any amounts then due it pursuant to the provisions of Section 7.06 hereof.

If a successor Indenture Trustee is appointed hereunder, a supplement to this Indenture executed and delivered by the Issuer, the predecessor Indenture Trustee and the successor Indenture Trustee shall be sufficient to effect the removal of the predecessor Indenture Trustee and to vest the successor Indenture Trustee with all rights, powers, duties and obligations of its predecessor hereunder and under the other Operative Documents, as if such successor Indenture Trustee was originally named as Indenture Trustee hereunder and thereunder.

No successor Indenture Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Indenture Trustee shall be eligible to act as Indenture Trustee under the provisions of Section 7.08 hereof.

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Upon acceptance of appointment by a successor Indenture Trustee as provided in this Section, the successor Indenture Trustee shall notify the Guaranteed Lenders and the Noteholders of such appointment by registered mail at their last address as they shall appear in the Register, and shall mail a copy of such notice to the Issuer. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 7.07 hereof.

Section 7.10. Merger, Conversion, Consolidation or Succession to Business . Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation or sale of all or substantially all assets to which the Indenture Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided such Person shall meet the requirements of Section 7.08 hereof and shall be otherwise qualified and eligible under this Article VII, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Note shall have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation or sale of assets to such authenticating Indenture Trustee may adopt such authentication and deliver such Note so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Note.

Section 7.11. Representations and Warranties of Indenture Trustee . The representations and warranties of Wilmington Trust Company in its individual capacity and as Indenture Trustee set forth in Section 9 of the Participation Agreement are hereby incorporated herein by reference thereto as fully and to the same extent as if set forth herein.

Section 7.12. Documents Furnished to Noteholders and Guaranteed Lenders . Promptly upon its receipt thereof, the Indenture Trustee shall furnish to each Noteholder and Guaranteed Lender, in the manner provided in Section 11.02 hereof a copy of any certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal or other paper or document it receives from the Issuer or any other party pursuant to this Indenture or any other Operative Document.

Section 7.13. Appointment . By its acceptance of any Note or beneficial interest therein, each Guaranteed Lender, each Noteholder and the Beneficial Owners (other than Ex-Im Bank) shall be deemed to have (i) appointed the Indenture Trustee to act as its agent in connection herewith and with the other Operative Documents and to have authorized the Indenture Trustee to exercise such rights, powers and discretions as are specifically delegated to the Indenture Trustee by the terms hereof and thereof together with all such rights, powers and discretions as are reasonably incidental thereto and (ii) agreed to be bound by and consented to the terms and provisions of the Operative Documents (including the provisions of Sections 4, 5.03 and 5.04 of the Ex-Im Bank Guarantee) and to have irrevocably authorized the Indenture Trustee to take any and all actions that may be taken by the Indenture Trustee under the terms of the Ex-Im Bank Guarantee, including an assignment of all of its rights, title and interest in a Note as to which enforcement of the Ex-Im Bank Guarantee is sought, this Indenture, any security referenced therein and the other Operative Documents (to the extent it relates to an affected Note). Upon the assignment of a Note to Ex-Im Bank pursuant to the Ex-Im Bank Guarantee,

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Ex-Im Bank shall be deemed to be (x) in the case of a Bank Note, the Guaranteed Lender and (y) with respect to any other Note, the Holder of such Note and, in either case, shall have all of the rights, powers and discretion of a Guaranteed Lender or Holder, as applicable, hereunder with respect to such Note. Without limiting the generality of the foregoing, each Guaranteed Lender hereby instructs and authorizes the Indenture Trustee to make demands for payment of any Bank Note against the Issuer, the Lessee and Ex-Im Bank in accordance with the provisions of this Indenture, the Ex-Im Bank Guarantee and the other Operative Documents and in furtherance thereof each Guaranteed Lender hereby expressly authorizes the Indenture Trustee to execute and deliver for and on its behalf each assignment of the relevant Bank Note under and as required by the Ex-Im Bank Guarantee.

Section 7.14. Certain Ex-Im Bank Guarantee Covenants .

(a) The Indenture Trustee hereby covenants and agrees for the benefit of the Noteholders and Depositary Participants holding an interest in a Definitive Note that, if any Global Note or Definitive Note is outstanding, (i) upon the occurrence of an Event of Default pursuant to Section 6.01(a) hereof with respect to a scheduled payment of principal of or interest on a Global Note or a Definitive Note, the Indenture Trustee shall make a demand on each of the Issuer and the Lessee (unless such demand may be omitted in accordance with the provisions of Section 4.01 of the Ex-Im Bank Guarantee) and Ex-Im Bank promptly within the periods contemplated in and otherwise on the terms of the Ex-Im Bank Guarantee (including but not limited to the provision of all information and documentation and any assignments (including rights under any Note, this Indenture or any other document or thing required thereunder) required by Section 4 of the Ex-Im Bank Guarantee) and provide notice of such demands to the Noteholders of such Global Note or Definitive Note and Depositary Participants holding an interest in a Definitive Note; provided that upon the occurrence of any Event of Default pursuant to Section 6.01(a) with respect to any scheduled payment of principal or interest on a Global Note or a Definitive Note and so long as such Event of Default is continuing, if the Indenture Trustee shall not have made such demand, the Applicable Majority Noteholders may by notice in writing instruct the Indenture Trustee to make a demand on Ex-Im Bank to enforce its rights and those of the Noteholders under the Ex-Im Bank Guarantee and (ii) if any right to make a claim under Section 2.07 of the Ex-Im Bank Guarantee arises and the Indenture Trustee has returned any amount of a payment of principal of or interest on any Global Note or Definitive Note or has received notice that any Holder of a Global Note or Definitive Note has returned any such amount as set forth in Section 2.07 of the Ex-Im Bank Guarantee, in either case, or if any such payment is rescinded, the Indenture Trustee shall make demand on Ex-Im Bank and the parties set forth in such Section 2.07 to the extent required by such Section 2.07 promptly within the time periods contemplated in and otherwise on the terms of the Ex-Im Bank Guarantee.

(b) The Indenture Trustee hereby covenants and agrees for the benefit of the Guaranteed Lenders (i) upon the occurrence of an Event of Default pursuant to Section 6.01(a) hereof with respect to a scheduled payment of principal or interest on a Bank Note, the Applicable Majority Guaranteed Lenders may by notice in writing instruct the Indenture Trustee to make a demand on Ex-Im Bank to enforce its rights and those of the Guaranteed Lenders under the Ex-Im Bank Guarantee and (ii) if any right to make a claim under Section 2.07 of the Ex-Im Bank Guarantee arises and the Indenture Trustee has returned any amount of a payment of principal or interest on any Note or has received written notice that any Guaranteed Lender has

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returned any such amount as set forth in Section 2.07 of the Ex-Im Bank Guarantee, in either case, or such payment is rescinded, the Indenture Trustee shall make demand on Ex-Im Bank and the parties set forth in such Section 2.07 to the extent required by such Section 2.07 promptly within the time periods contemplated in and otherwise on the terms of the Ex-Im Bank Guarantee.

(c) The Indenture Trustee hereby covenants and agrees for the benefit of the Noteholders, the Guaranteed Lenders and Depositary Participants holding an interest in a Definitive Note that, (i) without the prior written consent of Ex-Im Bank, the Indenture Trustee will not agree to an amendment or deviation prohibited by Section 5.03 of the Ex-Im Bank Guarantee and (ii) without the prior written consent of Ex-Im Bank, the Indenture Trustee will not declare all or any part of the Issuer’s indebtedness under any Note to be immediately due and payable or to be due and payable upon demand of the Indenture Trustee.

ARTICLE VIII

NOTEHOLDERS’ LISTS AND REPORTS

Section 8.01. Noteholders’ and Guaranteed Lenders’ Lists and Preservation of Information .

(a) The Indenture Trustee shall permit the Lessee, the Issuer, each Noteholder, each Guaranteed Lender and Ex-Im Bank to inspect and copy (at the expense of the Lessee, the Issuer, such Noteholder, Guaranteed Lender or Ex-Im Bank, as the case may be) the Register and other books and records relating to any Note upon written request during regular business hours of the Indenture Trustee; provided that, (i) each Guaranteed Lender shall only be permitted to inspect and copy the relevant portion of the Register and other books and records relating to the Bank Notes and (ii) each Noteholder shall only be permitted to inspect and copy the relevant portion of the Register and other books and records relating to the relevant Global Notes or Definitive Notes, as the case may be.

(b) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Noteholders and Guaranteed Lenders contained in the most recent list furnished to the Indenture Trustee, as provided in Section 2.12 hereof and the names and addresses of such Noteholders and Guaranteed Lenders received by the Indenture Trustee in its capacity as Registrar, if so acting. The Indenture Trustee may destroy any list furnished to it as provided in Section 2.12 upon receipt of a new list so furnished.

ARTICLE IX

SUPPLEMENTAL INDENTURES

Section 9.01. Supplemental Indentures Without Consent of the Guaranteed Lenders or Noteholders . Subject always to this Section 9.01, Section 9.03 and Section 9.04(b), without the consent of the Guaranteed Lenders or the Noteholders, but with the consent of the Security Trustee (acting upon the direction of the Instructing Group), the Issuer (acting solely at the direction of Lessee) may, and, upon request of the Issuer, the Indenture Trustee shall, at any time

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and from time to time enter into one or more agreements supplemental hereto, in form satisfactory to the Security Trustee and Ex-Im Bank, for any of the following purposes:

(1) to add to the covenants of the Issuer or the Indenture Trustee for the benefit of the Noteholders and/or the Guaranteed Lenders, or to surrender any right or power herein conferred upon the Issuer;

(2) to correct or supplement any provision herein or in any supplemental agreement which may be defective or inconsistent with any other provision herein or in any supplemental agreement or in any offering circular; provided that any such provision shall not adversely affect the interests of the Noteholders or the Guaranteed Lenders (and the Indenture Trustee shall have received an Opinion of Counsel to such effect satisfactory to it); or

(3) to evidence and provide for the acceptance of appointment hereunder by a successor Indenture Trustee, Calculation Agent or Registrar;

provided such supplemental agreement shall not increase the discretionary authority of the Indenture Trustee (in such capacity or any other capacity) or any successor Indenture Trustee without the consent of the Indenture Trustee, the Guaranteed Lenders and each Holder.

