investments as described below, our Chief Operating Decision Maker, who is the Company's Chief Executive Officer, began reviewing and assessing the operating performance of our business on a consolidated basis as the sale caused the operational results and asset levels of our remaining debt investments to be immaterial to our business and operations. As a result, we now operate in a single segment.
In February 2008, we sold two of our debt investments for $65.3 million, plus accrued interest. We repaid the outstanding balance of $52.3 million, plus accrued interest, under the related repurchase agreement. Additionally, we terminated the related interest rate swap, with notional amounts of $39.0 million at December 31, 2007 and $33.0 million as of the termination date, related to the repurchase agreement and paid breakage fees and accrued interest of approximately $1.0 million, resulting in a loss of $0.9 million, which is included in interest expense on the consolidated statement of income.
Our reduction in debt investments was done in order to deploy our capital more efficiently and to reduce short-term repurchase agreement borrowings and interest rate exposure on our hedged repurchase agreements related to these debt investments.
Revenues
Revenues are comprised primarily of operating lease rentals on flight equipment held for lease. Typically, our aircraft are subject to net operating leases whereby the lessee pays rentals and is generally responsible for maintaining the aircraft, and paying operational, maintenance and insurance costs, although in a majority of cases we are obligated to pay a portion of specified maintenance or modification costs. The amount of rent we receive depends on various factors, including the type, size and age of the aircraft in our portfolio. Lease payments are typically denominated in U.S. dollars. Lease rental revenue is recognized on a straight-line basis over the term of the lease. Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease. However, the amount of rent we receive may vary due to several factors, including the credit worthiness of our lessees and the occurrence of delinquencies and defaults. Our lease rental revenues are also affected by the extent to which aircraft are off-lease and our ability to remarket aircraft that are nearing the end of their leases in order to minimize their off-lease time. Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues. We also earn interest income from our debt investments.
We owned 14 aircraft at December 31, 2007 with leases originally scheduled to expire in 2008 and, as of August 1, 2008, we had executed leases or renewals, with respect to all 14 of these aircraft. In the second quarter of 2008, a lessee took delivery of an aircraft and subsequently defaulted. We terminated the lease for that aircraft and a second aircraft scheduled to be delivered to that customer in the third quarter of 2008. We signed a letter of intent to lease these aircraft to another customer and expect to have the aircraft in revenue service in the third quarter of 2008. We estimate that for these 14 aircraft, the weighted average lease term for the new leases or renewals will be more than six years with monthly lease rates that will be approximately 12% higher than the previous rentals. Additionally, two Boeing Model 757 aircraft with lease expiration dates in 2008 are committed for sale upon return from the existing lessee and the sale of one of these aircraft was completed in the third quarter of 2008.
For our 20 owned aircraft originally having lease expiries in 2009, we have executed lease renewals, or commitments to lease or renew, on 16 aircraft and are actively marketing the remaining aircraft.
Since June 2007, we purchased three off-lease Boeing Model 747-400 aircraft. In June 2007, we also entered into a passenger to freighter conversion agreement for these aircraft. The freighter conversion process for the first aircraft was completed at the end of March 2008 and it was delivered to a lessee on a long-term lease at the end of the first quarter of 2008. The second aircraft was placed on a short-term interim lease and began its freighter conversion process during the second quarter of 2008. We have executed a long-term, post-conversion lease for this aircraft upon completion of its freighter conversion process, currently scheduled for the fourth quarter of 2008. We cancelled the freighter conversion contract for the third aircraft and signed an agreement to sell it upon completion of an interim lease.
In the first quarter of 2008, we acquired one off-lease aircraft. This aircraft was subject to a lease that we entered into in 2007; however, the lessee failed to accept delivery of the aircraft and we terminated the lease in March 2008. In April 2008, we entered into a new lease for this aircraft with another customer and we delivered the aircraft under the

