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

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)


	Six Months Ended August 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	28,288	$	(1,011)
Adjustments to reconcile net income to net cash and restricted cash provided by operating activities:
Depreciation	175,117		163,424
Amortization of deferred financing costs	8,321		7,095
Amortization of lease premiums, discounts and incentives	14,331		10,906
Deferred income taxes	6,179		6,588


Collections on net investment in leases	1,598		4,016
Security deposits and maintenance payments included in earnings	(9,895)		(2,133)
Gain on sale of flight equipment	(47,047)		(13,736)
Loss on extinguishment of debt	—		463
Impairment of flight equipment	2,197		38,099
Provision for credit losses	6,125		689
Other	(845)		(1,179)
Changes in certain assets and liabilities:
Accounts receivable	1,437		5,808
Other assets	(9,723)		(8,223)
Accounts payable, accrued expenses and other liabilities	(3,833)		(2,284)
Lease rentals received in advance	14,165		7,094

Net cash and restricted cash provided by operating activities	186,415		215,616
Cash flows from investing activities:
Acquisition and improvement of flight equipment	(379,349)		(372,474)
Proceeds from sale of flight equipment	126,011		171,065


Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits	6,852		4,504


Other	(4,026)		1,500

Net cash and restricted cash used in investing activities	(250,512)		(195,405)
Cash flows from financing activities:
Proceeds from issuance of common shares	200,000		—


Proceeds from secured and unsecured debt financings	1,273,709		75,000
Repayments of secured and unsecured debt financings	(963,507)		(58,355)
Debt extinguishment costs	—		(291)
Deferred financing costs	(7,536)		(1,903)



Security deposits and maintenance payments received	77,006		63,758
Security deposits and maintenance payments returned	(10,508)		(11,239)

Dividends paid	(10,500)		(10,500)


Net cash and restricted cash provided by financing activities	558,664		56,470
Net increase in cash and restricted cash:	494,567		76,681
Cash and restricted cash at beginning of period	231,861		170,682

Cash and restricted cash at end of period	$	726,428	$	247,363

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

Nine Months Ended September 30,
2017 2016
Cash flows from operating activities:
Net income $ 92,754
$ 83,729
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 227,446
227,918
Amortization of deferred financing costs 15,860
13,567
Amortization of lease premiums, discounts and incentives 8,780
5,419
Deferred income taxes (1,369 ) 3,129
Non-cash share-based payment expense 10,636
5,796
Cash flow hedges reclassified into earnings 1,725
9,074
Security deposits and maintenance payments included in earnings (17,147 ) (12,844 )
Gain on sale of flight equipment (35,926 ) (14,932 )
Impairment of flight equipment 80,430
27,185
Other 2,078
(4,712 )
Changes in certain assets and liabilities:
Accounts receivable 415
1,699
Other assets (6,980 ) 3,815
Accounts payable, accrued expenses and other liabilities 17,648
16,459
Lease rentals received in advance (2,892 ) 2,111
Net cash and restricted cash provided by operating activities 393,458
367,413
Cash flows from investing activities:
Acquisition and improvement of flight equipment (353,492 ) (792,270 )
Proceeds from sale of flight equipment 764,984
488,749
Net investment in finance and sales-type leases (246,871 ) (78,892 )
Collections on finance and sales-type leases 23,673
14,413
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits (14,068 ) (14,035 )
Unconsolidated equity method investments and associated costs —
(12,686 )
Other (405 ) (812 )
Net cash and restricted cash provided by (used in) investing activities 173,821
(395,533 )
Cash flows from financing activities:
Repurchase of shares (4,862 ) (36,573 )
Proceeds from secured and unsecured debt financings 500,000
999,350
Repayments of secured and unsecured debt financings (852,451 ) (489,134 )
Deferred financing costs (8,540 ) (17,273 )
Restricted secured liquidity facility collateral —
65,000
Liquidity facility —
(65,000 )
Security deposits and maintenance payments received 138,813
123,767
Security deposits and maintenance payments returned (104,475 ) (37,036 )
Dividends paid (61,396 ) (56,702 )
Other —
(2,073 )
Net cash and restricted cash (used in) provided by financing activities (392,911 ) 484,326
Net increase in cash and restricted cash 174,368
456,206
Cash and restricted cash at beginning of period 508,817
254,041
Cash and restricted cash at end of period $ 683,185
$ 710,247