Section 9.02. Supplemental Indentures with Consent of the Guaranteed Lenders and the Noteholders . Subject always to Section 9.03 and Section 9.04(b), (a) with the consent of the Majority Guaranteed Lenders and/or the Majority Noteholders, as applicable, and the Security Trustee (acting upon the direction of the Instructing Group), the Issuer (acting solely at the direction of Lessee) may, and the Indenture Trustee shall, enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights and obligations of, the Guaranteed Lenders or the Holders, as applicable, under this Indenture and (b) with the consent of the Applicable Majority Guaranteed Lenders and/or Applicable Majority Noteholders with respect to a Note, as applicable, and the Security Trustee (acting upon the direction of the Instructing Group), the Issuer may (acting solely on the instructions of the Lessee), and the Indenture Trustee shall, enter into an agreement or agreements supplemental hereto for the purpose of adding, changing or eliminating any provisions of such Note or of modifying in any manner the rights and obligations of the Guaranteed Lenders and/or Holders thereof, as applicable; provided, that no such supplemental agreement may, without the unanimous consent of the Guaranteed Lenders and each Noteholder, in each case affected thereby:

(1) change any Payment Date, change the provisions of the Indenture relating to the amount, timing or application of payments on any Note or change any place where, or the coin or currency in which, such Note is payable;

(2) change the portion of percentage interests of any Note, as to which the consent of the relevant Holders or the Guaranteed Lenders is required for any such amendment or modification, or as to which the consent of

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the Holders or the Guaranteed Lenders is required for any waiver of compliance with certain provisions of this Indenture or any Operative Document;

(3) impair or adversely affect the rights of the Indenture Trustee or any Holder or any Guaranteed Lender under the Ex-Im Bank Guarantee or any Payment Certificate;

(4) modify any of the provisions of this Indenture in such a manner as to diminish the rights of the Guaranteed Lenders or the Holders of any Note for the repayment of such Note contained in this Indenture; and

(5) modify any of the provisions of this Section 9.02.

It shall not be necessary for any Act of Noteholders or Guaranteed Lenders under this Section 9.02 to approve the particular form of any proposed supplemental agreement, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02, the Indenture Trustee, at the expense of the Issuer, shall mail to Ex-Im Bank and the Guaranteed Lenders a copy thereof and notify the Noteholders in accordance with Section 11.02. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 9.03. Documents Affecting Immunity or Indemnity . If in the reasonable opinion of the Indenture Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Indenture Trustee under this Indenture, the Indenture Trustee may (but shall not be obligated to) execute such document.

Section 9.04. Execution of Supplemental Indentures .

(a) In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Officer’s Certificate and an Opinion of Counsel each stating that the execution of such supplemental agreement is authorized or permitted by this Indenture and that all conditions precedent have been complied with.

(b) Anything in this Article IX to the contrary notwithstanding, the Indenture Trustee shall not enter into any supplemental agreement pursuant to this Article IX without the written consent of Ex-Im Bank and the Security Trustee and any supplemental agreement entered into by the Indenture Trustee without such consent shall not be valid to amend this Indenture for any other purpose hereunder.

Section 9.05. Effect of Supplemental Indentures . Upon the execution of any supplemental agreement in accordance with this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Indenture for all

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purposes; and the Guaranteed Lenders and every Holder of a Note theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

Section 9.06. Reference in Notes to Supplemental Indentures . Each Note authenticated and delivered after the execution of any supplemental agreement pursuant to this Article may bear a notation in a form approved by the Indenture Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon such Outstanding Note after proper presentation and demand.

Section 9.07. Solicitation of Noteholders .

(a) The Issuer will provide the Indenture Trustee with sufficient information, sufficiently far in advance of the date a decision is required, to enable the Guaranteed Lenders and each Noteholder entitled to vote or consent, to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions of this Indenture or any Note. In determining the Guaranteed Lenders or the Noteholders, as applicable, entitled to vote or consent to any proposed amendment, waiver or consent, the Indenture Trustee may establish a special record date and notify (in the case of a Noteholder) the Depositary thereof.

(b) The Issuer will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any Guaranteed Lender or any Noteholder as consideration for or as an inducement to the entering into by any Guaranteed Lender or any Noteholder of any waiver or amendment of any of the terms and provisions hereof, or of a Note unless such remuneration is concurrently offered to be paid, or security is concurrently offered to be granted, on the same terms, ratably to each Guaranteed Lender and Holder of such Note then Outstanding even if such Guaranteed Lender or Holder did not consent to such waiver or amendment. For the avoidance of doubt, the foregoing provisions shall not apply to payments of fees made to the Initial Purchasers in connection with each Note Purchase Agreement.

ARTICLE X

SATISFACTION AND DISCHARGE

Section 10.01. Satisfaction and Discharge of Indenture . Provided no Event of Default has occurred and is continuing hereunder, this Indenture shall cease to be of further effect with respect to the Notes except as to (i) rights of registration of transfer or exchange, (ii) substitution of mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights of Noteholders and any Guaranteed Lender to receive payments hereunder, (iv) the rights, obligations and immunities of the Indenture Trustee hereunder and (v) the rights of Noteholders and Guaranteed Lenders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee and payable to all or any of them, and the Indenture Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture when (except as limited above):

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(a) all Notes theretofore authenticated and delivered (other than Notes which have been destroyed, lost or stolen and which have been paid or replaced as provided in Section 2.10), if not then in the possession of the Indenture Trustee, have been delivered to the Indenture Trustee for payment and cancellation and have been paid in full;

(b) the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer and all other Secured Obligations (other than in respect of the Lessor Guarantee) have been paid in full; and

(c) the Issuer has delivered to the Indenture Trustee and Ex-Im Bank an Officer’s Certificate confirming that there are no other amounts outstanding under the Notes, this Indenture and the other Operative Documents and that no Default or Event of Default has occurred and is continuing.

Notwithstanding the satisfaction and discharge of this Indenture, the obligation of the Issuer to the Indenture Trustee under Section 7.06 hereof shall survive.

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01. No Waiver . No failure on the part of the Indenture Trustee, the Security Trustee, Ex-Im Bank, any Guaranteed Lender or any Noteholder to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Indenture shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Indenture preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Any waiver actually given hereunder shall only be effective for its purpose and at the time given. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

Section 11.02. Notices .

(a) Each of the parties hereby acknowledges and confirms that this Indenture and each Note is one of the Operative Documents and as a result all of the provisions of Section 13(c) of the Participation Agreement are hereby incorporated herein and therein by reference thereto as fully and to the same extent as if set forth herein and therein (including, without limitation, (x) the manner in which all notices or other communications are to be made hereunder, (y) the time as of which such notices or communications shall be deemed to have been given or made, and (z) the address to which such notices or communications are to be sent). For the convenience of the parties hereto, the addresses for notices referred to in Section 13(c) of the Participation Agreement are as follows:

(i)

if to the Issuer to:

Helios Leasing I LLC

c/o Wilmington Trust Company

1100 North Market Street

Wilmington, Delaware 19890-1605

[Indenture]

Attention: Corporate Trust Administration

Fax: 302-636-4140

with a copy to:

Atlas Air, Inc.

2000 Westchester Avenue

Purchase, New York 10577

Attention: General Counsel

Fax: 914-701-8333

(ii)

if to the Security Trustee to:

Wells Fargo Bank Northwest, National Association

MAC: 1228-120, 12th Floor

299 South Main Street, 12th Floor

Salt Lake City, Utah 84111

Attention: Corporate Trust Department

Fax: 801-246-5053

(iii)

if to the Indenture Trustee to:

Wilmington Trust Company

1100 North Market Street

Wilmington, Delaware 19890-1605

U.S.A.

Attention: Corporate Trust Administration

Fax: 302-636-4140

(iv)

if to the Guaranteed Lender to:

Apple Bank for Savings

122 East 42nd Street, 9th Floor

New York, New York 10168

Attention: Jonathan Byron, Senior Vice President

Fax: 212-224-6580

with a copy to:

Apple Bank for Savings

122 East 42nd Street, 9th Floor

New York, New York 10168

Attention: Antonio Martinez

[Indenture]

Fax: 212-224-6588

(v)

if to Ex-Im Bank to:

Export-Import Bank of the United States

811 Vermont Avenue, N. W.

Washington, D.C. 20571

U.S.A.

Attention: Vice President – Transportation Division and Vice

President – Transportation Portfolio Management Division

Subject: Ex-Im Bank Guarantee No. AP086438XX

Atlas Air, Inc.

Facsimile No.: 202-565-3558 and 202-565-3294

with a copy to Ex-Im Bank’s Counsel:

Vedder Price P.C.

222 North LaSalle Street

Chicago, Illinois 60601

U.S.A.

Attention: Dean N. Gerber, Esq.

Fax No: 312-609-5005

or, as to any party, at such other address as shall be designated by such party in a written notice to each other party hereto. Any communication or document to be made or delivered to Ex-Im Bank shall be effective only when received by Ex-Im Bank and then only if the same is expressly marked for the attention of the department or officer identified above (or such other department or officer as Ex-Im Bank shall specify from time to time for this purpose).