new lease in the second quarter of 2008. We also acquired an aircraft in satisfaction of a debt instrument and leased the aircraft to a follow-on lessee during the first quarter of 2008; however, in April 2008, the follow-on lessee defaulted under the lease and later filed for bankruptcy protection in the U.S. We recovered possession of the aircraft in May 2008 and signed a letter of intent to lease this aircraft to another customer and expect to have the aircraft in revenue service in the third quarter of 2008.
In the second quarter of 2008, we acquired one off-lease aircraft, which at June 30, 2008 was undergoing maintenance, and we delivered the aircraft under the new lease in the third quarter of 2008.
Revenues from operating lease rentals for the three and six months ended June 30, 2007 were $81.9 million and $149.3 million, respectively, as compared to $144.3 million and $277.9 million, respectively, for the three and six months ended June 30, 2008, Our operating lease revenues increased significantly from 2007 to 2008 primarily as a result of continued aircraft acquisitions during the balance of 2007 and the first six months of 2008 which caused our aircraft fleet to grow from 100 aircraft at June 30, 2007, to 135 aircraft at June 30, 2008, all but two of which were on lease as of June 30, 2008.
Revenues from interest income on our debt investments are recognized using the effective interest method. Certain investments which represent residual interests are accounted for using a level yield methodology based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest. Interest income from our debt investments for the three and six months ended June 30, 2007 was $2.7 million and $5.3 million, respectively, as compared to $0.6 million and $1.9 million for the three and six months ended June 30, 2008. The decrease in interest income of $2.1 million and $3.4 million, respectively, for the three and six months ended June 30, 2008 as compared to the same periods in 2007 was primarily due to the sale of two of our debt investments in early February 2008.
Operating Expenses
Operating expenses are comprised of depreciation of flight equipment held for lease, interest expense, selling, general and administrative expenses, or SG&A, and other expenses.
Since our operating lease terms generally require the lessee to pay for operating, maintenance and insurance costs, our portion of other expenses relating to aircraft reflected in our statement of income has been nominal. Income Tax Provision
We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in or earn income in jurisdictions that impose income taxes, primarily Ireland and the United States.
All of our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are non-U.S. corporations. These non-U.S. subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes unless they operate within the U.S. in which case they may be subject to federal, state and local income taxes. We also have a U.S-based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes.
Acquisitions and Dispositions
We believe the large and growing aircraft market generates additional acquisition opportunities. Our approach is predicated on sourcing investments we believe to be accretive to shareholders. Currently, our investment focus is primarily on high-utility commercial jet aircraft for the passenger and freighter markets, although we also intend to continue to explore investment opportunities for asset-backed aviation assets, such as debt investments. Our business strategy has been to pursue acquisitions through multiple channels across the world, such as sale-leasebacks with

