SEC Info - Aircastle Ltd. - ‘10-K’ for 2/29/24

F - 4

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)


	February 29,		February 28,
	2024		2023
ASSETS
Cash and cash equivalents	$	i 129,977	$	i 231,861

Accounts receivable	i 12,518		i 12,855

Flight equipment held for lease, net	i 6,940,502		i 6,567,606
Net investment in leases, net	i 282,439		i 67,694
Unconsolidated equity method investment	i 42,710		i 40,505
Other assets	i 271,807		i 346,330

Total assets	$	i 7,679,953	$	i 7,266,851

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Borrowings from secured financings, net	$	i 875,397	$	i 752,298
Borrowings from unsecured financings, net	i 3,823,099		i 3,842,454
Accounts payable, accrued expenses and other liabilities	i 219,588		i 206,473
Lease rentals received in advance	i 52,654		i 66,816

Security deposits	i 69,544		i 61,734
Maintenance payments	i 505,897		i 465,618
Total liabilities	i 5,546,179		i 5,395,393

Commitments and Contingencies	i		i

SHAREHOLDERS’ EQUITY
Preference shares, $ i 0.01 par value, i 50,000,000 shares authorized, i 400 (aggregate liquidation preference of $ i 400,000) shares issued and outstanding at February 29, 2024 and February 28, 2023	i —		i —
Common shares, $ i 0.01 par value, i 250,000,000 shares authorized, i 15,564 and i 14,048 shares issued and outstanding at February 29, 2024 and February 28, 2023, respectively	i —		i —
Additional paid-in capital	i 2,078,774		i 1,878,774
Retained earnings (accumulated deficit)	i 55,000		( i 7,316)

Total shareholders’ equity	i 2,133,774		i 1,871,458

Total liabilities and shareholders’ equity	$	i 7,679,953	$	i 7,266,851

The accompanying notes are an integral part of these consolidated financial statements.

F - 5

Aircastle Limited and Subsidiaries

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(Dollars in thousands, except per share amounts)

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Revenues:

Lease rental revenue

i 603,571

i 586,508

i 595,236

Direct financing and sales-type lease revenue

i 16,503

i 9,030

i 10,733

Amortization of lease premiums, discounts and incentives

( i 20,420)

( i 20,574)

( i 20,190)

Maintenance revenue

i 132,179

i 138,099

i 152,030

Total lease revenue

i 731,833

i 713,063

i 737,809

Gain on sale or disposition of flight equipment

i 121,646

i 70,860

i 26,001

Other revenue

i 1,937

i 12,110

i 5,977

Total revenues

i 855,416

i 796,033

i 769,787

Operating expenses:

Depreciation

i 348,229

i 332,663

i 337,528

Interest, net

i 229,050

i 204,606

i 214,352

Selling, general and administrative

i 82,127

i 76,857

i 66,338

Provision for credit losses

i 12,081

i 1,507

i 930

Impairment of flight equipment

i 55,240

i 85,623

i 452,250

Maintenance and other costs

i 29,884

i 22,196

i 31,166

Total operating expenses

i 756,611

i 723,452

i 1,102,564

Other income (expense):

Loss on extinguishment of debt

i —

( i 636)

( i 14,156)

Other

i 5,571

i 14,092

i 57,682

Total other income

i 5,571

i 13,456

i 43,526

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment

i 104,376

i 86,037

( i 289,251)

Income tax provision (benefit)

i 23,265

i 25,466

( i 7,998)

Earnings of unconsolidated equity method investment,
net of tax

i 2,205

i 2,188

i 3,044

Net income (loss)

i 83,316

i 62,759

( i 278,209)

Preference share dividends

( i 21,000)

( i 16,159)

Net income (loss) available to common shareholders

i 62,316

i 41,759

( i 294,368)

Total comprehensive income (loss) available to common shareholders

i 62,316

i 41,759

( i 294,368)

The accompanying notes are an integral part of these consolidated financial statements.

F - 6

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Cash flows from operating activities:

Net income (loss)

i 83,316

i 62,759

( i 278,209)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation

i 348,229

i 332,663

i 337,528

Amortization of deferred financing costs

i 17,090

i 14,338

i 16,267

Amortization of lease premiums, discounts and incentives

i 20,420

i 20,574

i 20,190

Deferred income taxes

i 20,053

i 13,690

( i 9,386)

Collections on net investments in leases

i 3,557

i 6,505

i 14,297

Security deposits and maintenance payments included in earnings

( i 54,373)

( i 66,194)

( i 123,969)

Gain on sale or disposition of flight equipment

( i 121,646)

( i 70,860)

( i 26,001)

Loss on extinguishment of debt

i —

i 636

i 14,156

Impairment of aircraft

i 55,240

i 85,623

i 452,250

Provision for credit losses

i 12,081

i 1,507

i 930

Other

( i 2,512)

( i 2,211)

( i 3,043)

Changes on certain assets and liabilities:

Accounts receivable

( i 443)

i 17,338

i 16,948

Other assets

( i 9,317)

( i 12,510)

( i 29,963)

Accounts payable, accrued expenses and other liabilities

( i 15,907)

i 4,278

( i 5,716)

Lease rentals received in advance

i 14,466

i 29,601

( i 23,414)

Net cash and restricted cash provided by operating activities

i 370,254

i 437,737

i 372,865

Cash flows from investing activities:

Acquisition and improvement of flight equipment

( i 1,240,183)

( i 994,040)

( i 795,426)

Proceeds from sale or disposition of flight equipment

i 361,826

i 426,454

i 210,718

Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits

i 5,650

i 28,393

( i 202)

Distributions from unconsolidated equity method investment in excess of earnings

i —

i 104

Other

( i 6,408)

i 1,319

( i 1,694)

Net cash and restricted cash used in investing activities

( i 879,115)

( i 537,874)

( i 586,500)

Cash flows from financing activities:

Proceeds from issuance of common shares

i 200,000

i —

Net proceeds from preference share issuance

i —

i 392,997

Proceeds from secured and unsecured debt financings

i 2,029,750

i 493,848

i 20,000

Repayments of secured and unsecured debt financings

( i 1,917,744)

( i 420,372)

( i 646,943)

Deferred financing costs

( i 25,035)

( i 13,242)

( i 5,339)