(b) Where this Indenture provides for notice to the Guaranteed Lenders or Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if such notice is in writing and mailed, first-class postage prepaid, to each Guaranteed Lender and each Noteholder affected by such event, at its address as it appears on the Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.

In any case where notice to the Guaranteed Lenders and the Noteholders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any Guaranteed Lender or Noteholder shall affect the sufficiency of such notice with respect to other Guaranteed Lenders (if any) or Noteholders. Any notice that is given in the manner herein provided shall conclusively be presumed to have been duly given whether or not actually received by any Guaranteed Lender or any Noteholder. Any notice to the Guaranteed Lenders or Noteholders provided for in this Indenture will be deemed to have been given on the date of mailing if sent by overnight courier guaranteeing next day delivery and otherwise on the third day after the date of mailing.

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Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by any Guaranteed Lender or any Noteholder shall be filed with the Indenture Trustee but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In the event that, by reason of the suspension of the regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to any Guaranteed Lender or Noteholder when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee and as shall be reasonably calculated to reach the intended recipients thereof shall be deemed to be a sufficient giving of such notice.

(c) Each document, instrument, statement, report, notice or other communication delivered in connection with this Indenture shall be in English or where not in English shall be accompanied by a certified English translation which translation shall with respect to all documents of a contractual nature and all certificates and notices to be delivered hereunder be the governing version and upon which in all cases the Security Trustee, Ex-Im Bank, the Indenture Trustee, the Guaranteed Lenders and the Noteholders shall be entitled to rely.

Section 11.03. Governing Law . THIS INDENTURE AND EACH NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICTS OF LAW OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

Section 11.04. Severability . If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Guaranteed Lenders, the Noteholders and Ex-Im Bank in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

Section 11.05. Captions . The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Indenture.

Section 11.06. Successors and Assigns . This Indenture shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

Section 11.07. Assignments and Participations .

(a) A Guaranteed Lender may sell or agree to sell to one or more other Persons a participation in all or any part of a Bank Note beneficially held by it. No Transfer Certificate or other notice shall be required in connection with any such participation. The grant by a Guaranteed Lender of such a participation shall not preclude any such Person holding any

[Indenture]

such participation from granting a subparticipation to one or more other Persons. No participation or subparticipation shall affect the right of such Guaranteed Lender to any compensation pursuant to this Indenture, the Issuer Indemnity Agreement or any other Operative Document, any such amount of compensation to be determined without respect to any participation or subparticipation which has been so granted, provided that if such participation or subparticipation would subject the Issuer and/or the Lessee to any greater obligation or liability under the Issuer Indemnity Agreement or any other Operative Document than it would have been subject to on such date if no such participation or subparticipation had taken place, then unless such participation or subparticipation was made (i) at the request of the Issuer to mitigate or avoid the requirement for payment of additional amounts or increased costs under the Issuer Indemnity Agreement, (ii) at the request of the Lessee or Issuer or Ex-Im Bank in connection with the Ex-Im Bank Guarantee or (iii) following the occurrence and during the continuance of an Event of Default, such Guaranteed Lender shall not be entitled to receive any greater payment under the Issuer Indemnity Agreement or any other Operative Document than it would have been entitled to receive had such participation or subparticipation not been completed. Any agreement pursuant to which a Guaranteed Lender grants such a participation or subparticipation shall provide that, with respect to such participation or subparticipation, such participant or subparticipant shall be prohibited from enforcing the obligations of the Issuer relating to such Bank Note subject to such participation or subparticipation, all of which shall be retained by the Security Trustee, the Indenture Trustee and such Guaranteed Lender; provided that the approval of any participant or subparticipant may be required in connection with any matter directly affecting such participant or subparticipant in which the consent of the Guaranteed Lender is required as provided in Section 9.02 hereof. No holder of a participation or subparticipation in any Bank Note of any Guaranteed Lender shall have any rights under this Indenture, such Bank Note or under any other Operative Document, other than to receive payment of principal of and interest on the Bank Note which has been so participated or subparticipated, and any other amounts provided for in this Indenture to the extent so participated or subparticipated. No participant or subparticipant shall enjoy any right of set-off against assets of the Issuer as a result of any participation or subparticipation. Anything in this Section 11.07 to the contrary notwithstanding, in no event shall the grant of any participation or subparticipation restrict, condition or otherwise impair the transfer and exchange of such Bank Note as provided in Sections 2.04, 2.05 and 2.06 hereof.

(b) [Intentionally Omitted.]

(c) At any time, a Guaranteed Lender may sell, assign and transfer all or any part of its rights, interests and obligations in, to and under any Bank Note and a corresponding part of its rights, interests and obligations under the other Operative Documents on and subject to the terms and conditions specified in Section 24 of the Participation Agreement, such transfer to be effected under a Transfer Certificate substantially in the form of Schedule 10 hereto (except in the case of a transfer to Ex-Im Bank) and to be registered in the Registry as provided in Section 2.12 hereof and Section 5.01 of the Ex-Im Bank Guarantee.

(d) Except as expressly permitted in the Operative Documents, the Issuer may not assign or transfer its rights or delegate its obligations hereunder or under any other Operative Document without the prior written consent of Ex-Im Bank, the Indenture Trustee and, provided no Event of Default shall have occurred and be continuing, the Lessee.

[Indenture]

Section 11.08. Counterparts . This Indenture may be executed in any number of counterparts each of which shall be an original and all of which taken together shall constitute one and the same instrument and any of the parties hereto may execute this Indenture by signing any such counterpart.

Section 11.09. Jurisdiction; Service of Process . Any suit, proceeding, action or process against the Issuer with respect to this Indenture may be brought in accordance with Section 13(d) of the Participation Agreement as if the same were repeated herein in full mutatis mutandis, and the Issuer hereby consents to service of process as therein set forth.

Section 11.10. Waiver of Jury Trial . THE ISSUER, THE SECURITY TRUSTEE, THE INDENTURE TRUSTEE, THE GUARANTEED LENDERS AND EACH NOTEHOLDER (BY ACCEPTANCE OF A NOTE) HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS INDENTURE, OR ANY OTHER OPERATIVE DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OR OMISSIONS OF THE GUARANTEED LENDERS, THE SECURITY TRUSTEE, THE INDENTURE TRUSTEE, THE NOTEHOLDERS OR THE ISSUER OR ANY PERSON RELATING TO THE OPERATIVE DOCUMENTS.

Section 11.11. Expenses, Etc. The provisions of Section 12 of the Participation Agreement are hereby incorporated herein, mutatis mutandis , with references to the “Lessee” being construed as references to the “Issuer”. In addition the Issuer agrees to pay or reimburse each of Ex-Im Bank, the Guaranteed Lenders, the Security Trustee and the Indenture Trustee for paying (against invoices or receipts (to the extent available) submitted by Ex-Im Bank, the Security Trustee, the Indenture Trustee and/or any Guaranteed Lender): (a) all reasonable out-of-pocket costs and expenses of Ex-Im Bank, any Guaranteed Lender, the Indenture Trustee and the Security Trustee (including the reasonable fees and expenses of counsel to Ex-Im Bank, such Guaranteed Lender, the Indenture Trustee and the Security Trustee), in connection with any actual or proposed amendment, modification or waiver requested by the Issuer or the Lessee (whether the same shall ever become effective) of any of the terms of this Indenture and the other Operative Documents and in accordance with the terms thereof; and (b) all costs and expenses of Ex-Im Bank, the Security Trustee, the Indenture Trustee and any Guaranteed Lender (including counsel’s fees) in connection with any Event of Default and any enforcement or collection proceedings resulting therefrom.

Section 11.12. Guaranteed Lender . From and after the date all Bank Notes shall be cancelled, no Ex-Im Bank Commitment shall be remaining, and all sums payable to the Guaranteed Lenders hereunder and under the other Operative Documents shall have been paid in full, all references herein and in any other Operative Document (other than the Issuer Indemnity Agreement and the Ex-Im Bank Guarantee) to the “Guaranteed Lender”, “Guaranteed Lenders” or “Majority Guaranteed Lenders” shall cease to be operative other than as provided in Article IV and any provision hereof or thereof which is intended to survive the payment in full of the Notes.

[Indenture]

Section 11.13. Intercreditor Arrangements . So long as no Event of Default has occurred and is continuing, all payments under this Indenture or a Note made by or on behalf of the Issuer shall be paid, collected and distributed in accordance with Article III. Following the occurrence of and during the continuance of an Event of Default any payments under or pursuant to any Operative Document, including, without limitation, any principal or interest on any Note, fees, indemnities or any other amounts payable under any Operative Document, which are received by any Guaranteed Lender, any Noteholder or the Indenture Trustee (other than from the Security Trustee as a result of a distribution pursuant to Section 9 of the Intercreditor Agreement or from Ex-Im Bank under the Ex-Im Bank Guarantee or any Payment Certificate), if the Security Trustee shall have notified the Indenture Trustee of such Event of Default, shall (except as provided in Section 5.04 of the Ex-Im Bank Guarantee) be paid over to the Security Trustee for distribution, application and payment pursuant to the applicable provisions of Section 9 of the Intercreditor Agreement.

Section 11.14. Noteholders and Guaranteed Lenders . By acceptance of a Note or Beneficial Interest therein, each Noteholder, Guaranteed Lender and Beneficial Owner (other than Ex-Im Bank) shall be deemed to have agreed to be bound by and consented to the terms and provisions of the Operative Documents. Upon the assignment of a Note to Ex-Im Bank in accordance with the terms of the Ex-Im Bank Guarantee, Ex-Im Bank shall be deemed the Guaranteed Lenders or Holder of such Note, as the case may be, and shall have all the rights, powers and discretion of a Guaranteed Lender or Holder, as the case may be, hereunder with respect to such Note.