airlines and purchases from operating lessors, banks and other aircraft owning entities. We also explore opportunities to purchase aircraft from manufacturers. Going forward, we may seek to make investments through investment vehicles involving third party investors. Our ability to successfully and efficiently acquire and integrate additional aviation assets on favorable terms, including our ability to source capital to fund acquisitions, will significantly impact our financial results and growth prospects.
We evaluate our portfolio on a regular basis in order to manage our investments in a way we believe will maximize shareholder value. As part of our active portfolio management, we will sell aircraft or debt investments in order to manage exposures, to reflect our views of evolving market conditions, and in cases where we believe we can earn better returns, by selling aircraft and investing our capital in other ways. In addition, we analyze each aircraft as its lease expiration or other milestones approach, to determine whether to offer it for sale, re-lease, or in the case of passenger aircraft, to reconfigure the aircraft as a freighter, and then lease it. Although our focus is not on trading assets to generate short-term gains, asset sales are a fundamental part of our ongoing portfolio management.
On January 22, 2007, we entered into the GAIF Acquisition Agreement, pursuant to which we agreed to acquire 38 aircraft for an aggregate base purchase price of approximately $1.595 billion, subject to certain agreed adjustments. In November 2007, we agreed with GAIF to remove two aircraft from the GAIF Acquisition Agreement. In March 2008, we agreed to remove one additional aircraft from the GAIF Acquisition Agreement and in June 2008 we determined that we would not acquire three additional aircraft from the GAIF Acquisition Agreement, reducing the total number of aircraft to be acquired to 32, with an aggregate base purchase price of approximately $1.412 billion. For certain of the aircraft, we agreed to make accelerated payments to the relevant sellers and acquire their rights and obligations under the seller's purchase or freighter conversion agreements, with final payment and delivery of the aircraft to us being made upon delivery by the manufacturer or seller, or completion of the conversion process. In June 2008, we decided not to acquire three of these aircraft and will not recover the accelerated payments we previously made for these aircraft, although these accelerated payments were offset by fees paid to us by the aircraft seller for the right to put the aircraft to us in 2013 and 2014 for a reduced purchase price. We acquired 28 of these aircraft in 2007 and four of these aircraft during the first six months of 2008. As of June 30, 2008, we have completed the acquisition of the 32 aircraft for approximately $1.385 billion.
On June 20, 2007, we entered into the Airbus A330 Agreement, under which we agreed to acquire from Airbus fifteen new A330-200 aircraft, or the New A330 Aircraft. Pre-delivery payments for each aircraft are payable to Airbus and are refundable to us only in limited circumstances. We agreed to separate arrangements with Rolls-Royce PLC, or Rolls-Royce, and Pratt & Whitney, or P&W, pursuant to which we committed to acquire aircraft engines for the New A330 Aircraft. We agreed to acquire six shipsets of Trent 772B engines from Rolls-Royce and were granted options to acquire an additional four shipsets. We also committed to acquire five shipsets of PW4170 engines from P&W, and were granted options to acquire an additional five shipsets. Each shipset consists of two engines. In July 2008, we amended the Airbus A330 Agreement to reduce the number of New A330 aircraft to be acquired from fifteen to twelve and to change the Airbus A330 Agreement so that we receive a mix of freighter and passenger aircraft. Seven of the New A330 aircraft are scheduled to be delivered as freighters, including three early positions, and five New A330 aircraft will be manufactured in passenger configuration. Under certain circumstances, we have the right to change the delivery positions to alternative A330 aircraft models. Four of the New A330 aircraft are scheduled to be delivered in 2010, six are scheduled to be delivered in 2011 and the remaining two are scheduled to be delivered in 2012.
In May 2008, we sold three Boeing Model 737-500 aircraft that were on lease to one of our customers, which resulted in a pre-tax gain of $5.1 million and is included in other income on our consolidated statement of income. In July 2008, we sold one Boeing Model 757-200 aircraft that had previously been subject to a forward sales agreement and on lease to one of our customers, to a third party. The lease expired immediately prior to the sale of this aircraft.

The following table sets forth certain information with respect to the aircraft acquired by us as of June 30, 2008:
AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)

                                                                        Owned
                                                                       Aircraft
                                                                        as of
                                                                       June 30,
                                                                       2008(1)
   Flight Equipment Held for Lease                                     $ 4,081
   Number of Aircraft                                                      135
   Number of Lessees                                                        58
   Number of Countries                                                      30
   Weighted Average Age - Passenger (years)(2) (5)                        10.5
   Weighted Average Age - Freighter (years)(2) (5)                         8.8
   Weighted Average Age - Combined (years)(2) (5)                         10.1
   Weighted Average Remaining Passenger Lease Term (years)(3) (4)          4.1
   Weighted Average Remaining Cargo Lease Term (years)(3) (4)              9.0
   Weighted Average Remaining Combined Lease Term (years)(3) (4)           5.5
   Weighted Average Fleet Utilization during Second Quarter 2008(6)         99 %

(1) Calculated using net book value.

(2) Weighted average age (years) by net book value is as of June 30, 2008.

(3) Weighted average remaining lease term (years) by net book value is as of June 30, 2008.

(4) One Boeing Model 747-400 aircraft that was scheduled to go into freighter conversion in the fourth quarter of 2008 is currently on a short-term lease in passenger configuration is included as "Passenger" aircraft. In July 2008, we terminated the freighter conversion contract for this aircraft and have signed an agreement to sell this aircraft to a third party following lease expiry.

(5) One Boeing Model 747-400 aircraft currently being converted to freighter configuration is included as "Freighter" aircraft; the remaining lease term for this aircraft, for which we have an executed lease post-conversion, is measured based on the ten-year term of that post-conversion lease.

(6) Aircraft on-lease days as a percent of total days in period weighted by net book value, excluding aircraft in conversion.

