AIG Deconstructed: Why AIG Owns 900 Jets

(Update: Additional background on ILFC, and adds price of AIG shares at the market close on Monday.)

It's time for your AIG Fun-Fact of the Week: Did you know that American International Group(AIG), that debt-riddled monstrosity, also happens to own of the world's largest collection of both Boeing(BA) and Airbus airplanes?

Crazy, right? Well, not so crazy if you also consider that the insurer's aircraft leasing arm, International Lease Finance (ILFC), is the world's largest aircraft leasing company, in terms of the value of its planes, with some 955 jets in its portfolio.

It makes a little bit more sense then. A little bit.

Indeed, ILFC has been a cash cow for AIG, earning $703.1 million in 2008, a 16% increase from the year prior. And it's hardly poised to slow down any time soon.

Earlier this month, the company announced that it would increase its fleet of planes by 20% to 30% within the next 12 to 18 months.

One might think, in fact, that this powerhouse is exactly what AIG needs to help satisfy its $180 billion bailout from the government. And that's what AIG thought, too, when it added it to its ever growing list of subsidiaries on the sell-block.

ILFC, however, doesn't look as alluring to potential bidders when you factor in its mounds of debt. The company is currently carrying about $32 billion in debt, some of which is slated to mature in October.

ILFC has a book value of $7.8 billion, but potential bidders, which include Thomas H. Lee Partners and Carlyle Group, Onex and Greenbriar Equity, and Terra Firma Capital Partners, seem reluctant to offer more than than $5 billion, says Roger King, analyst at CreditSights.

And it's fair to say that no one will touch ILFC with a 10-foot pole without some form of government involvement or guarantee -- an obstacle that has, so far, helped prolong the completion of any deal.

The U.S. Federal Reserve suggested it could provide about $5 billion in loans, but that still would not cover ILFC's refinancing and debt over the next few years, which would be roughly $6 billion annually.