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(Dollars in thousands)

(Unaudited)

Nine Months Ended September 30,
2017 2016
Supplemental disclosures of cash flow information:
Cash paid for interest, net of capitalized interest $ 156,428
$ 141,653
Cash paid for income taxes $ 3,622
$ 12,904
Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits and maintenance payments assumed in asset acquisitions $ 133,389
$ 110,472
Advance lease rentals, security deposits, and maintenance payments settled in sale of flight equipment $ 22,542
$ 26,671
Transfers from Flight equipment held for lease to Net investment in finance and sales-type leases, Other assets, and Maintenance reserves $ 154,213
$ 140,150


	Six Months Ended August 31,
	2023		2022
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents	$	726,428	$	246,713
Restricted cash and cash equivalents	—		650

Unrestricted and restricted cash and cash equivalents	$	726,428	$	247,363

Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	116,827	$	93,007
Cash paid for income taxes	$	5,631	$	200
Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	$	12,927	$	6,100

Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	$	11,974	$	14,791
Transfers from flight equipment held for lease to Net investment in leases and Other assets	$	182,818	$	8,895

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

Aircastle Limited and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands, except share amounts)

(Unaudited)


	Common Shares			Preference Shares			Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance, February 28, 2023	14,048	$	—	400	$	—	$	1,878,774	$	(7,316)	$	1,871,458
Net income	—	—		—	—		—		22,770		22,770

Balance, May 31, 2023	14,048	$	—	400	$	—	1,878,774		15,454		1,894,228
Issuance of common shares	1,516	—		—	—		200,000		—		200,000
Net income	—	—		—	—		—		5,518		5,518
Preference share dividends	—	—		—	—		—		(10,500)		(10,500)

Balance, August 31, 2023	15,564	$	—	400	$	—	$	2,078,774	$	10,472	$	2,089,246


	Common Shares			Preference Shares			Additional Paid-In Capital		Accumulated Deficit		Total Shareholders’ Equity
	Shares	Amount		Shares	Amount
Balance, February 28, 2022	14,048	$	—	400	$	—	$	1,878,774	$	(49,075)	$	1,829,699
Net income	—	—		—	—		—		7,682		7,682

Balance, May 31, 2022	14,048	$	—	400	$	—	1,878,774		(41,393)		1,837,381
Net loss	—	—		—	—		—		(8,693)		(8,693)
Preference share dividends	—	—		—	—		—		(10,500)		(10,500)

Balance, August 31, 2022	14,048	$	—	400	$	—	$	1,878,774	$	(60,586)	$	1,818,188

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~September 30, 2017~~August 31, 2023

Note 1. Summary of Significant Accounting Policies

Organization ~~and Basis of Presentation~~

Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda exempted 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 isconsists of 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 ~~that~~and conducts its business through ~~subsidiaries. Aircastle~~subsidiaries that are wholly owned, either directly or indirectly, ~~owns all~~by Aircastle.

Basis of ~~the outstanding common shares~~Presentation and Principles of ~~its subsidiaries.~~ Consolidation

The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment: leasing, financing, selling and managing commercial flight equipment. Our chief executive officer is the chief operating decision maker.

The accompanying consolidated financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, in our opinion, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the ~~SEC; however,~~SEC. However, we believe that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended ~~December 31, 2016~~.