Debt extinguishment costs

i —

( i 310)

( i 13,372)

Security deposits and maintenance payments received

i 159,792

i 142,699

i 88,891

Security deposits and maintenance payments returned

( i 18,786)

( i 20,307)

( i 26,857)

Dividends paid

( i 21,000)

( i 5,658)

Net cash and restricted cash provided by (used in) financing activities

i 406,977

i 161,316

( i 196,281)

Net (decrease) increase in cash and restricted cash

( i 101,884)

i 61,179

( i 409,916)

Cash and restricted cash at beginning of year

i 231,861

i 170,682

i 580,598

Cash and restricted cash at end of year

i 129,977

i 231,861

i 170,682

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(Dollars in thousands)

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Reconciliation to Consolidated Balance Sheets:

Cash and cash equivalents

i 129,977

i 231,861

i 167,891

Restricted cash and cash equivalents

i —

i 2,791

Unrestricted and restricted cash and cash equivalents

i 129,977

i 231,861

i 170,682

Supplemental disclosures of cash flow information:

Cash paid during the year for interest

i 240,715

i 193,283

i 200,922

Cash paid during the year for income taxes

i 5,135

i 9,511

i 240

Supplemental disclosures of non-cash investing activities:

Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment

i 55,046

i 50,758

i 12,391

Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions

i 28,350

i 10,810

i 21,764

Transfers from Flight equipment held for lease, net to Net investment in leases, net and Other assets

i 220,648

i 1,695

i 57,489

Acquisition of investments, at fair value

i —

i 10,819

i —

The accompanying notes are an integral part of these consolidated financial statements.

F - 7

Aircastle Limited and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands, except share amounts)

Additional
Paid-In
Capital

Retained
Earnings
(Accumulated
Deficit)

Total
Shareholders’
Equity

Common Shares

Preference Shares

Amount

Balance, February 28, 2021

i 14,048

i —

i 1,485,777

i 245,293

i 1,731,070

Issuance of preference shares

—

i 400

—

i 392,997

—

i 392,997

Preference share dividends

—

( i 16,159)

Net loss

—

( i 278,209)

Balance, February 28, 2022

i 14,048

i —

i 400

i —

i 1,878,774

( i 49,075)

i 1,829,699

Preference share dividends

—

( i 21,000)

Net income

—

i 62,759

Balance, February 28, 2023

i 14,048

i —

i 400

i —

i 1,878,774

( i 7,316)

i 1,871,458

Issuance of common shares

i 1,516

—

i 200,000

—

i 200,000

Preference share dividends

—

( i 21,000)

Net income

—

i 83,316

Balance, February 29, 2024

i 15,564

i —

i 400

i —

i 2,078,774

i 55,000

i 2,133,774

The accompanying notes are an integral part of these consolidated financial statements.

F - 8

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note 1. i Summary of Significant Accounting Policies

Organization

Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda company that was incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act of 1981 of Bermuda. Aircastle’s business is acquiring, leasing, managing and selling commercial jet aircraft.

The Company is controlled by affiliates of Marubeni Corporation (“Marubeni”) and Mizuho Leasing Company, Limited (“Mizuho Leasing” and, together with Marubeni, our “Shareholders”).

Aircastle is a holding company and conducts its business through subsidiaries that are wholly-owned, either directly or indirectly, by Aircastle.

Basis of Presentation and i Principles of Consolidation

The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of Aircastle and all its subsidiaries, including any Variable Interest Entity (“VIE”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We manage and analyze our business and report on our results of operations based on i one operating segment: leasing, financing, selling and managing commercial flight equipment. Our Chief Executive Officer is the chief operating decision maker.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of February 29, 2024, through the date on which the consolidated financial statements included in this Annual Report were issued.

/ i

Risk and Uncertainties

In the normal course of business, Aircastle encounters several significant types of economic risk, including credit, market, aviation industry and capital market risks. Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations to Aircastle. Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings. Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of early lease terminations and depress lease rates and the value of the Company’s aircraft. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its business or to refinance existing debt facilities.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While Aircastle believes the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Cash and Cash Equivalents

Aircastle considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Virtually all our cash and cash equivalents are held or managed by i five major financial institutions.

F - 9

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Flight Equipment Held for Lease and Depreciation

Flight equipment held for lease is stated at cost and depreciated using the straight-line method, typically over a i 25-year life from the date of manufacture for passenger aircraft and over a i 30 to i 35-year life for freighter aircraft, depending on whether the aircraft is a converted or purpose-built freighter, to estimated residual values. Estimated residual values are generally determined to be i 15% of the manufacturer’s estimated realized price for passenger aircraft when new and i 5% to i 10% for freighter aircraft when new. Management may make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of situations where exceptions may arise include but are not limited to:

•flight equipment where estimates of the manufacturer’s realized sales prices are not relevant (e.g., freighter conversions);

•flight equipment where estimates of the manufacturer’s realized sales prices are not readily available; and

•flight equipment which may have a shorter useful life due to obsolescence.

Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to get the aircraft ready for initial service are capitalized and depreciated over the remaining life of the flight equipment.

For purchase lease-back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the fair value of the aircraft and lease. The fair value of the lease may include a maintenance premium and a lease premium or discount.

When we acquire an aircraft with a lease, determining the fair value of attached leases requires us to make assumptions regarding the current fair values of leases for specific aircraft. We estimate a range of current lease rates of like aircraft in order to determine if the attached lease is within a fair value range. If a lease is below or above the range of current lease rates, we present value the estimated amount below or above the fair value range over the remaining term of the lease. The resulting lease discount or premium is amortized into lease rental income over the remaining term of the lease.

/ i

Impairment of Flight Equipment

F - 10

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2.

Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors, such as the location of the aircraft and accessibility to records and technical documentation.

If our estimates or assumptions change, including those related to our customers that have entered judicial insolvency proceedings or similar-type proceedings or restructurings, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in our recoverability assessments are appropriate, actual results could differ from those estimates.

Net Investment in Leases

If a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we recognize the lease as a direct financing or sales-type lease. The net investment in direct financing and sales-type leases consists of the lease receivable, estimated unguaranteed residual value of the leased flight equipment at lease-end and, for direct financing leases, deferred selling profit. For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of flight equipment. Selling profit on a direct financing lease is deferred and amortized over the lease term, and a selling loss is recognized at lease commencement. Interest income on our net investment in leases is recognized as Direct financing and sales-type leases revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease.