Section 11.15. Amendments, Etc. Except as otherwise expressly provided in this Indenture, no provision of this Indenture may be amended, changed, waived, discharged or terminated except in accordance with the provisions of Section 13(f) of the Participation Agreement.

Section 11.16. Entire Agreement . This Indenture (together with the other Operative Documents) is the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes all prior communications and agreements by the parties hereto with respect thereto, and each such prior communication and agreement is null and void.

Section 11.17. Limitation on Liability . This Indenture is subject to the provisions of Section 30 of the Participation Agreement.

Section 11.18. Trust Indenture Act . This Indenture shall not be qualified under the Trust Indenture Act of 1939 and shall not be subject to the provisions of the Trust Indenture Act of 1939.

[Indenture]

IN WITNESS WHEREOF , the parties hereto have caused this Indenture to be duly executed all as of the day and year first above written.


HELIOS LEASING I LLC
by Helios Leasing Trust, its Manager by Wilmington Trust Company, not in its individual capacity, but solely as Trustee

By:		/s/ Robert P. Hines, Jr.
		Name: Robert P. Hines, Jr.
		Title: Assistant Vice President

APPLE BANK FOR SAVINGS as Initial Guaranteed Lender

By:		/s/ Jonathan Byron
		Name: Jonathan Byron
		Title: Senior Vice President

APPLE BANK FOR SAVINGS as Calculation Agent

By:		/s/ Jonathan Byron
		Name: Jonathan Byron
		Title: Senior Vice President

WILMINGTON TRUST COMPANY , not in its individual capacity, except as expressly provided herein, but solely as Indenture Trustee

By:		/s/ Robert P. Hines, Jr.
		Name: Robert P. Hines, Jr.
		Title: Assistant Vice President

WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION , as Security Trustee

By:		/s/ Michael Arsenault
		Name: Michael Arsenault
		Title: Vice President

[Indenture]


EXPORT-IMPORT BANK OF THE UNITED STATES

By:		/s/ Robert F.X. Roy, Jr.
		Name: Robert F.X. Roy, Jr.
		Title: Deputy Vice President Transportation Division Export-Import Bank

Exhibit 4.2

THIS FIXED RATE GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF. TRANSFERS OF THIS FIXED RATE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, EITHER TO THE DEPOSITARY, TO NOMINEES OF THE DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE OR TO EXPORT-IMPORT BANK OF THE UNITED STATES, IN EACH INSTANCE, MADE IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN THE INDENTURE. TRANSFERS OF BENEFICIAL INTERESTS IN THIS FIXED RATE GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE PROVISIONS SET FORTH IN THE INDENTURE AND THE APPLICABLE PROCEDURES OF THE DEPOSITARY REFERRED TO THEREIN.

HELIOS LEASING I LLC

SECURED FIXED RATE GLOBAL NOTE

DUE IN QUARTERLY INSTALLMENTS

COMMENCING ON AUGUST 29, 2012 AND

MATURING ON MAY 29, 2024

ISSUED IN CONNECTION WITH

ONE BOEING MODEL 747-87UF AIRCRAFT WITH

MANUFACTURER’S SERIAL NO. 37570,

WITH FOUR INSTALLED GENERAL ELECTRIC

MODEL GENX-2B67 ENGINES

(THE “ AIRCRAFT ”)


CUSIP No. 42328B AA0		June 19, 2012
$142,034,000.00

HELIOS LEASING I LLC , a limited liability company formed under the laws of the State of Delaware (the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO. or its registered assigns, the principal amount of One Hundred Forty-Two Million Thirty-Four Thousand and 00/100 United States Dollars (U.S.$142,034,000.00) constituting as of the date hereof the aggregate outstanding unpaid principal amount of each of the Bank Notes issued with respect to the above-referenced Aircraft under that certain Indenture dated as of May 1, 2012 (the “ Indenture ”) among the Issuer, Apple Bank for Savings, as Initial Guaranteed Lender, Apple Bank for Savings, as Calculation Agent, Wilmington Trust Company, not in its individual capacity, except as expressly provided therein, but solely in its capacity as Indenture Trustee, Wells Fargo Bank Northwest, National Association, as Security Trustee, and Export-Import Bank of the United States (“ Ex-Im Bank ”), payable in forty-eight (48) consecutive quarterly principal installments commencing on August 29, 2012, and thereafter on November 29, February 29, May 29 and August 29 of each year (or if any such day is not a Business Day, on the next succeeding Business Day, each such day being a “ Payment Date ”), each such principal installment to be in the amount set forth opposite the applicable Payment Date in Annex A attached hereto and made a part hereof, and the entire unpaid principal amount then owing hereunder to be paid in full on May 29, 2024 (the “ Final Maturity Date ”); and to pay interest on

the unpaid principal amount of this Note from time to time at 2.018% per annum (the “ Fixed Rate ”) on each Payment Date and upon the payment or redemption thereof (but only on the principal amount so paid or redeemed). The Issuer also agrees to pay on demand interest at the Fixed Rate on overdue principal and overdue interest payable under this Note, from the date due until the Business Day such payment is received at or before 11:00 a.m. (New York time) at the place of payment set forth below, and to pay the costs of collection, if any (including reasonable attorneys’ fees), and in each case, in lawful money of the United States of America and in immediately available and freely transferable funds.

All payments of principal, interest, overdue interest and other amounts to be made by the Issuer to the Indenture Trustee for the account of the Noteholders under this Note shall be made in Dollars by payment to the account of the Indenture Trustee at Wilmington Trust Company, Attn: Corporate Trust Administration; ABA No. 0311 00092, Account No. 100872-000 (Reference: Atlas Air, Inc.) (or such other account in the continental United States as the Indenture Trustee may designate, in writing, by not less than ten (10) Business Days’ notice) at or before 11:00 a.m. on the due date therefor at the place of payment.

Interest shall accrue on the unpaid principal amount of this Note from and including the date hereof to but not including each Payment Date and the date the principal amount of this Note shall be due (by installments, at maturity, by acceleration or otherwise) at the Fixed Rate. Any payment of interest, principal or any other payment not paid to the Indenture Trustee when due and payable hereunder shall, from the date when due and payable until the date when fully paid, bear interest at the Fixed Rate. Interest shall be computed on the basis of a year of 360 days and twelve (12) 30-day months, and interest at the Post-Default Rate shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) occurring in the period for which such interest is payable.

The Issuer agrees that the records maintained by the Indenture Trustee as to the outstanding principal amount of this Note, the Fixed Rate, the date and amount of each repayment of principal of this Note and payment of interest or overdue interest received by the Indenture Trustee, shall be conclusive absent manifest error.

This Note is a “ Fixed Rate Global Note ” as referred to in the Indenture and is secured by the Security Documents. The Issuer may redeem or be obligated to redeem the principal of this Note, all as specified in the Indenture, and subject to the requirements thereof. Capitalized terms not otherwise defined herein shall have the respective meanings assigned thereto in the Indenture.

Upon the occurrence of an Event of Default and for so long as such Event of Default shall continue, the principal hereof, accrued and unpaid interest hereon and all other amounts payable hereunder may be declared to be or may automatically become forthwith due and payable, all as provided in the Indenture.

The Issuer waives diligence, demand, presentment, notice of nonpayment, protest, and notice of protest all in the sole discretion of the Holder and without notice and without affecting in any manner the liability of the Issuer. This Note (i) is intended by the Issuer to be an “instrument for the payment of money only” within the meaning of New York law, and (ii) shall

be governed by and construed in accordance with the internal laws of the State of New York, United States of America, without reference to principles of conflicts of law other than Sections 5-1401 and 5-1402 of the New York General Obligations Law.

This Note is a registered instrument. A manually signed and authenticated copy of this Note shall be evidence of the Holder’s rights and is not a bearer instrument.

No transfer by the Holder of any interest of the Holder in this Note or in the rights to receive any payments hereunder (other than a transfer to Ex-Im Bank) shall be effective unless a book entry of such transfer is made upon the Register referred to in the Indenture and such transfer is effected in compliance with the Indenture including final acceptance and entry into the Register of the transfer pursuant to the Indenture.

Prior to the entry into the Register of any transfer (other than a transfer to Ex-Im Bank) as provided in the immediately preceding paragraph, the Issuer and each other Person shall deem and treat each owner of this Note reflected in the Register as owner of this Note or the rights to receive any payments hereunder as the owner thereof for all purposes.

This Note or any Tranche hereof is subject to redemption only as required or permitted by the terms of the Indenture. In connection with any redemption of this Note or any Tranche hereof in accordance with the terms of the Indenture, the “Premium Over Treasuries” shall be 0.15%. Following any redemption of any Tranche hereof in full, Annex A hereto shall be amended such that each installment payable on a Payment Date is equal to the sum of the Tranches that have not been redeemed. Thereafter, all payment of principal and interest under this Note shall be made in accordance with Annex A, as so amended.

By acceptance of this Note or a Beneficial Interest herein, each Noteholder and Beneficial Owner (other than Ex-Im Bank) shall be deemed to have agreed to be bound by and consented to the terms and provisions of the Operative Documents.

IN WITNESS WHEREOF , the Issuer has caused its officer or attorney-in-fact thereunto duly authorized to execute this Fixed Rate Global Note as of the date first above written.