~~Effective January 1, 2017, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2016-18,~~ ~~Statement of Cash Flows (Topic 230), Restricted Cash~~. For the nine months ended September 30, 2017, the Company revised the presentation in our Consolidated Statements of Cash Flows to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. For the nine months ended September 30, 2016, our Consolidated Statement of Cash Flows reflected: (1) changes in restricted cash related to the sale of flight equipment within investing activities; and (2) changes in restricted cash and restricted cash equivalents related to rents, maintenance payments and security deposits within financing activities. Therefore, the amounts included for the nine months ended September 30, 2016 have been reclassified to conform to the current period presentation.

~~The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure since the balance sheet date of~~ ~~September 30, 2017~~ ~~through the date on which the consolidated financial statements included in this Form 10-Q were issued.~~

~~Principles of Consolidation~~February 28, 2023.

The consolidated financial statements include the accounts of Aircastle and all of its ~~subsidiaries. Aircastle consolidates four~~subsidiaries, including any Variable Interest ~~Entities~~Entity (“~~VIEs”~~VIE”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We ~~consolidate VIEs~~manage and analyze our business and report on our results of operations based on 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 August 31, 2023, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

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 ~~we have determined that we are~~could adversely impact a lessee’s ability to make payments, increase the ~~primary beneficiary. We use judgment when deciding: (a) whether an entity is subject to consolidation as a VIE; (b) who~~risk of early lease terminations and depress lease rates and the ~~variable interest holders are; (c) the potential expected losses and residual returns~~value of the ~~variable interest holders; and (d) which variable interest holder~~Company’s aircraft. Capital market risk is the ~~primary beneficiary. When determining which enterprise~~risk that the Company is unable to obtain capital at reasonable rates to fund the ~~primary beneficiary, we consider: (1) the entity’s purpose and design; (2) which variable interest holder has the power~~growth of its business or to direct the activities that most significantly impact the entity’s economic performance; and (3) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When certain events occur, we reconsider whether we are the primary beneficiary of VIEs. We do not reconsider whether we are a primary beneficiary solely because of operating losses incurred by an entity.refinance existing debt facilities.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~September 30, 2017~~August 31, 2023

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 ~~that~~ the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Recent Accounting Pronouncements

~~On February 25, 2016,~~In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued Accounting ~~Standards Codification~~Standard Update (“~~ASC”~~ASU”) ~~842~~2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASC ~~842”~~848”)~~, “Leases,” which replaced the existing guidance in~~. ASC ~~840,~~ ~~Leases. The accounting~~848 provides temporary optional expedients and exceptions to certain U.S. GAAP contract modification requirements for ~~leases~~contracts affected by ~~lessors basically remained unchanged~~reference rate reform as entities transition away from the concepts that existed in ASC 840 accounting. The FASB decided that lessors would be precluded from recognizing selling profit and revenue at lease commencement for any sales-type or direct finance lease that does not transfer control of the underlying assetLondon Interbank Offered Rate (“LIBOR”) to the lessee. This requirement aligns the notion of what constitutes a sale in the lessor accounting guidance with that in the forthcoming revenue recognition standard, which evaluates whether a sale has occurred from the customer’s perspective. The standard will be effective for public entities beginning afteralternative reference rates. In December 15, 2018. The standard is applied on a modified retrospective approach. We plan to adopt the standard on its required effective date of January 1, 2019. We are evaluating the impact that ASC 842 will have on our consolidated financial statements and related disclosures. We do not believe that the adoption of the standard will significantly impact our existing or potential lessees' economic decisions to lease aircraft.

~~In June 2016,~~2022, the FASB issued ASU ~~No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326), Measurement~~2022-06 to defer the sunset date of ~~Credit Losses on Financial Instruments~~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”). ~~The standard affects entities holding financial assets and net investment in~~As of August 31, 2023, we had no aircraft leases ~~that are not accounted~~or debt financings for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded fromwhich the scope that have the contractual right to receive cash. The standard is applied on a modified retrospective approach. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as earlyassociated lease rental revenue or interest expense used LIBOR as the ~~fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process~~applicable reference rate. The adoption of ~~determining the impact the standard will have on our consolidated financial statements and related disclosures.~~

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments~~. The standard clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The update should be applied using a retrospective transition method to each period presented. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard willASC 848 did not have a material impact on our consolidated financial ~~statements and related disclosures.~~statements.