Our owned aircraft portfolio as of June 30, 2008 is listed in Exhibit 99.1 in the original Form 10-Q. Approximately 86% of the total aircraft and 92% of the freighters we owned as of June 30, 2008 are what we consider to be the most current technology for the relevant airframe and engine type and airframe size, as listed under the headings "Latest Generation Narrowbody Aircraft," "Latest Generation Midbody Aircraft," "Latest Generation Widebody Aircraft" and "Latest Generation Widebody Freighter Aircraft" in Exhibit 99.1 in the original Form 10-Q.

PORTFOLIO DIVERSIFICATION

                                              Owned Aircraft as of
                                                  June 30, 2008
                                          Number of          % of Net
                                           Aircraft         Book Value
               Aircraft Type
               Passenger:
               Narrowbody                         92                 47 %
               Midbody                            24                 23 %
               Widebody (1)                        2                  3 %

               Total Passenger                   118                 73 %
               Freighter (2)                      17                 27 %

               Total                             135                100 %


               Manufacturer
               Boeing                             93                 67 %
               Airbus                             42                 33 %

               Total                             135                100 %


               Regional Diversification
               Europe (3)                         64                 47 %
               Asia (4)                           34                 23 %
               North America (5)                  14                 11 %
               Latin America                      11                  7 %
               Middle East and Africa             10                 12 %
               Off-lease (6)                       2                  - %

               Total                             135                100 %

(1) One Boeing Model 747-400 aircraft that was scheduled to go into freighter conversion in the fourth quarter of 2008 currently on short-term lease in passenger configuration is included as a "Passenger" aircraft. In July 2008, we terminated the freighter conversion agreement for this aircraft and have signed an agreement to sell this aircraft to a third party following lease expiry.

(2) One Boeing Model 747-400 aircraft currently being converted to freighter configuration is included as "Freighter" aircraft.

(3) Includes one Airbus Model A320-200 aircraft that was undergoing maintenance as of June 30, 2008 for which we have an executed lease and which was delivered during the third quarter of 2008.

(4) Includes one Boeing Model 747-400 aircraft currently on short-term lease in passenger configuration to an airline in Asia. This aircraft was scheduled to go into freighter conversion in the fourth quarter of 2008. In July 2008, we terminated the freighter conversion agreement for this aircraft and have signed an agreement to sell this aircraft to a third party following lease expiry.

(5) Includes one Boeing Model 747-400 aircraft currently being converted to freighter configuration for which we have an executed lease post-conversion with a carrier in North America.

(6) At June 30, 2008, includes one off-lease Boeing Model 757-200 aircraft and one off-lease Boeing Model 737-300 for which we have signed letters of intent with new carriers.

Our top 15 customers for aircraft we owned at June 30, 2008, representing 63 aircraft and 59% of the net book value of flight equipment held for lease, are as follows:

Percent of Net                                                                Number of
  Book Value         Customer                              Country             Aircraft


Greater than 6%      Martinair                             Netherlands             5
per customer         Emirates                              United Arab             2
                                                           Emirates


3% to 6%             US Airways                            USA                     8
per customer         Sterling Airlines                     Denmark                 7
                     Iberia Airlines                       Spain                   6
                     Jet Airways                           India                   8
                     Airbridge Cargo                       Russia                  1
                     VRG Linhas Aereas/GOL                 Brazil                  7
                     Transportes Aereos (1)
                     KLM Royal Dutch Airlines              Netherlands             1


Less than 3%         Swiss International Air Lines         Switzerland             2
per customer         China Eastern Airlines                China                   4
                     World Airways (2)                     USA                     2
                     Korean Air                            South Korea             2
                     Malaysia Airlines                     Malaysia                2
                     Hainan Airlines                       China                   6

(1) VRG Linhas Aereas and
GOL
Transportes Aereos are shown combined in the above table.

(2) Includes one Boeing Model 747-400 aircraft currently being converted to freighter configuration and scheduled for delivery in the fourth quarter of 2008.

Finance
We have typically financed the initial purchase of aircraft using committed short-term credit arranagements and cash on hand. These arrangements and our long-term financings are typically secured by the acquired aircraft and related leases, and recourse to the Company is limited. We believe such financing is available on reasonable terms given the loan to value profile we have pursued.
On May 2, 2008 two of our subsidiaries entered into a seven year, $786.1 million term debt facility, which were refer to as Term Financing No. 1, . . .