The net investment in leases is recorded net of an allowance for credit losses. The allowance for credit losses is recorded upon the initial recognition of the net investment in the lease based on the Company’s estimate of expected credit losses over the lease term. The allowance reflects the Company’s estimate of lessee default probabilities and loss given default percentages. When determining the credit loss allowance, we consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the net investment in the lease. The allowance also considers potential losses due to non-credit risk related to unguaranteed residual values. A provision for credit losses is recorded as a component of operating expenses to adjust the allowance for changes to management’s estimate of expected credit losses.

Unconsolidated Equity Method Investment

Aircastle accounts for its interest in an unconsolidated joint venture using the equity method as we do not control the joint venture entity. Under the equity method, the investment is initially recorded at cost and the carrying amount is affected by its share of the unconsolidated joint venture’s undistributed earnings and losses and distributions of dividends and capital. The investment may also reflect an equity loss in the event that circumstances indicate an other-than-temporary impairment.

Security Deposits

Most of our operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit. Security deposits represent cash received from the lessee that is held on deposit until lease expiration or termination. If a lease is terminated, we recognize security deposits in excess of outstanding lease payments as other revenue.

Maintenance Payments

Typically, under an operating lease, the lessee is responsible for performing all maintenance but they may also be required to make payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending upon the component, and are required to be made monthly in arrears or at the end of the lease term. Our determination of whether

F - 11

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

to require such payments to be made monthly or to permit a lessee to make a single maintenance payment at the end of the lease term depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease. If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work. If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease; however, in some cases, we may owe a net payment to the lessee in the event heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception.

We record monthly maintenance payments by the lessee as accrued maintenance payments liabilities in recognition of our contractual commitment to refund such receipts. In these contracts, we typically do not recognize such maintenance payments as maintenance revenue during the lease. Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability. We currently defer maintenance revenue recognition of most monthly maintenance payments until we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance, which generally occurs at or near the end of the lease. End of lease term maintenance payments made to us are recognized as maintenance revenue, and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue.

Lease Incentives and Amortization

Many of our leases contain provisions that may require us to pay a portion of the lessee’s costs for heavy maintenance, overhaul or replacement of certain high-value components. We account for these expected payments as lease incentives, which are amortized as a reduction of revenue over the life of the lease. We estimate the amount of our portion for such costs, typically for the first major maintenance event for the airframe, engines, landing gear and auxiliary power units, expected to be paid to the lessee based on assumed utilization of the related aircraft by the lessee, the anticipated amount of the maintenance event cost and the estimated amounts the lessee is responsible to pay. The assumptions supporting these estimates are reevaluated annually.

This estimated lease incentive is not recognized as a lease incentive liability at the inception of the lease. We recognize the lease incentive as a reduction of lease revenue on a straight-line basis over the life of the lease, with the offset being recorded as a lease incentive liability which is included in maintenance payments on the balance sheet. The payment to the lessee for the lease incentive liability is first recorded against the lease incentive liability, and any excess above the lease incentive liability is recorded as a prepaid lease incentive asset, which is included in other assets on the balance sheet and continues to amortize over the remaining life of the lease.

Lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs are capitalized and amortized into revenue over the initial life of the lease, assuming no lease renewals, and are included in other assets.

Income Taxes

Aircastle uses an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount estimated by us to be realizable. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

F - 12

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Fair Value Measurements

Fair value is defined as the amount 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. We measure the fair value of our cash and cash equivalents and certain of our investments in debt and equity securities on a recurring basis and measure the fair value of our aircraft and investment in unconsolidated joint venture on a non-recurring basis. See Note 2.

Lease Revenue Recognition

We lease flight equipment under net operating leases with lease terms typically ranging from i 3 to i 7 years. We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals.

/ i

Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that, under U.S. GAAP, are excluded from net income (loss).

Deferred Financing Costs

Deferred financing costs, which are included in borrowings from secured and unsecured financings, net, in the Consolidated Balance Sheets, are amortized using the interest method for amortizing loans over the lives of the relevant related debt.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC 848”). ASC 848 provides temporary optional expedients and exceptions to certain U.S. GAAP contract modification requirements for contracts affected by reference rate reform as entities transition away from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. In December 2022, the FASB issued ASU 2022-06 to defer the sunset date of ASC 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the optional expedients in ASC 848.

The ICE Benchmark Administration Limited, LIBOR’s administrator, has ceased publishing all LIBOR settings, including the Overnight, 1-month, 3-month, 6-month, and 12-month USD LIBOR U.S. dollar settings. Effective March 1, 2023, we adopted ASC 848 and commenced the transition of our LIBOR-based contracts to the Secured Overnight Financing Rate (“SOFR” or “Term SOFR”). As of February 29, 2024, we had no aircraft leases or debt financings for which the associated lease rental revenue or interest expense used LIBOR as the applicable reference rate. The adoption of ASC 848 did not have a material impact on our consolidated financial statements.

F - 13

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASC 740”). ASC 740 enhances the transparency of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The standard requires disclosure of specific categories in the rate reconciliation, using both percentages and reporting currency amounts, as well as disclosure of income taxes paid, net of refunds received, disaggregated by federal, state, and foreign taxes and individual jurisdictions. The standard is effective for annual periods beginning after December 15, 2024. We are currently evaluating the standard, however, it is not expected to have a material impact on our consolidated financial statements.

Note 2. i Fair Value Measurements

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

•Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

•Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

•Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

•The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

•The income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts.