~~On May 28, 2014, the FASB and the International Accounting Standards Board (the “IASB”) (collectively, “the Boards”), jointly issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers~~ ~~(Topic 606) and related updates. Lease contracts within the scope of ASC 840,~~ ~~Leases~~, are specifically excluded from ASU No. 2014-09. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. The standard is effective for public entities beginning after December 15, 2017. The standard allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. We plan to adopt the standard on its required effective date of January 1, 2018, using the modified retrospective approach. We do not expect the impact of this standard to be material to our consolidated financial statements and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting~~. The standard clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Entities will apply the modification accounting guidance if the value, vesting

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~(Dollars in thousands, except per share amounts)~~

~~September 30, 2017~~

conditions or classification of the award changes. In addition, when applicable, disclosure is required to indicate that compensation expense has not changed. The update should be applied using a prospective transition method to each period presented. The standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The standard will not have a material impact on our consolidated financial statements and related disclosures.

Note 2. 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 the 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).~~

The following tables set forth our financial assets as of ~~September 30, 2017~~August 31, 2023 and ~~December 31, 2016~~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 Measurements at August 31, 2023 Using Fair Value Hierarchy
	Fair Value as of August 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	726,428	$	726,428	$	—	$	—	Market

Investment in debt securities	5,029		—		—		5,029		Income
Investment in equity securities	5,757		2,313		—		3,444		Market/Income

Total	$	737,214	$	728,741	$	—	$	8,473

Fair Value Measurements at September 30, 2017
Using Fair Value Hierarchy
Fair Value as of September 30, 2017
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

Significant
Other
Observable
Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)

Valuation
Technique
Assets:
Cash and cash equivalents $ 662,649
$ 662,649
$ —
$ —
Market
Restricted cash and cash equivalents 20,536
20,536
—
—
Market
Derivative assets 2,663
—
2,663
—
Market
Total $ 685,848
$ 683,185
$ 2,663
$ —

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~September 30, 2017~~August 31, 2023


			Fair Value Measurements at December 31, 2016 Using Fair Value Hierarchy										Fair Value Measurements at February 28, 2023 Using Fair Value Hierarchy
	Fair Value as of December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique		Fair Value as of February 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:										Assets:
Cash and cash equivalents	$	455,579	$	455,579	$	—	$	—	Market	Cash and cash equivalents	$	231,861	$	231,861	$	—	$	—	Market
Restricted cash and cash equivalents	53,238		53,238		—		—		Market
Derivative assets	5,735		—		5,735		—		Market

Investment in debt securities										Investment in debt securities	5,029		—		—		5,029		Income
Investment in equity securities										Investment in equity securities	5,790		2,346		—		3,444		Market/Income

Total	$	514,552	$	508,817	$	5,735	$	—		Total	$	242,680	$	234,207	$	—	$	8,473

Our cash and cash equivalents ~~along with our restricted cash and cash equivalents balances,~~ consist largely of money market securities that are ~~considered to be~~ 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 ~~therefore classified as Level 1 within our fair value hierarchy.~~traded in an active market have been valued using quoted market prices (Level 1). Our ~~interest rate derivative included~~investments in ~~Level 2 consists of United States dollar-denominated interest rate cap,~~other equity securities and debt securities for which there is no active market or there is limited market data have been valued using the fair value is based on market comparisons for similar instruments. We also considered the credit rating and risk of the counterparty providing the interest rate cap based on quantitative and qualitative factors.income approach (Level 3).

