Fitch Downgrades 2 & Affirms 16 Classes in Pegasus Aviation Lease Securitization Trusts.

CHICAGO -- Fitch Ratings has taken the following rating actions on the three Pegasus Aviation Lease Securitization Trusts:

Pegasus Aviation Lease Securitization (PALS I)

--Class A-1 notes remain at 'CC/DR4';

--Class A-2 notes remain at 'CC/DR4';

--Class B notes remain at 'C/DR6';

--Class C notes remain at 'C/DR6';

--Class D notes remain at 'C/DR6'.

Pegasus Aviation Lease Securitization II (PALS II)

--Class A-1 notes downgraded to 'CCC/DR2' from 'B-/DR2';

--Class A-2 notes downgraded to 'CCC/DR3' from 'B-/DR2';

--Class B notes remain at 'C/DR6';

--Class C notes remain at 'C/DR6';

--Class D notes remain at 'C/DR6'.

Pegasus Aviation Lease Securitization III (PALS III)

--Class A-1 notes affirmed at 'B/DR2';

--Class A-2 notes affirmed at 'B/DR2';

--Class A-3 notes affirmed at 'B/DR2';

--Class B-1 notes remain at 'C/DR6';

--Class B-2 notes remain at 'C/DR6';

--Class C-1 notes remain at 'C/DR6';

--Class C-2 notes remain at 'C/DR6';

--Class D-1 notes remain at 'C/DR6'.

Cash flow available to service debt in the PALS II transaction has continued to steadily decline over the past two years. The decline in monthly collections combined with increased expenses in recent months has further stressed the transaction structure. While the class A notes are receiving current interest payments, total monthly collections were insufficient to pay minimum principal to the class A notes on the March, May, and June 2008 payment dates. As available cash flow continues to decrease, the reliability of full principal payment on the class A notes also declines. The DR-Rating differential between the A-1 and A-2 notes reflects the differing amortization schedules between the two classes. Class A-1 is currently receiving the full benefit of class A principal payments.

In addition, the PALS II portfolio contains significant concentrations in older generation, less fuel efficient aircraft types such as 757-200s and MD-80s. These aircraft types are exposed to potential value and lease rate deterioration resulting from increased fuel prices, airline capacity reductions, and bankruptcies in the current environment.

Fitch's analysis incorporated expected cash flow to be available to the trust over the remaining life of the transaction. This expectation is based on several factors including aircraft age, current portfolio value, potential lease rates, and perceived liquidity of the portfolio. Lease rate and portfolio value expectations have been updated to reflect Fitch's views on certain aircraft given the aviation market volatility and significantly elevated fuel prices.

PALS I and PALS III were affirmed as they were found to have credit support consistent with their current ratings.

Fitch will continue to monitor these, and all, aircraft securitizations and update ratings as warranted.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.