•The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Assets Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets as of February 29, 2024 and February 28, 2023, that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

Fair Value

as of

Fair Value Measurements at February 29, 2024

Using Fair Value Hierarchy

Level 1

Level 2

Level 3

Valuation
Technique

Assets:

Cash and cash equivalents

i 129,977

i —

Market

Investments, at fair value

Investment in debt securities

i 5,029

i —

i 5,029

Income

Investment in equity securities

i 5,131

i 1,687

i —

i 3,444

Market/Income

Total investments, at fair value

i 10,160

i 1,687

i —

i 8,473

F - 14

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Fair Value

as of

Fair Value Measurements at February 28, 2023

Using Fair Value Hierarchy

Level 1

Level 2

Level 3

Valuation
Technique

Assets:

Cash and cash equivalents

i 231,861

i —

Market

Investments, at fair value

Investment in debt securities

i 5,029

i —

i 5,029

Income

Investment in equity securities

i 5,790

i 2,346

i —

i 3,444

Market/Income

Total investments, at fair value

i 10,819

i 2,346

i —

i 8,473

Our cash and cash equivalents consist largely of money market securities that are highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities (Level 1). Our investments in debt and equity securities consist of notes and shares received as a result of claims settlements from various airline customers that had entered into bankruptcy proceedings or similar-type restructurings. Our investment in equity securities that are traded in an active market have been valued using quoted market prices (Level 1). Our investments in other equity securities and debt securities for which there is no active market or there is limited market data have been valued using the income approach (Level 3).

For the years ended February 29, 2024 and February 28, 2023, we had i no transfers into or out of Level 3.

Assets Measured at Fair Value on a Non-recurring Basis

We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our aircraft and investment in unconsolidated joint venture.

We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on the average of the market approach (Level 2 or 3), which includes third party appraisal data, and an income approach (Level 3), which includes the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital. Level 3 valuations contain significant non-observable inputs. See “Aircraft Valuation” below for further information.

We account for our investment in unconsolidated joint venture under the equity method of accounting. Our investment is recorded at cost and is adjusted by undistributed earnings and losses and the distributions of dividends and capital. This investment is reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, accounts receivable, investments in debt and equity securities, accounts payable and secured and unsecured financings. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair value of our investments, which consist of debt and equity securities, have been valued using either quoted market prices to the extent such securities are traded in an active market (Level 1), or using the income approach for those securities where there is no active market or there is limited market data (Level 3). The fair value of our senior notes is estimated using quoted market prices (Level 1), whereas all our other financings are valued using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

F - 15

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The carrying amounts and fair values of our financial instruments at February 29, 2024 and February 28, 2023, were as follows:

Assets

Carrying Amount
of Asset

Fair Value
of Asset

Carrying Amount
of Asset

Fair Value
of Asset

Investments, at fair value(1)

i 10,160

i 10,819

Other investments, net(2)

i 5,079

i —

Liabilities

Carrying Amount
of Liability

Fair Value
of Liability

Carrying Amount
of Liability

Fair Value
of Liability

Credit Facilities

i 20,000

Unsecured Term Loan

i —

i 155,000

i 151,449

Term Financings

i 883,451

i 885,139

i 761,283

i 739,804

Senior Notes

i 3,850,000

i 3,738,146

i 3,700,000

i 3,524,563

_______________

(1)See Assets Measured at Fair Value on a Recurring Basis.

(2)As of February 29, 2024, we had a $ i 3.2 million allowance for credit losses on certain investments in debt securities that are carried at amortized cost – see Note 15.

Aircraft Valuation

Impairment of Flight Equipment

During the year ended February 29, 2024, the Company recorded impairments charges totaling $ i 55.2 million. Of the total impairments, $ i 39.5 million were transactional impairments related to scheduled aircraft lease expirations and engine redeliveries during the year ended February 29, 2024. The Company recognized $ i 48.0 million of maintenance revenue for these aircraft and engines. See “Annual Recoverability Assessment” below for further information regarding impairment charges recognized as part of our annual fleet review.

During the year ended February 28, 2023, the Company wrote off the remaining book values of i 8 narrow-body and i 1 freighter aircraft in Russia which have not been returned to us. As a result, the Company recorded impairment charges totaling $ i 31.9 million during the year ended February 28, 2023. The Company also recognized $ i 20.3 million of maintenance and other revenue for these i 9 aircraft related to payments received on maintenance and general security letters of credit.

In addition to the asset write-offs above, during the year ended February 28, 2023, the Company recorded impairment charges totaling $ i 53.7 million primarily related to the scheduled lease expirations of i 3 narrow-body aircraft and lease terminations of i 2 narrow-body aircraft, as well as i 1 wide-body aircraft resulting from our annual fleet review. The Company recognized $ i 58.9 million of maintenance and lease rentals received in advance into revenue for these aircraft during the year ended February 28, 2023.

Annual Recoverability Assessment

We performed our annual recoverability assessment of all our aircraft during the third quarter of fiscal 2023. As a result, of our annul fleet review, we recorded impairment charges of $ i 9.5 million related to i 3 narrow-body aircraft, as well as i 1 spare engine.

F - 16

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note 3. Flight Equipment Held for Lease, Net

The following table summarizes the activities for the Company’s flight equipment held for lease for the years ended February 29, 2024 and February 28, 2023:


	February 29,		February 28,
	2024		2023
Beginning balance	$	i 6,567,606	$	i 6,313,950
Additions	i 1,264,369		i 984,172
Depreciation	( i 347,297)		( i 331,387)
Disposals and transfers to net investment in leases and held for sale	( i 492,818)		( i 316,892)
Impairments	( i 51,358)		( i 82,237)

Ending balance	$	i 6,940,502	$	i 6,567,606

Accumulated depreciation	$	i 2,328,354	$	i 2,289,264

Russian Aircraft Insurance Settlements

The Company leased i 9 aircraft to Russian airlines that were unrecoverable following Russia’s invasion of Ukraine in February 2022. The Company filed claims against the reinsurers of the Russian airlines’ insurance and the Company’s contingent and possessed insurance policies (“C&P Policies”) seeking indemnity.

On December 26, 2023, the Company received cash settlement proceeds of $ i 43.2 million in settlement of the Company’s claims under the insurance policies of Joint Stock Company Aurora Airlines and Joint Stock Company Rossiya Airlines (collectively, the “Airlines”) in respect of i 4 aircraft (collectively, the “Aircraft”) formerly on lease to the Airlines, which has been recorded within gain on sale or disposition of flight equipment. The settlement resolves claims against the Airlines, their respective insurers, and transfers the Aircraft title to a Russian insurer. The Company is in ongoing settlement discussions for the i 5 other aircraft that were not included in the insurance settlement. However, it is uncertain whether any of these discussions will result in any settlement and, if so, in what amount. Settlement proceeds, net of any related costs, were recorded as a component of gain on sale or disposition of flight equipment for the year ended February 29, 2024.