For the three and ~~nine~~six months ended ~~September 30, 2017 and the year ended December~~August 31, ~~2016,~~2023, we had no transfers into or out of Level 3.

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 ~~that~~ the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our ~~investments~~aircraft and investment in unconsolidated joint ~~ventures and aircraft. We account for our investments in unconsolidated joint ventures under the equity method of accounting and record impairment when its fair value is less than its carrying value.~~ 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), which includes third party appraisal data, and an income approach (Level 3), which ~~uses Level 3 inputs, which include~~includes the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling ~~aircraft.~~

~~Aircraft Valuation~~

~~Transactional Impairments~~

~~During~~aircraft discounted using the ~~second quarter~~Company’s weighted average cost of 2017, we entered into agreements to sell two Boeing 747-400 production freighter aircraft at the end of their respective leases and one older Boeing 747-400 converted freighter aircraft to its lessee, resulting in impairment charges totaling $79,234, partially offset by maintenance revenue of $13,520. During the third quarter of 2017, we sold one production freighter and one converted freighter aircraft. We expect to sell one production freighter aircraft in the first quarter of 2018.

~~Annual Recoverability Assessment~~capital.

We ~~completed~~account for our ~~annual recoverability assessment~~investment in unconsolidated joint venture under the equity method of ~~our aircraft in~~accounting. Our investment is recorded at cost and is adjusted by undistributed earnings and losses and the ~~second quarter this year. We also performed aircraft-specific analyses where there were~~distributions of dividends and capital. This investment is reviewed for impairment whenever events or changes in circumstances ~~such as approaching lease expirations. Other~~indicate the fair value is less than ~~the transactional impairments discussed above, no other impairments were recorded as a result of our annual recoverability assessment.~~

~~The recoverability assessment is a comparison of the~~its carrying value ~~of each aircraft to its undiscounted expected future cash flows. We develop~~and the assumptions used in the recoverability assessment, including those relating to current and future demand for each aircraft type, based on management’s experience in the aircraft leasing industry, as well as information received from third-party sources. Estimates of the undiscounted cash flows for each aircraft type are impacted by changes

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~(Dollars in thousands, except per share amounts)~~

~~September 30, 2017~~

~~in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors.~~

~~Management believes that the net book value of each aircraft~~decline is currently supported by the estimated future undiscounted cash flows expected to be generated by that aircraft, and accordingly, no aircraft were impaired as a consequence of our annual recoverability assessment. However, if our estimates or assumptions change, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in the annual recoverability assessment are appropriate, actual results could differ from those estimates.other-than-temporary.

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, ~~restricted cash and cash equivalents,~~ accounts receivable, investments in debt and equity securities, accounts payable ~~amounts borrowed under financings~~ and ~~interest rate derivatives.~~secured and unsecured financings. The fair value of ~~cash, cash equivalents, restricted~~ 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 senior notes is estimated using quoted market ~~prices. The fair values of~~prices (Level 1), whereas all our other financings are ~~estimated~~valued using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing ~~arrangements.~~arrangements (Level 2).

~~The carrying amounts and fair values of our financial instruments at September 30, 2017 and December 31, 2016 are as follows:~~

September 30, 2017 December 31, 2016

Carrying Amount
of Liability

Fair Value
of Liability

Carrying
Amount
of Liability

Fair Value
of Liability
Unsecured Term Loan $ 120,000
$ 120,000
$ 120,000
$ 120,000
ECA Financings 236,879
243,880
305,276
316,285
Bank Financings 651,434
649,557
933,541
925,783
Senior Notes 3,200,000
3,422,824
3,200,000
3,387,125

~~All of our financial instruments are classified as Level 2 with the exception of our Senior Notes, which are classified as Level 1.~~

~~Note 3. Lease Rental Revenues and Flight Equipment Held for Lease~~

~~Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at~~ ~~September 30, 2017~~ ~~were as follows:~~