HELIOS LEASING I LLC by Helios Leasing Trust, its Manager by Wilmington Trust Company, not in its individual capacity, but solely as Trustee

By:		/s/ Adam R. Vogelsong
		Name: Adam R. Vogelsong
		Title: Assistant Vice President

GUARANTEE

This promissory note is guaranteed by the Export-Import Bank of the United States (“ Ex-Im Bank ”) for a principal amount not to exceed U.S.$142,034,000.00 plus interest thereon at the Guaranteed Interest Rate as provided in the Guarantee Agreement dated as of May 1, 2012 (the “ Guarantee Agreement ”) between the Indenture Trustee and Ex-Im Bank, and said guarantee is expressly made subject to all of the provisions therein as if all of said provisions were expressly set forth herein. Capitalized terms used herein and not otherwise defined have the meaning specified in the Guarantee Agreement.


EXPORT-IMPORT BANK OF THE UNITED STATES

By:		/s/ Donna L. Schneider
		(Signature)



Name:		Donna L. Schneider
(Print)



Title:		Vice President, Acting

Ex-Im Bank Guarantee No. AP086438XX – Atlas Air, Inc.

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is a Fixed Rate Global Note issued under the Indenture and is entitled to the benefits thereof.


Date:	June 19, 2012	WILMINGTON TRUST COMPANY,
		not in its individual capacity but solely as the Indenture Trustee

		By:	/s/ Adam R. Vogelsong
			Authorized Signatory

Annex A

Tranche in respect of one Boeing Model 747-87UF Aircraft

(MSN 37570) equipped with four GEnx-2B67 aircraft engines


Payment Date	Principal Component		Interest Component		Total		Principal Balance
8/29/2012	$	2,625,503.00	$	557,326.00	$	3,182,829.00	$	139,408,497.00
11/29/2012	$	2,638,630.00	$	703,316.00	$	3,341,946.00	$	136,769,867.00
2/28/2013	$	2,651,823.00	$	690,004.00	$	3,341,827.00	$	134,118,044.00
5/29/2013	$	2,665,082.00	$	676,626.00	$	3,341,708.00	$	131,452,962.00
8/29/2013	$	2,678,408.00	$	663,180.00	$	3,341,588.00	$	128,774,554.00
11/29/2013	$	2,691,800.00	$	649,668.00	$	3,341,468.00	$	126,082,754.00
2/28/2014	$	2,705,259.00	$	636,087.00	$	3,341,346.00	$	123,377,495.00
5/29/2014	$	2,718,785.00	$	622,439.00	$	3,341,224.00	$	120,658,710.00
8/29/2014	$	2,732,379.00	$	608,723.00	$	3,341,102.00	$	117,926,331.00
11/29/2014	$	2,746,041.00	$	594,938.00	$	3,340,979.00	$	115,180,290.00
2/28/2015	$	2,759,771.00	$	581,085.00	$	3,340,856.00	$	112,420,519.00
5/29/2015	$	2,773,570.00	$	567,162.00	$	3,340,732.00	$	109,646,949.00
8/29/2015	$	2,787,438.00	$	553,169.00	$	3,340,607.00	$	106,859,511.00
11/29/2015	$	2,801,375.00	$	539,106.00	$	3,340,481.00	$	104,058,136.00
2/29/2016	$	2,815,382.00	$	524,973.00	$	3,340,355.00	$	101,242,754.00
5/29/2016	$	2,829,459.00	$	510,770.00	$	3,340,229.00	$	98,413,295.00
8/29/2016	$	2,843,606.00	$	496,495.00	$	3,340,101.00	$	95,569,689.00
11/29/2016	$	2,857,824.00	$	482,149.00	$	3,339,973.00	$	92,711,865.00
2/28/2017	$	2,872,113.00	$	467,731.00	$	3,339,844.00	$	89,839,752.00
5/29/2017	$	2,886,474.00	$	453,242.00	$	3,339,716.00	$	86,953,278.00
8/29/2017	$	2,900,906.00	$	438,679.00	$	3,339,585.00	$	84,052,372.00
11/29/2017	$	2,915,411.00	$	424,044.00	$	3,339,455.00	$	81,136,961.00
2/28/2018	$	2,929,988.00	$	409,336.00	$	3,339,324.00	$	78,206,973.00
5/29/2018	$	2,944,638.00	$	394,554.00	$	3,339,192.00	$	75,262,335.00
8/29/2018	$	2,959,361.00	$	379,698.00	$	3,339,059.00	$	72,302,974.00
11/29/2018	$	2,974,158.00	$	364,769.00	$	3,338,927.00	$	69,328,816.00
2/28/2019	$	2,989,029.00	$	349,764.00	$	3,338,793.00	$	66,339,787.00
5/29/2019	$	3,003,974.00	$	334,684.00	$	3,338,658.00	$	63,335,813.00
8/29/2019	$	3,018,994.00	$	319,529.00	$	3,338,523.00	$	60,316,819.00
11/29/2019	$	3,034,089.00	$	304,298.00	$	3,338,387.00	$	57,282,730.00
2/29/2020	$	3,049,259.00	$	288,991.00	$	3,338,250.00	$	54,233,471.00
5/29/2020	$	3,064,505.00	$	273,608.00	$	3,338,113.00	$	51,168,966.00
8/29/2020	$	3,079,828.00	$	258,147.00	$	3,337,975.00	$	48,089,138.00
11/29/2020	$	3,095,227.00	$	242,610.00	$	3,337,837.00	$	44,993,911.00
2/28/2021	$	3,110,703.00	$	226,994.00	$	3,337,697.00	$	41,883,208.00
5/29/2021	$	3,126,257.00	$	211,301.00	$	3,337,558.00	$	38,756,951.00
8/29/2021	$	3,141,888.00	$	195,529.00	$	3,337,417.00	$	35,615,063.00
11/29/2021	$	3,157,597.00	$	179,678.00	$	3,337,275.00	$	32,457,466.00
2/28/2022	$	3,173,385.00	$	163,748.00	$	3,337,133.00	$	29,284,081.00
5/29/2022	$	3,189,252.00	$	147,738.00	$	3,336,990.00	$	26,094,829.00
8/29/2022	$	3,205,198.00	$	131,648.00	$	3,336,846.00	$	22,889,631.00
11/29/2022	$	3,221,224.00	$	115,478.00	$	3,336,702.00	$	19,668,407.00
2/28/2023	$	3,237,331.00	$	99,227.00	$	3,336,558.00	$	16,431,076.00
5/29/2023	$	3,253,517.00	$	82,895.00	$	3,336,412.00	$	13,177,559.00
8/29/2023	$	3,269,785.00	$	66,481.00	$	3,336,266.00	$	9,907,774.00
11/29/2023	$	3,286,134.00	$	49,985.00	$	3,336,119.00	$	6,621,640.00
2/29/2024	$	3,302,564.00	$	33,406.00	$	3,335,970.00	$	3,319,076.00
5/29/2024	$	3,319,076.00	$	16,745.00	$	3,335,821.00	$	0.00

Exhibit 4.3

HELIOS LEASING I LLC

SECURED FIXED RATE GLOBAL NOTE

DUE IN QUARTERLY INSTALLMENTS

COMMENCING ON OCTOBER 24, 2012 AND

MATURING ON JULY 24, 2024

ISSUED IN CONNECTION WITH

ONE BOEING MODEL 747-87UF AIRCRAFT WITH

MANUFACTURER’S SERIAL NO. 37565,

WITH FOUR INSTALLED GENERAL ELECTRIC

MODEL GENX-2B67 ENGINES

(THE “ AIRCRAFT ”)


CUSIP No. 42328B AB8		July 31, 2012
$142,693,000.00

HELIOS LEASING I LLC , a limited liability company formed under the laws of the State of Delaware (the “ Issuer ”), for value received, hereby promises to pay to CEDE & CO. or its registered assigns, the principal amount of One Hundred Forty-Two Million Six Hundred Ninety-Three Thousand and 00/100 United States Dollars (U.S.$142,693,000.00) constituting as of the date hereof the aggregate outstanding unpaid principal amount of the Bank Note issued with respect to the above-referenced Aircraft under that certain Indenture dated as of May 1, 2012 (the “ Indenture ”) among the Issuer, Apple Bank for Savings, as Initial Guaranteed Lender, Apple Bank for Savings, as Calculation Agent, Wilmington Trust Company, not in its individual capacity, except as expressly provided therein, but solely in its capacity as Indenture Trustee, Wells Fargo Bank Northwest, National Association, as Security Trustee, and Export-Import Bank of the United States (“ Ex-Im Bank ”), payable in forty-eight (48) consecutive quarterly principal installments commencing on October 24, 2012, and thereafter on January 24, April 24, July 24 and October 24 of each year (or if any such day is not a Business Day, on the next succeeding Business Day, each such day being a “ Payment Date ”), each such principal installment to be in the amount set forth opposite the applicable Payment Date in Annex A attached hereto and made a part hereof, and the entire unpaid principal amount then owing hereunder to be paid in full on July 24, 2024 (the “ Final Maturity Date ”); and to pay interest on

the unpaid principal amount of this Note from time to time at 1.734% per annum (the “ Fixed Rate ”) on each Payment Date and upon the payment or redemption thereof (but only on the principal amount so paid or redeemed). The Issuer also agrees to pay on demand interest at the Fixed Rate on overdue principal and overdue interest payable under this Note, from the date due until the Business Day such payment is received at or before 11:00 a.m. (New York time) at the place of payment set forth below, and to pay the costs of collection, if any (including reasonable attorneys’ fees), and in each case, in lawful money of the United States of America and in immediately available and freely transferable funds.

This Note is a registered instrument. A manually signed and authenticated copy of this Note shall be evidence of the Holder’s rights and is not a bearer instrument.

This Note or any Tranche hereof is subject to redemption only as required or permitted by the terms of the Indenture. In connection with any redemption of this Note or any Tranche hereof in accordance with the terms of the Indenture, the “Premium Over Treasuries” shall be 0.25%. Following any redemption of any Tranche hereof in full, Annex A hereto shall be amended such that each installment payable on a Payment Date is equal to the sum of the Tranches that have not been redeemed. Thereafter, all payment of principal and interest under this Note shall be made in accordance with Annex A, as so amended.