F - 17

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note 4. i Lease Rental Revenues

Minimum future lease rentals contracted to be received under our existing operating leases of flight equipment at February 29, 2024 were as follows:


Year Ended February 28/29,	Amount(1)
2025	$	i 613,668
2026	i 523,495
2027	i 459,657
2028	i 387,353
2029	i 313,853
Thereafter	i 792,459
Total	$	i 3,090,485

_______________

(1)Reflects impact of lessee lease rental deferrals.

At February 29, 2024 and February 28, 2023, the amounts of lease incentive liabilities recorded in maintenance payments on the consolidated balance sheets were $ i 26.6 million and $ i 22.4 million, respectively.

Note 5. Net Investment in Leases, Net

At February 29, 2024 and February 28, 2023, our net investment in leases consisted of i 15 and i 4 aircraft, respectively. i The components of our net investment in leases at February 29, 2024 and February 28, 2023 were as follows:


	February 29,		February 28,
	2024		2023
Lease receivable	$	i 142,983	$	i 31,674
Unguaranteed residual value of flight equipment	i 147,170		i 37,287
Net investment in leases	i 290,153		i 68,961
Allowance for credit losses	( i 7,714)		( i 1,267)
Net investment in leases, net	$	i 282,439	$	i 67,694

During the year ended February 29, 2024, i 12 aircraft were reclassified from operating leases to sales-type leases and we recognized a provision for credit losses totaling $ i 7.0 million for these aircraft.

Collectability of the lease payments for i 10 of these i 12 aircraft, which was not deemed probable at the effective date of the related lease modifications, became probable during the year ended February 29, 2024. Accordingly, we derecognized the carrying amounts of the underlying aircraft and lease payments recorded by us as deposit liabilities and recognized net investments in leases. A selling profit totaling $ i 32.7 million for these i 10 aircraft was recognized as a component of gain on sale or disposition of flight equipment for the year ended February 29, 2024.

We also sold i 1 aircraft that was subject to a sales-type lease during the year ended February 29, 2024.

F - 18

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

As of February 29, 2024, future lease payments on net investment in leases were as follows:


Year Ending February 28/29,	Amount
2025	$	i 28,151
2026	i 17,262
2027	i 26,160
2028	i 27,163
2029	i 26,716
Thereafter	i 65,194
Total lease payments to be received	i 190,646
Present value of lease payments - lease receivable	( i 142,983)
Difference between undiscounted lease payments and lease receivable	$	i 47,663

Note 6. Concentration of Risk

The classification of regions in the tables below is based on our customers’ principal place of business.

The geographic concentration of our Net Book Value as of February 29, 2024 and February 28, 2023 was as follows:

Region

Number of
Aircraft

Net Book
Value %

Number of
Aircraft

Net Book
Value %

Asia and Pacific

i 63

i 27

i 62

i 28

Europe

i 90

i 30

i 88

i 30

Middle East and Africa

i 9

i 5

i 8

i 3

North America

i 46

i 23

i 38

i 20

South America

i 32

i 14

i 29

i 14

Off-lease

i 3

(1)

i 1

i 14

i 5

Total

i 243

i 100

i 239

i 100

_______________

(1)Of the i 3 off-lease aircraft at February 29, 2024, we have i 1 narrow-body freighter aircraft that we are currently marketing for lease or sale.

The following table sets forth Net Book Value of flight equipment attributable to individual countries representing at least 10% of Net Book Value of flight equipment based on each lessee’s principal place of business as of:

Region

Net Book
Value

Net Book
Value %

Number
of
Lessees

Net Book
Value

Net Book
Value %

Number
of
Lessees

India(1)

i 750,498

i 11%

i 4

i —

i —%

i —

United States(1)

i 806,162

i 11%

i 5

i —

i —%

i —

_______________

(1) As of February 28, 2023, India and the United States represented less than 10% of our Net Book Value.

/ /

F - 19

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The geographic concentration of our lease rental revenue earned from flight equipment held for lease was as follows:


	Year Ended February 29,		Year Ended February 28,
Region	2024		2023		2022
Asia and Pacific	i 29	%	i 33	%	i 29	%
Europe	i 30	%	i 29	%	i 36	%
Middle East and Africa	i 4	%	i 5	%	i 5	%
North America	i 23	%	i 19	%	i 15	%
South America	i 14	%	i 14	%	i 15	%

Total	i 100	%	i 100	%	i 100	%

The following table shows the number of lessees with lease rental revenue of at least 5% of total lease rental revenue and their combined total percentage of lease rental revenue for the periods indicated:

Year Ended
February 29,

Year Ended February 28,

2024

2023

2022

Number of Lessees

Combined % of
Lease Rental Revenue

Number of Lessees

Combined % of
Lease Rental Revenue

Number of Lessees

Combined % of
Lease Rental Revenue

Largest lessees by lease rental revenue(1)

i 3

i 21%

i 3

i 21%

i 6

i 38%

_______________

(1)The number of lessees and combined percentage for the year ended February 28, 2022, includes i 1 of our Russian lessees, which accounted for i 5% of total lease rental revenue. Lease rental revenue for this customer includes the recognition of lease rentals received in advance of $ i 17.2 million into revenue; excluding this amount, this customer accounted for i 2% of total lease rental revenue.

For the year ended February 29, 2024, no single country comprised 10% or more of total revenue.

For the year ended February 28, 2023, total revenue attributable to the United States and India was i 15% and i 12%, respectively, and was partially driven by maintenance and other revenue and gains on sale of aircraft.

For the year ended February 28, 2022, we had i 6 Russian lessees that accounted for i 17% of our total revenue. Total revenue from these lessees included $ i 89.4 million of lease rentals received in advance, maintenance, security deposits and other revenue resulting from the sanctions placed on Russia, which required the termination of leasing activities.

Note 7. i Unconsolidated Equity Method Investment

We have an equity method investment with Mizuho Leasing which has i 9 aircraft with a net book value of $ i 271.7 million at February 29, 2024.