Year Ending December 31, Amount
Remainder of 2017 $ 163,587
2018 630,237
2019 532,026
2020 424,140
2021 350,093
Thereafter 830,674
Total $ 2,930,757

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~September 30, 2017~~August 31, 2023

The carrying amounts and fair values of our financial instruments at August 31, 2023, and February 28, 2023 were as follows:


	August 31, 2023				February 28, 2023
	Carrying Amount of Asset		Fair Value of Asset		Carrying Amount of Asset		Fair Value of Asset
Investment in debt securities	$	5,029	$	5,029	$	5,029	$	5,029
Investment in equity securities	5,757		5,757		5,790		5,790

	Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Credit Facilities	$	20,000	$	20,000	$	20,000	$	20,000
Unsecured Term Loan	155,000		154,932		155,000		151,449

Term Financings	922,688		918,700		761,283		739,804
Senior Notes	3,850,000		3,685,049		3,700,000		3,524,563

~~Geographic concentration~~Aircraft Valuation

Annual Recoverability Assessment

We plan to perform our annual recoverability assessment of all our aircraft during the third quarter of 2023.

Additional customer and aircraft specific recoverability assessments are also performed whenever indicators suggest the carrying amount of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, a significant change in an aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production, or a significant airworthiness directive is issued. We have focused and will continue to focus on aircraft with near-term lease expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers or aircraft variants that are more susceptible to value deterioration.

The recoverability assessment is a comparison of the carrying value of an aircraft to its estimated undiscounted future cash flows. We develop 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 ~~revenue earned from flight equipment held~~and maintenance payments, residual values, economic conditions, technology, airline demand for ~~lease was~~a particular aircraft type and other factors, such as ~~follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
Region 2017 2016 2017 2016
Asia and Pacific 35 % 40 % 38 % 40 %
Europe 24 % 22 % 23 % 23 %
Middle East and Africa 12 % 12 % 12 % 12 %
North America 9 % 7 % 8 % 6 %
South America 20 % 19 % 19 % 19 %
Total 100 % 100 % 100 % 100 %

~~The classification of regions in~~ the ~~tables above and in the table and discussion below is determined based on the principal~~ location of the ~~lessee of each aircraft.~~aircraft and accessibility to records and technical documentation.

~~The following table shows~~If our estimates or assumptions change, including those related to our customers that have entered judicial insolvency proceedings, we may revise our cash flow assumptions and record future impairment charges. While we believe that the ~~number of lessees with lease rental revenue of at least 5%~~estimates and ~~their combined total percentage of lease rental revenue for the years indicated:~~related assumptions used in our recoverability assessments are appropriate, actual results could differ from those estimates.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Number of Lessees
Combined % of Lease
Rental Revenue
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 4 25% 4 25% 4 24% 4 25%

The following table sets forth revenue attributable to individual countries representing at least 10% of total revenue (including maintenance revenue) in any year based on each lessee’s principal place of business for the years indicated:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Country Revenue
% of
Total
Revenue
Revenue
% of
Total
Revenue
Revenue
% of
Total
Revenue
Revenue
% of
Total
Revenue
Indonesia⁽¹⁾
$ —
—% $ 21,745
11% $ —
—% $ 61,195
11%

~~_______________~~


~~(1)~~	~~Total revenue attributable to Indonesia was less than 10% for the three and nine months ended September 30, 2017.~~

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~September 30, 2017~~August 31, 2023

Note 3. Flight Equipment Held for Lease, Net

~~Geographic concentration of net book value of flight equipment (including~~The following table summarizes the activities for the Company’s flight equipment held for lease ~~and net investment in finance and sales-type leases, or "net book value") was as follows:~~for the six months ended August 31, 2023:

September 30, 2017 December 31, 2016
Region
Number
of
Aircraft

Net Book
Value %

Number
of
Aircraft

Net Book
Value %
Asia and Pacific 54
31 % 61
38 %
Europe 67
28 % 66
23 %
Middle East and Africa 13
9 % 14
11 %
North America 34
11 % 26
8 %
South America 24
21 % 23
18 %
Off-lease —