IN WITNESS WHEREOF , the Issuer has caused its officer or attorney-in-fact thereunto duly authorized to execute this Fixed Rate Global Note as of the date first above written.


HELIOS LEASING I LLC by Helios Leasing Trust, its Manager by Wilmington Trust Company, not in its individual capacity, but solely as Trustee

By:		/s/ Robert P. Hines, Jr.
		Name: Robert P. Hines, Jr.
		Title: Assistant Vice President

GUARANTEE

This promissory note is guaranteed by the Export-Import Bank of the United States (“ Ex-Im Bank ”) for a principal amount not to exceed U.S.$142,693,000.00 plus interest thereon at the Guaranteed Interest Rate as provided in the Guarantee Agreement dated as of May 1, 2012 (the “ Guarantee Agreement ”) between the Indenture Trustee and Ex-Im Bank, and said guarantee is expressly made subject to all of the provisions therein as if all of said provisions were expressly set forth herein. Capitalized terms used herein and not otherwise defined have the meaning specified in the Guarantee Agreement.


EXPORT-IMPORT BANK OF THE UNITED STATES

By:		/s/ Katherine Lockhart Arendt
		(Signature)



Name:		Katherine Lockhart Arendt
(Print)



Title:		Vice President, Acting

Ex-Im Bank Guarantee No. AP086438XX – Atlas Air, Inc.

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

This is a Fixed Rate Global Note issued under the Indenture and is entitled to the benefits thereof.


Date:	July 31, 2012	WILMINGTON TRUST COMPANY,
		not in its individual capacity but solely as the Indenture Trustee

		By:	/s/ Robert P. Hines, Jr.
			Authorized Signatory

Annex A


Payment Date	Principal Component		Interest Component		Total		Principal Balance
10/24/2012	$	2,653,766.00	$	577,269.00	$	3,231,035.00	$	140,039,234.00
1/24/2013		2,666,372.00		607,000.00		3,273,372.00		137,372,862.00
4/24/2013		2,679,037.00		595,443.00		3,274,480.00		134,693,825.00
7/24/2013		2,691,762.00		583,830.00		3,275,592.00		132,002,063.00
10/24/2013		2,704,548.00		572,163.00		3,276,711.00		129,297,515.00
1/24/2014		2,717,395.00		560,440.00		3,277,835.00		126,580,120.00
4/24/2014		2,730,302.00		548,662.00		3,278,964.00		123,849,818.00
7/24/2014		2,743,271.00		536,827.00		3,280,098.00		121,106,547.00
10/24/2014		2,756,302.00		524,936.00		3,281,238.00		118,350,245.00
1/24/2015		2,769,394.00		512,989.00		3,282,383.00		115,580,851.00
4/24/2015		2,782,549.00		500,985.00		3,283,534.00		112,798,302.00
7/24/2015		2,795,766.00		488,924.00		3,284,690.00		110,002,536.00
10/24/2015		2,809,046.00		476,806.00		3,285,852.00		107,193,490.00
1/24/2016		2,822,389.00		464,630.00		3,287,019.00		104,371,101.00
4/24/2016		2,835,795.00		452,397.00		3,288,192.00		101,535,306.00
7/24/2016		2,849,265.00		440,105.00		3,289,370.00		98,686,041.00
10/24/2016		2,862,799.00		427,755.00		3,290,554.00		95,823,242.00
1/24/2017		2,876,398.00		415,346.00		3,291,744.00		92,946,844.00
4/24/2017		2,890,060.00		402,878.00		3,292,938.00		90,056,784.00
7/24/2017		2,903,788.00		390,351.00		3,294,139.00		87,152,996.00
10/24/2017		2,917,581.00		377,765.00		3,295,346.00		84,235,415.00
1/24/2018		2,931,440.00		365,118.00		3,296,558.00		81,303,975.00
4/24/2018		2,945,364.00		352,412.00		3,297,776.00		78,358,611.00
7/24/2018		2,959,355.00		339,645.00		3,299,000.00		75,399,256.00
10/24/2018		2,973,411.00		326,818.00		3,300,229.00		72,425,845.00
1/24/2019		2,987,535.00		313,930.00		3,301,465.00		69,438,310.00
4/24/2019		3,001,726.00		300,980.00		3,302,706.00		66,436,584.00
7/24/2019		3,015,984.00		287,969.00		3,303,953.00		63,420,600.00
10/24/2019		3,030,310.00		274,897.00		3,305,207.00		60,390,290.00
1/24/2020		3,044,704.00		261,762.00		3,306,466.00		57,345,586.00
4/24/2020		3,059,166.00		248,564.00		3,307,730.00		54,286,420.00
7/24/2020		3,073,697.00		235,304.00		3,309,001.00		51,212,723.00
10/24/2020		3,088,298.00		221,982.00		3,310,280.00		48,124,425.00
1/24/2021		3,102,967.00		208,595.00		3,311,562.00		45,021,458.00
4/24/2021		3,117,706.00		195,146.00		3,312,852.00		41,903,752.00
7/24/2021		3,132,515.00		181,632.00		3,314,147.00		38,771,237.00
10/24/2021		3,147,395.00		168,054.00		3,315,449.00		35,623,842.00
1/24/2022		3,162,345.00		154,412.00		3,316,757.00		32,461,497.00
4/24/2022		3,177,366.00		140,704.00		3,318,070.00		29,284,131.00
7/24/2022		3,192,458.00		126,932.00		3,319,390.00		26,091,673.00
10/24/2022		3,207,623.00		113,094.00		3,320,717.00		22,884,050.00
1/24/2023		3,222,859.00		99,191.00		3,322,050.00		19,661,191.00
4/24/2023		3,238,167.00		85,221.00		3,323,388.00		16,423,024.00
7/24/2023		3,253,549.00		71,186.00		3,324,735.00		13,169,475.00
10/24/2023		3,269,003.00		57,083.00		3,326,086.00		9,900,472.00
1/24/2024		3,284,531.00		42,914.00		3,327,445.00		6,615,941.00
4/24/2024		3,300,132.00		28,677.00		3,328,809.00		3,315,809.00
7/24/2024	$	3,315,809.00	$	14,372.00	$	3,330,181.00	$	0.00

Exhibit 10.1

ATLAS AIR, INC.

401(k) RESTORATION AND VOLUNTARY DEFERRAL PLAN

Effective as of February 11, 2011

TABLE OF CONTENTS


ARTICLE I NAME AND PURPOSE OF PLAN AND DEFINITIONS			1

1.1 Name and effective date .			1

1.2 Status of Plan; Section 409A, etc. .			1

1.3 Definitions .			1

ARTICLE II ELIGIBILITY AND PARTICIPATION			4

2.1 Eligibility to participate .			4

2.2 Termination of participation .			5

ARTICLE III CREDITS; ELECTIONS TO DEFER; NOTIONAL INVESTMENT OF ACCOUNTS			5

3.1 Employer Credits .			5

3.2 Elective Credits .			5

3.3 Accounts .			6

ARTICLE IV VESTING			6

4.1 Vesting of Elective Credits .			6

4.2 Vesting of Employer Credits .			7

ARTICLE V PLAN DISTRIBUTIONS			7

5.1 Time and form of payment .			7

5.2 Designation of Beneficiary; Death .			7

5.3 Certain tax matters .			8

ARTICLE VI ADMINISTRATION OF THE PLAN			8

6.1 Administrator .			8

6.2 Indemnification .			8

6.3 Claims and appeal procedures .			9

ARTICLE VII AMENDMENT AND TERMINATION			9

7.1 Amendment; termination .			9

7.2 Effect of amendment or termination .			9

ARTICLE VIII MISCELLANEOUS PROVISIONS			9

8.1 Source of payments .			9

8.2 Inalienability of benefits .			9



8.3 Expenses .			10

8.4 No right of employment .			10

8.5 Headings .			10

8.6 Acceptance of Plan terms .			10

8.7 Construction .			10

-2-

ARTICLE I

NAME AND PURPOSE OF PLAN AND DEFINITIONS

1.1	Name and effective date . The Plan set forth herein is the Atlas Air, Inc. 401(k) Restoration and Voluntary Deferral Plan, effective February 11, 2011.

1.2

Status of Plan; Section 409A, etc . . The Plan is intended to be (i) a plan described in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA, and (ii) a nonqualified deferred compensation plan that complies in form and operation with Section 409A. Notwithstanding the foregoing, neither the Company nor any parent, subsidiary or affiliate, nor any officer, director or employee of the Company or of any parent, subsidiary or affiliate shall be liable to any Participant or to any other person by reason of any failure or asserted failure of the Plan so to qualify, in whole or in part. Without limiting the generality of the foregoing and for the avoidance of doubt, (i) if at the time of a Participant’s Separation From Service the Participant is determined by the Administrator to be a specified employee under Treasury Regulation Section 1.409A-1(i), any and all amounts payable under the Plan on account of such Separation From Service that constitute nonqualified deferred compensation and would otherwise be payable within six (6) months following the date of Separation From Service shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon the Participant’s death; and (ii) if any portion of an Account is determined by the Administrator to be includible, by reason of Section 409A, in a Participant’s or Beneficiary’s income, such portion shall be paid by the Company to such Participant or Beneficiary in a manner consistent with Section 409A and the regulations thereunder.

1.3	Definitions . When used herein, the following words shall have the meanings indicated below.

(a)

“Account” : an account described in Section 3.3, including any sub-accounts that the Administrator may establish.