February 29,

February 28,

2024

2023

Balance at February 28, 2023

i 40,505

i 38,317

Earnings of unconsolidated equity method investment, net of tax

i 2,205

i 2,188

Balance at February 29, 2024

i 42,710

i 40,505

F - 20

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Note 8. i Borrowings from Secured and Unsecured Debt Financings

The outstanding amounts of our secured and unsecured term debt financings were as follows:

At February 29, 2024

Debt Obligation

Outstanding
Borrowings

Number of Aircraft

Interest Rate

Final Stated
Maturity

Outstanding
Borrowings

Secured Debt Financings:

Term Financings(1)

i 883,451

i 38

i 2.36% to i 7.67%

09/13/24 to 06/27/32

i 761,283

Less: Debt issuance costs

( i 8,054)

( i 8,985)

Total secured debt financings, net of debt issuance costs and discounts

i 875,397

i 752,298

Unsecured Debt Financings:

5.000% Senior Notes due 2023(2)

i —

i —%

N/A

i 500,000

4.400% Senior Notes due 2023(2)

i —

i —%

N/A

i 650,000

Senior Notes due 2024

i 500,000

i 4.125%

05/01/24

i 500,000

Senior Notes due 2025

i 650,000

i 5.25%

08/11/25

i 650,000

Senior Notes due 2026

i 650,000

i 4.25%

06/15/26

i 650,000

2.850% Senior Notes due 2028

i 750,000

i 2.85%

01/26/28

i 750,000

6.500% Senior Notes due 2028

i 650,000

i 6.50%

07/18/28

i —

Senior Notes due 2029

i 650,000

i 5.95%

02/15/29

i —

Unsecured Term Loan(2)

i —

i —%

N/A

i 155,000

Revolving Credit Facilities

i 20,000

i 7.48%

05/24/25 to 02/08/28

i 20,000

Less: Debt issuance costs and discounts

( i 46,901)

( i 32,546)

Total unsecured debt financings, net of debt issuance costs and discounts

i 3,823,099

i 3,842,454

Total secured and unsecured debt financings, net of debt issuance costs and discounts

i 4,698,496

i 4,594,752

_______________

(1)The borrowings under these financings at February 29, 2024 have a weighted-average fixed rate of interest of i i 5.45 / %.

(2)Repaid at their final stated maturity date.

Secured Debt Financings:

Term Financings

During the year ended February 29, 2024, we borrowed the remaining $ i 168.7 million available under our full recourse secured financing facility entered into on November 21, 2022 (the “2022 Secured Facility”). The total amount borrowed under the 2022 Secured Facility was $ i 447.7 million in relation to i 17 owned aircraft. The 2022 Secured Facility bears interest at a floating rate under the Term SOFR (as defined in the credit agreement governing the 2022 Secured Facility) plus i 2.35% per annum and matures on November 21, 2029.

Unsecured Debt Financings:

i 6.500% Senior Notes due 2028

On July 18, 2023, the Company issued $ i 650.0 million aggregate principal amount of i 6.500% Senior Notes due 2028 (the “ i 6.500% Senior Notes due 2028”) at an issue price of i 99.815%. The i 6.500% Senior Notes due 2028 will mature on July 18, 2028, and bear interest at a rate of i 6.50% per annum, payable semi-annually on January 18 and July 18 of each year, commencing on January 18, 2024. Interest accrues on the i 6.500% Senior Notes due 2028 from July 18, 2023.

F - 21

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

i 5.950% Senior Notes due 2029

On January 22, 2024, the Company issued $ i 650.0 million aggregate principal amount of i 5.950% Senior Notes due 2029 (the “Senior Notes due 2029”) at an issue price of i 99.391%. The Senior Notes due 2029 will mature on February 15, 2029, and bear interest at a rate of i 5.95% per annum, payable semi-annually on February 15 and August 15 of each year, commencing on August 15, 2024. Interest accrues on the Senior Notes due 2029 from January 22, 2024.

Revolving Credit Facilities

During the year ended February 29, 2024, we entered into various amendments for i one of our unsecured revolving credit facilities that extended the maturity date and expanded the size of the facility from $ i 245.0 million to $ i 640.0 million. Of the total commitment, $ i 40.0 million was allocated to Tranche C, which matures on May 24, 2025, and $ i 600.0 million was allocated to Tranche D, which matures on January 9, 2028. The facility bears interest at Term SOFR (as defined in the amendment to the credit agreement) plus i 1.950%.

On January 31, 2024, we entered into an amendment that extended the maturity date of our $ i 200.0 million revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party, to January 31, 2027. The facility bears interest at Term SOFR (as defined in the amendment to the credit agreement) plus i 2.01%. This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

On February 8, 2024, we entered into an amendment that extended the maturity date of our $ i 300.0 million revolving credit facility with Mizuho Bank Ltd., a related party, to February 7, 2027. The facility bears interest at Term SOFR (as defined in the amendment to the credit agreement) plus i 1.5%. This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

On February 8, 2024, we entered into an amendment that extended the maturity date of our $ i 1.0 billion unsecured credit facility, to February 7, 2028. The facility bears interest at Term SOFR (as defined in the amendment to the credit agreement) plus i 1.25%.

As of February 29, 2024, we had $ i 20.0 million in borrowings outstanding under our revolving credit facilities and had $ i 2.1 billion available for borrowing.

Maturities of the secured and unsecured debt financings over the next five years and thereafter are as follows:


Year Ending February 28/29,	Amount
2025	$	i 824,514
2026	i 779,194
2027	i 683,380
2028	i 785,343
2029	i 1,337,374
Thereafter	i 343,646
Total	$	i 4,753,451

As of February 29, 2024, we were in compliance with all applicable covenants in our financings.

Note 9. i Shareholders’ Equity

Issuance of Common Shares

On July 5, 2023, the Company entered into a Subscription Agreement with its Shareholders, pursuant to which the Company has agreed to make a pro rata issuance of the Company’s common shares, $ i 0.01 par value per share (the “Shares”), for an aggregate purchase price of up to $ i 500.0 million. The Shares will be issued in i two tranches, with i 1,516 Shares issued under the first tranche on July 18, 2023, for an aggregate purchase price of $ i 200.0 million. The issuance of the second tranche, which is subject to both the approval of the Company’s Board of Directors and Shareholders, is expected to occur during the Company’s first fiscal quarter of 2024 for an aggregate purchase price of up to $ i 300.0

F - 22

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

million. The number of Shares and the subscription price per share are to be determined and agreed to by the parties at the time of issuance. The Shares will rank pari passu in all respects with other common shares of the Company. The Company has used and intends to continue to use the net proceeds from the issuance of Shares for general corporate purposes.

Preference Share Dividends

On March 15, 2023, the Company paid a semi-annual dividend in the amount of $ i 10.5 million for its preference shares, which was approved by the Company’s Board of Directors on January 10, 2023, and accrued as of February 28, 2023.

On September 15, 2023, the Company paid a semi-annual dividend in the amount of $ i 10.5 million for its preference shares, which was approved by the Company’s Board of Directors on July 11, 2023.

On January 9, 2024, the Company’s Board of Directors approved a semi-annual dividend in the amount of $ i 10.5 million for its preference shares, which was accrued as of February 29, 2024, and paid on March 15, 2024.

Note 10. i Related Party Transactions

We incurred fees from our Shareholders as part of intra-company service agreements totaling $ i 8.3 million and $ i 5.5 million during the years ended February 29, 2024 and February 28, 2023, respectively, whereby our Shareholders provide certain management and administrative services to the Company. These fees are recorded in selling, general and administrative costs in the consolidated statement of income (loss). In addition, the Company purchased parts under a parts management services and supply agreement with an affiliate of Marubeni totaling $ i 1.5 million and $ i 4.2 million during the years ended February 29, 2024 and February 28, 2023, respectively.

On February 8, 2024, the Company incurred fees of $ i 2.7 million in relation to the amendment of our $ i 300.0 million unsecured revolving credit facilities with Mizuho Bank Ltd., a related party - see Note 8 for additional information. This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

See Note 8 for additional information regarding amendments entered into during the year ended February 29, 2024 in respect of our unsecured revolving credit facilities with Mizuho Marubeni Leasing America Corporation and Mizuho Bank Ltd., each a related party.

See Note 9 for additional information regarding our Subscription Agreement entered into with our Shareholders during the year ended February 29, 2024.

Note 11. i Income Taxes

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. In December 2023, the Government of Bermuda enacted the Bermuda Corporate Income Tax Act which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025, and is expected to supersede the Minister of Finance’s assurance from such date onwards. The Company expects to be subject to Bermuda corporate income tax with respect to its fiscal year beginning March 1, 2025 and in subsequent years. Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

F - 23

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The sources of income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended February 29, 2024, and February 28, 2023 and 2022, were as follows:

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

U.S. operations

i 25,029

i 21,172

i 20,803

Non-U.S. operations

i 79,347

i 64,865

( i 310,054)

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment

i 104,376

i 86,037

( i 289,251)

/ i

The components of the income tax provision (benefit) for the years ended February 29, 2024, and February 28, 2023 and 2022, consisted of the following:

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Current:

United States:

Federal

i 2,484

i 5,671

i 247

State

i 2,249

i 1,667

i 161

Non-U.S.

( i 1,521)

i 4,438

i 980

Current income tax provision

i 3,212

i 11,776

i 1,388

Deferred:

United States:

Federal

i 5,415

( i 728)

i 5,206

State

i 1,120

( i 341)

i 1,593

Non-U.S.

i 13,518

i 14,759

( i 16,185)

Deferred income tax (benefit)

i 20,053

i 13,690

( i 9,386)

Total

i 23,265

i 25,466

( i 7,998)

/ i

Significant components of the Company’s deferred tax assets and liabilities at February 29, 2024 and February 28, 2023, consisted of the following:


	Year Ended February 29,		Year Ended February 28,
	2024		2023
Deferred tax assets:

Net operating loss carry forwards	$	i 239,306	$	i 145,299
Interest expense carry forwards	i 2,085		i 1,139
Other	i 23,426		i 26,041
Valuation allowance	( i 53,408)		i —

Total deferred tax assets	i 211,409		i 172,479
Deferred tax liabilities:
Accelerated depreciation	( i 299,957)		( i 233,340)
Other	( i 11,809)		( i 18,825)
Total deferred tax liabilities	( i 311,766)		( i 252,165)

Net deferred tax liabilities	$	( i 100,357)	$	( i 79,686)

F - 24

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The Company had $ i 152.1 million of federal net operating loss (“NOL”) carry forwards available at February 29, 2024 with no expiration date to offset future taxable income subject to U.S. graduated tax rates. The Company also had NOL carry forwards of $ i 1.2 billion with no expiration date to offset future Irish taxable income. The Bermuda Corporate Income Tax Act includes a provision which would allow the Company to carry forward losses incurred in Bermuda for the fiscal year ended February 28, 2021 and subsequent fiscal years. The Company has NOL carryforwards of $ i 356.1 million with no expiration date to offset future Bermuda taxable income. A full valuation allowance of $ i 356.1 million has been recognized against the Bermuda tax loss carry forwards based on all available information, including projections of future taxable income.

Deferred tax assets and liabilities are included in other assets and accounts payable, accrued expenses and other liabilities, respectively.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings. As of February 29, 2024, we have elected to permanently reinvest our accumulated undistributed U.S. earnings of $ i 44.6 million. Accordingly, no U.S. withholding taxes have been provided. Withholding tax of $ i 2.2 million would be due if such earnings were remitted.

Our aircraft-owning subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland and the U.S. are subject to tax in those respective jurisdictions.

We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations for the years ended February 29, 2024, and February 28, 2023 and 2022, consisted of the following:

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Notional U.S. federal income tax expense at the statutory rate:

i 21,919

i 18,068

( i 60,742)

U.S. state and local income tax, net

i 1,098

i 928

i 1,237

Non-U.S. operations:

Bermuda

( i 6,659)

( i 12,039)

i 27,751

Ireland

i 5,709

i 19,279

i 23,510

Singapore

( i 2)

i 27

i 174

Other low tax jurisdictions

i 64

i 152

( i 15)

Non-deductible expenses in the U.S.

i 29

i 19

i 16

Other

i 1,107

( i 968)

i 71

Provision (benefit) for income taxes

i 23,265

i 25,466

( i 7,998)

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

We conduct business globally and, as a result, the Company and its subsidiaries or branches are subject to foreign, U.S. federal and various state and local income taxes, as well as withholding taxes. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Ireland and the United States.

Our policy is that we will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the year.