(b)

“Administrator” : the Administrator appointed pursuant to Section 6.1.

(c)

“Basic Plan” : the Atlas Air, Inc. Retirement Plan, as from time to time amended and in effect.

(d)

“Basic Plan Compensation” : for purposes of calculating the Employer Credits, for any Participant for any Plan Year, all items of remuneration for such Plan Year that would be eligible for deferral by the Participant under the Basic Plan, determined with regard to the dollar limit in effect for such Plan Year under Section 401(a)(17) of the Code. For any Plan Year, the amount of Basic Plan Compensation allocable to any day shall equal the total amount of Basic Plan Compensation for the year divided by three hundred sixty-five (365). For the avoidance of doubt, Basic Plan Compensation for the Plan Year ending December 31,

2011 shall also include amounts that would have qualified as Basic Compensation for the period January 1, 2011 through February 10, 2011.

(e)

“Beneficiary” : in respect of any Participant, the person or persons that are treated as the Participant’s Beneficiary in accordance with Section 5.2(a).

(f)

“Change in Control” : means a “change in control event” (as that term is defined at Section 1.409A-3(i)(5) of the Treasury Regulations) with respect to the Company, which generally will include the following events, subject to such additional rules and requirements as may be set forth in the Treasury Regulations and related guidance:

(1)

a transfer or issuance of stock of the Company, where stock in the Company remains outstanding after the transaction, and one person, or more than one person acting as a group (as determined under the Treasury Regulations), acquires ownership of stock in the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company (however, if a person or group is considered to own more than 50% of the total fair market value or 30% of the total voting power of the stock of the Company, the acquisition of additional stock by the same person or group will not be considered a change in control for purposes of this Section 2(f));

(2)

the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of ownership of stock possessing 30% or more of the total voting power of the Company (however, if a person or group is considered to control the Company within the meaning of this sentence (i.e.,owns stock of the Company possessing 30% of the total voting power of the Company), then the acquisition of additional control will not be considered a change in control for purposes of this Section 2(1));

(3)

the replacement of a majority of members of the Company’s Board of Directors during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board of Directors before the appointment or election; or

(4)

the acquisition by a person or group, during the 12-month period ending on the date of the most recent acquisition by such person or group, of assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Company, as determined under the Treasury Regulations (however, a transfer of assets to certain related persons, as provided under the Treasury Regulations, or to an entity that is controlled by the shareholders of the Company immediately after the transfer, will not be considered a change in control for purposes of this Section 2(f)).

(g)

“Code” : the Internal Revenue Code of 1986, as amended from time to time.

(h)

“Committee” : the Compensation Committee of the Board of Directors of Atlas Air Worldwide Holdings, Inc.

(i)

“Company” : Atlas Air, Inc.

(j)

“Credit” : any or all, as the context requires, of an Elective Credit or an Employer Credit.

(k)

“Deferred Compensation Agreement” : a written agreement described in Section 3.2(a).

(l)

“Disabled” and the correlative term “Disability” : a Participant will be considered Disabled (as that term is defined in Section 409A(a)(2)(C) of the Internal Revenue Code) on the date as of which, in the Administrator’s determination, he or she: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months, under an accident and health plan covering employees of the Company.

(m)

“Elective Credit” : an amount credited under Section 3.2.

(n)

“Eligible Employee” : an employee who meets the eligibility criteria set forth in Section 2.1.

(o)

“Eligible Compensation” : with respect to Employer Credits, for any Participant for any Plan Year, the excess of (i) all items of remuneration (other than Equity Compensation) for such Plan Year that would be eligible for deferral by the Participant under the Basic Plan, determined without regard to any dollar limits in effect under the Code, over (ii) the dollar limit in effect for such Plan Year under Section 401(a)(17) of the Code. For any Plan Year, the amount of Eligible Compensation allocable to any day shall equal the total amount of Eligible Compensation for the year divided by three hundred sixty-five (365). For the avoidance of doubt, Eligible Compensation for the Plan Year ending December 31, 2011 shall also include amounts that would have qualified as Eligible Compensation for the period January 1, 2011 through February 10, 2011.

(p)

“Employer Credit” : an amount credited under Section 3.1.

(q)

“Equity Compensation” : all items of remuneration received by a Participant pursuant to a stock-based award under the Atlas Air Worldwide Holdings, Inc. 2007 Incentive Plan, the Atlas Air Worldwide Holdings, Inc. 2004 Long Term

Incentive and Share Award Plan or any other plan of the Company or its parent, subsidiary or affiliate providing for awards of stock-based incentive compensation.

(r)

“Participant” : an Eligible Employee who has an Account under the Plan.

(s)

“Pay” : with respect to Elective Credits, for any Participant for any Plan Year, the sum of base salary plus any cash bonus and/or cash incentive pay. Base salary shall be treated as Pay for a Plan Year only if it is or, but for deferral under the Plan or the Basic Plan, would be paid on a current basis in respect of services performed during the Plan Year. Cash bonuses and/or cash incentive pay shall be treated as Pay for a Plan Year (the “first Plan Year”) only if it is or, but for deferral under the Plan or the Basic Plan, would be paid not later than the following Plan Year in respect of a performance period consisting of the first Plan Year.

(t)

“Plan” : this Atlas Air, Inc. 401(k) Restoration and Voluntary Deferral Plan, as from time to time amended and in effect.

(u)

“Section 409A”: Section 409A of the Code.

(v)

“Separation from Service” : a separation from service, within the meaning of Treas. Regs. §1.409A-1(h), with the Company and any other company that would be treated as a single employer with the Company under the first sentence of Treas. Regs. §1.409A-1(h)(3); and correlative terms shall be construed to have a corresponding meaning.

To the extent permitted by the Administrator, the terms “written,” “in writing,” and terms of similar import shall include communications by electronic media.

ARTICLE II

ELIGIBILITY AND PARTICIPATION

2.1 Eligibility to participate .

(a)

General Rule . Except as provided in Section 2.1(b), an individual shall be eligible to receive Credits under the Plan for a Plan Year only if, as of the immediately preceding December 31 (the “eligibility determination date”), he or she holds the title of Senior Vice President or above of the Company. Any individual who has satisfied the eligibility requirements of this Section 2.1 as of the December 31 immediately preceding a Plan Year shall remain an Eligible Employee for the entirety of the Plan Year or until his or her Separation from Service if earlier. All determinations by the Administrator under this Section 2.1 for a Plan Year shall be made not later than by the immediately preceding eligibility determination date.

(b)

Special Rule for Newly Eligible Individuals . An individual who, by reason of commencement of employment or promotion during a Plan Year, would first satisfy the requirements for eligibility then in effect under Section 2.1(a) as of a date during such Plan Year (the “mid-year eligibility determination date”), will be treated as an Eligible Employee for the remainder of the Plan Year. For purposes of the preceding sentence, the rules of Section 1.409A-2(a)(7) shall apply.

2.2

Termination of participation . The Committee may terminate an Eligible Employee’s participation in the Plan at any time. If an Eligible Employee’s participation in the Plan terminates hereunder, the Participant’s Account shall continue to be adjusted for notional earnings until it is distributed as further provided in Section 3.3. No termination of participation shall result in a cessation or refund of deferrals for which the deferral election has already been made, except in a manner that is consistent with compliance with the requirements of Section 409A.

ARTICLE III

CREDITS; ELECTIONS TO DEFER; NOTIONAL INVESTMENT OF ACCOUNTS

3.1

Employer Credits . For each Plan Year, an Eligible Employee shall be entitled to an Employer Credit equal to (a) the excess of 5% of Basic Plan Compensation over half the limit in effect for such Plan Year described in Section 402(g)(1)(A) of the Code (without regard to Section 402(g)(1)(C) of the Code) plus (b) 5% of the Participant’s Eligible Compensation for such Plan Year. Employer Credits for a Plan Year shall be added to the Participant’s Account as of and as soon as practicable following the earlier of (i) the last day of the Plan Year, (ii) the Participant becoming Disabled, (iii) the date of the Participant’s Separation from Service, (iv) the date of the Participant’s death, or (v) a Change in Control.

3.2	Elective Credits .

(a)

Deferred Compensation Agreement . An Eligible Employee may elect to defer a portion of his or her Pay for a Plan Year (or, in the case of an Eligible Employee described in Section 2.1(b), for the balance of the Plan Year of initial eligibility) by entering into a Deferred Compensation Agreement with the Company. Elective Credits equal to the amounts deferred shall be credited to the Participant’s Account as soon as practicable after the deferral is withheld from Pay.

(b)

Election procedures and deadlines: deferrals of base salary . In general, a Deferred Compensation Agreement with respect to Pay consisting of base salary must be entered into, in accordance with such procedures as the Administrator may establish, prior to the beginning of the Plan Year in which the services relating to such base salary are to be performed. In the case of an Eligible Employee described in Section 2.1(b), a Deferred Compensation Agreement with

respect to Pay consisting of base salary for the balance of the Plan Year of initial eligibility must be entered into within thirty (30) days of initial eligibility and shall apply only to base salary for services performed after the date of such Agreement.

(c)

Election procedures and deadlines; deferrals of cash bonuses or other cash incentive pay . In general, a Deferred Compensation Agreement with respect to Pay consisting of cash bonuses or other cash incentive pay must be entered into prior to the beginning of the Plan Year in which any portion of the services relating to such bonus or incentive pay is performed. Notwithstanding the foregoing, (i) in the case of cash bonuses or other cash incentive pay that in the Administrator’s judgment will qualify under Section 409A of the Code as “performance-based compensation” that has not yet become readily ascertainable, a Deferred Compensation Agreement with respect to such pay may be entered into as late as six (6) months before the end of the performance period if the Eligible Employee has been in continuous employment with the Company since the later of the beginning of the performance period or the date the performance criteria are established, and (ii) in the case of an Eligible Employee described in Section 2.1(b) above, any Deferred Compensation Agreement with respect to cash bonuses or other cash incentive pay for the balance of the Plan Year of initial eligibility must be entered into with thirty (30) days of initial eligibility and, unless clause (i) of this Section 3.2(c) is applicable, shall apply only to the portion of such bonuses or incentive pay determined by multiplying the total amount of such bonuses or incentive pay by a fraction, the numerator of which is the number of days from the date of such Deferred Compensation Agreement until the close of the Plan Year and the denominator of which is three hundred sixty five (365).