F - 25

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Ireland and Bermuda Tax Law Changes

On December 18, 2023, Ireland enacted Finance (No. 2) Bill 2023 (the “Finance Bill”) which includes legislative changes for new tax measures and amendments to the Irish tax code, such as provisions to implement the Pillar Two GloBE rules, new outbound payment rules, and a dividend withholding tax, among other changes. The Finance Bill requires a 20% withholding tax be applied to certain payments, such as interest payments, from Irish companies to recipients in no-tax and zero-tax jurisdictions, effective April 1, 2024. The Finance Bill also requires a 25% withholding tax be applied to dividends and distributions, subject to certain exemptions, as well as introduces new interest deduction rules for a qualifying finance company. The Company has determined that there is no current year impact of the law change and is currently evaluating the impact the Finance Bill may have in future years on its operations, in particular, with respect to existing intra-entity loans, as well as on our provision for income taxes and the consolidated financial statements.

On December 18, 2023, Bermuda enacted a 15% corporate income tax regime (the “Bermuda CIT”) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the Company’s exemption from Bermuda corporate income, withholding and capital gains taxes will cease on February 28, 2025. The Company has determined that there is no current year impact of the law change and is currently evaluating the impact the Bermuda CIT may have in future years on its operations, as well as on our provision for income taxes and the consolidated financial statements.

Note 12. i Interest, Net

The following table shows the components of interest, net.

Year Ended February 29,

Year Ended February 28,

2024

2023

2022

Interest on borrowings and other liabilities

i 228,539

i 196,502

i 200,220

Amortization of deferred financing fees and debt discount

i 17,090

i 14,338

i 16,267

Interest expense

i 245,629

i 210,840

i 216,487

Less: Interest income

( i 13,710)

( i 3,954)

( i 1,209)

Less: Capitalized interest

( i 2,869)

( i 2,280)

( i 926)

Interest, net

i 229,050

i 204,606

i 214,352

Note 13. i Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ i 2.3 million, $ i 2.1 million and $ i 1.6 million for the years ended February 29, 2024, and February 28, 2023 and 2022, respectively.

As of February 29, 2024, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in the United States, Ireland and Singapore for future minimum lease payments as follows:


Year Ending February 28/29,	Amount
2025	$	i 2,938
2026	i 2,783
2027	i 2,721
2028	i 2,752
2029	i 1,959
Thereafter	i 15,617
Total	$	i 28,770

At February 29, 2024, we had commitments to acquire i 17 aircraft for $ i 525.1 million.

F - 26

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Commitments under signed purchase agreements, including $ i 34.4 million of remaining progress payments, contractual price escalations and other adjustments for these aircraft at February 29, 2024, net of amounts already paid, were as follows:


Year Ending February 28/29,	Amount
2025	$	i 222,834
2026	i 204,343
2027	i 97,876
2028	i —
2029	i —
Thereafter	i —
Total	$	i 525,053

Note 14. i Other Assets

Other assets consisted of the following as of February 29, 2024 and February 28, 2023:

February 29,

February 28,

2024

2023

Deferred income tax asset

i 48

i 304

Lease incentives and premiums, net of accumulated amortization of $ i 90,408 and $ i 77,722, respectively

i 37,459

i 54,208

Flight equipment held for sale

i 19,190

i 59,370

Aircraft purchase deposits and Embraer E-2 progress payments

i 42,784

i 43,494

Right-of-use asset(1)

i 16,053

i 16,930

Deferred rent receivable, net(2)

i 15,825

i 35,631

Investments, at fair value(3)

i 10,160

i 5,029

Other investments, net(2)(3)

i 5,079

i 5,790

Other assets

i 125,209

i 125,574

Total other assets

i 271,807

i 346,330

______________

(1)Net of lease incentives and tenant allowances.

(2)Net of an allowance for credit losses as of February 29, 2024 – see Note 15.

(3)See Note 2.

Note 15. Allowance for Credit Losses

The activity in the allowance for credit losses related to our net investment in leases, other investments, and deferred rent receivables for the years ended February 29, 2024 and February 28, 2023, were as follows:

Net Investment in Leases, net

Other Investments, net

Deferred Rent

Receivables, net

Total

Balance at February 28, 2022

i 1,764

i —

i 1,764

Provision for credit losses

i 1,507

i —

i 1,507

Write-offs

( i 2,004)

i —

( i 2,004)

Balance at February 28, 2023

i 1,267

i —

i 1,267

Provision for credit losses

i 6,726

i 3,209

i 2,146

i 12,081

Write-offs

( i 279)

i —

( i 279)

Balance at February 29, 2024

i 7,714

i 3,209

i 2,146

i 13,069

F - 27

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

During the year ended February 29, 2024, we increased our credit provision for net investment in leases as a result of i 12 aircraft that were reclassified from operating leases to sales-type leases – see Note 5. We also recognized a credit provision for debt securities received by us as part of an airline restructuring, as well as certain restructured receivables, during the year ended February 29, 2024.

Note 16. i Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities consisted of the following as of February 29, 2024 and February 28, 2023:

February 29,

February 28,

2024

2023

Accounts payable and accrued expenses

i 68,185

i 60,225

Deferred income tax liability

i 100,405

i 79,990

Accrued interest payable

i 27,507

i 42,752

Lease liability

i 19,193

i 19,951

Lease discounts, net of accumulated amortization of $ i 43,519 and $ i 45,586, respectively

i 4,298

i 3,555

Total accounts payable, accrued expenses and other liabilities

i 219,588

i 206,473

F - 28

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Aircastle Limited has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: April 25, 2024


			Aircastle Limited
			By:						/s/ *Michael Inglese*
									Michael Inglese
									Chief Executive Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Aircastle Limited and in the capacities and on the date indicated.

SIGNATURE

TITLE

DATE

/s/ Michael Inglese

Chief Executive Officer and Director

Michael Inglese

/s/ Roy Chandran

Chief Financial Officer

Roy Chandran

/s/ Dane Silverman

Chief Accounting Officer

Dane Silverman

/s/ Takayuki Sakakida

Chairman of the Board

Takayuki Sakakida

/s/ Douglas A. Hacker

Director

Douglas A. Hacker

/s/ Naoshi Hirose

Director

Naoshi Hirose

/s/ Taro Kawabe

Director

Taro Kawabe

/s/ Keiji Okuno

Director

Keiji Okuno

/s/ Charles W. Pollard

Director