(d)

Other requirements . Except as otherwise determined by the Administrator, a new Deferred Compensation Agreement must be timely executed for each Plan Year and shall be effective only if accepted and approved by the Administrator by the applicable deadline.

(e)

Amount of Deferrals . The Administrator may, prior to the effectiveness of any Deferred Compensation Agreement, limit the amount of Pay eligible to be deferred under such Agreement.

3.3

Accounts . The Administrator shall establish for each Participant an Account together with such sub-accounts as in the determination of the Administrator are needed or appropriate to reflect the Credits described above as well as debits and other adjustments, including without limitation adjustments for notional (hypothetical) earnings as described in this Section 3.3. Notional earnings shall be added to a Participant’s Account as of and as soon as practicable following the earlier of (i) the last day of the Plan Year, (ii) the Participant becoming Disabled, (iii) the date of the Participant’s Separation from Service, (iv) the date of the Participant’s death, or (v) a Change in Control and will be calculated using the U.S. prime interest rate as reported in The Wall Street Journal as of the day prior to the date such earnings are added to a Participant’s Account.

ARTICLE IV

VESTING

4.1

Vesting of Elective Credits . The portions of each Account that reflect Elective Credits, together with related notional earnings, shall be fully vested at all times. The fact that an Account or any portion thereof is fully vested shall not give the Participant (or his or her Beneficiary(ies)) or any other person any right to receive the value of such Account (as the same may from time to time be adjusted) except in accordance with the terms of the Plan.

4.2

Vesting of Employer Credits . Provided a Participant remains employed by the Company, the portions of each Account that reflect Employer Credits together with related notional earnings shall vest 100% on the third anniversary of the Participant’s initial eligibility for the Plan. Notwithstanding the above, for purposes of this Section 4.2, a Participant who is an Eligible Employee on February 11, 2011 shall be deemed to be initially eligible for the Plan on the first day he or she held the position of senior vice president or above of the Company. The portions of each Account that reflect Employer Credits credited to a Participant’s Account on or after the Participant’s third anniversary shall be fully vested at all times. The fact that an Account or any portion thereof is fully vested shall not give the Participant (or his or her Beneficiary(ies)) or any other person any right to receive the value of such Account (as the same may from time to time be adjusted) except in accordance with the terms of the Plan.

ARTICLE V

PLAN DISTRIBUTIONS

5.1	Time and form of payment . Except as otherwise provided herein, each Account, and related notional earnings, shall be paid in a single lump sum to the Participant within 60 days following the earliest to occur of:

(a)

The Participant becoming Disabled; or

(b)

The Participant’s Separation From Service;

(c)

The Participant’s death; or

(d)

A Change in Control.

5.2	Designation of Beneficiary; Death .

(a)

Designation of Beneficiary . A Participant may designate, in writing in a form acceptable to the Administrator, one or more beneficiaries under the Plan, who may be the same or different than those named under the Basic Plan, to receive benefits, if any, payable upon the Participant’s death; provided, that in the

absence of any beneficiary so designated, benefits payable following death shall be paid to the Participant’s estate.

(b)

Death . If a Participant dies while still employed by the Company, or following a Separation from Service but prior to the complete distribution of his or her Account, the Participant’s Account shall be paid to his or her Beneficiary in a lump sum as soon as reasonably practicable, but not later than 60 days, following such Participant’s death. The Administrator reserves the right to require as a condition of payment of any death benefit hereunder a certified death certificate or other confirmation of death satisfactory to the Administrator with respect to a payment to be made to a Participant’s Beneficiary.

5.3

Certain tax matters . Payments hereunder shall be reduced by required tax withholdings. To the extent any deferral or credit under the Plan results in current “wages” for FICA purposes, the Company may reduce other pay of the Participant to satisfy withholding requirements related thereto; but if there is no other pay (or if the Company fails to withhold from such other pay to satisfy its FICA withholding obligations), the Participant’s Account shall be appropriately reduced (in a manner consistent with Section 409A and the regulations thereunder) by the amount of the required withholding.

ARTICLE VI

ADMINISTRATION OF THE PLAN

6.1

Administrator . Except as the Committee may otherwise determine, the Administrator shall be the Director of Benefits or such other person holding the most senior position in the Benefits Department of the Company as from time to time in office, and his or her delegates. The Administrator shall have complete discretionary authority to interpret the Plan and to decide all matters under the Plan. Such interpretation and decision shall be final, conclusive and binding on all Participants and any person claiming under or through any Participant, in the absence of clear and convincing evidence that the Administrator acted arbitrarily and capriciously. However, no individual acting, directly or by delegation, as the Administrator may determine his or her own rights or entitlements under the Plan. The Administrator shall establish such rules and procedures, maintain such records and prepare such reports as it considers to be necessary or appropriate to carry out the purposes of the Plan.

6.2

Indemnification . To the extent permitted by law and not prohibited by its charter and by-laws, the Company will indemnify and hold harmless every person serving (directly or by delegation) as Administrator and the estate of such an individual if he or she is deceased from and against all claims, loss, damages, liability and reasonable costs and expenses incurred in carrying out his or her responsibilities as Administrator, unless due to the gross negligence, bad faith or willful misconduct of such individual; provided , that counsel fees and amounts paid in settlement must be approved by the Company; and further provided, that this Section 6.2 will not apply to any claims, loss, damages,

liability or costs and expenses which are covered by a liability insurance policy maintained by the Company or by the individual. The provisions of the preceding sentence shall not apply to any corporate trustee, insurance company, investment manager or outside service provider (or to any employee of any of the foregoing) unless the Company otherwise specifies in writing.

6.3	Claims and appeal procedures . The Administrator shall establish claims and appeals procedures for the Plan under Section 503 of ERISA, which procedures (as from time to time amended and in effect) shall be deemed a part of the Plan and incorporated herein.

ARTICLE VII

AMENDMENT AND TERMINATION

7.1

Amendment; termination . By action of the Committee or its delegate, the Company reserves the absolute right at any time and from time to time to amend any or all provisions of the Plan, and to terminate the Plan at any time. In addition, the Administrator shall have the right at any time and from time to time to make amendments to the Plan (in general or with respect to one or more individual Participants or Beneficiaries) that are administrative in nature, including, without limitation, amendments coordinating the provisions of the Plan with the terms of any severance, separation or similar plan or agreement.

7.2

Effect of amendment or termination . No action under Section 7.1 shall operate to reduce the balance of a Participant’s Account as compared to such balance immediately prior to the effectiveness of such action, other than through a distribution upon a termination and liquidation of the Plan in accordance with the requirements of Treas. Regs. §1.409A-3(j)(4)(ix)).

ARTICLE VIII

MISCELLANEOUS PROVISIONS

8.1

Source of payments . All payments hereunder to Participants and their Beneficiaries shall be paid from the general assets of the Company, including for this purpose, if the Company in its sole discretion so determines, assets of one or more trusts established in a manner consistent with Section 1.2 above to assist in the payment of benefits hereunder.

8.2	Inalienability of benefits . Except as required by law, no benefit under, or interest in, the Plan shall be subject in any manner to anticipation, alienation, sale,

transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so shall be void.

8.3	Expenses . The Company shall pay all costs and expenses incurred in operating and administering the Plan.

8.4	No right of employment . Nothing contained herein, nor any action taken under the provisions hereof, shall be construed as giving any Participant the right to be retained in the employ of the Company.

8.5	Headings . The headings of the sections in the Plan are placed herein for convenience of reference, and, in the case of any conflict, the text of the Plan, rather than such heading, shall control.

8.6	Acceptance of Plan terms . By receiving Employer Credits or executing a Deferred Compensation Agreement, a Participant agrees, on his or her behalf and on behalf of his or her Beneficiaries, to abide by the terms of the Plan and the determinations of the Administrator with respect thereto.

8.7	Construction . The Plan shall be construed, regulated, and administered in accordance with the laws of New York and applicable federal laws.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by it duly respective duly authorized officer as of the 11 ^th day of February, 2011.


ATLAS AIR, INC.

By:		/s/ Adam R. Kokas
		Adam R. Kokas
		Senior Vice President

Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer

I, William J. Flynn, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

2.	Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.	Based on my knowledge, the Financial Statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

d) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer

I, Spencer Schwartz, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Atlas Air Worldwide Holdings, Inc.;

2.	Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

3.	Based on my knowledge, the Financial Statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting ( as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EXHIBIT 32.1

Section 1350 Certifications

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Atlas Air Worldwide Holdings, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2012 as filed with the Securities and Exchange Commission (the “Report”), we, William J. Flynn and Spencer Schwartz, Chief Executive Officer and Chief Financial Officer, respectively, of the Company certify that to our knowledge:

1. the Report complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange of 1934, as amended; and

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.




Date: August 2, 2012				/s/ William J. Flynn
				William J. Flynn
				President and Chief Executive Officer



				/s/ Spencer Schwartz
				Spencer Schwartz
				Senior Vice President and Chief Financial Officer

Dated: August 2, 2012

/s/ William J. Flynn

William J. Flynn

President and Chief Executive Officer