— % 3
⁽¹⁾
2 %
Total 192
100 % 193
100 %

~~_______________~~


~~(1)~~	~~Consisted~~	Amount
Balance at February 28, 2023		$	6,567,606
Additions		365,025
Depreciation		(174,652)
Disposals and transfers to net investment in leases and held for sale		(255,054)
Impairments		(1,097)

Balance at August 31, 2023		$	6,501,828

Accumulated depreciation as of one Airbus A330-200 aircraft, which was delivered on lease to a customer in February 2017, and two Airbus A321-200 aircraft, which were both delivered on lease to a customer during the second quarter of 2017.August 31, 2023		$	2,254,500

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

~~(Dollars in thousands, except per share amounts)~~

~~September 30, 2017~~

~~Note 16. Accumulated Other Comprehensive Loss~~

~~The following table describes the principal components of accumulated other comprehensive loss recorded on our Consolidated Balance Sheets:~~

Changes in accumulated other comprehensive loss by component⁽¹⁾
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Beginning balance $ (2,396 ) $ (4,845 ) $ (3,552 ) $ (13,213 )
Amounts recognized in other comprehensive loss on derivatives, net of tax expense of $0 for all periods presented —
—
—
(690 )
Amounts reclassified from accumulated other comprehensive loss into income, net of tax expense of $0 for all periods presented 569
705
1,725
9,763
Net current period other comprehensive income 569
705
1,725
9,073
Ending balance $ (1,827 ) $ (4,140 ) $ (1,827 ) $ (4,140 )

~~(1) All amounts are net of tax. Amounts in parentheses indicate debits.~~

Reclassifications from accumulated other comprehensive loss⁽¹⁾
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Amount of effective amortization of net deferred interest rate derivative losses⁽²⁾
$ 569
$ 705
$ 1,725
$ 9,074
Effective amount of net settlements of interest rate derivatives, net of tax expense of $0 for all periods presented —
—
—
689
Amount of loss reclassified from accumulated other comprehensive loss into income $ 569
$ 705
$ 1,725
$ 9,763

~~(1) All amounts are net of tax.~~

~~(2) Included in interest expense.~~

At September 30, 2017, the amount of deferred net loss expected to be reclassified from OCI into interest expense over the next twelve months related to our terminated interest rate derivatives is $1,361.

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

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this report. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those described under “Risk Factors” and included in our Annual Report on Form 10-K for the year ended ~~December 31, 2016 filed with the Securities and Exchange Commission (the “SEC”).~~February 28, 2023. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and, unless otherwise indicated, the other financial information contained in this report has also been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all references to “dollars” and “$” in this report are to, and all monetary amounts in this report are presented in, U.S. dollars.

All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “report”), other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA ~~Adjusted EBITDA~~ and Adjusted ~~Net Income~~EBITDA and the global aviation industry and aircraft leasing sector. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “may,” “will,” “would,” “could,” “should,” “seeks,” “estimates” and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on our historical performance and that of our subsidiaries and on our current plans, estimates and expectations and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any such forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. These risks or uncertainties include, but are not limited to, those described from time to time in Aircastle’s filings with the ~~SEC~~Securities and Exchange Commission (the “SEC”) and previously disclosed under “Risk Factors” in Part I - Item 1A of Aircastle’s ~~2016~~ Annual Report on Form 10-K ~~and elsewhere in this report.~~for the year ended February 28, 2023. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

WEBSITE AND ACCESS TO THE COMPANY’S REPORTS

The Company’s Internet website can be found at www.aircastle.com. Our annual reports on Forms 10-K, quarterly reports on Forms 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) are available free of charge through our website under “Investors — SEC Filings” as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

Statements and information concerning our status as a Passive Foreign Investment Company (“PFIC”) for U.S. taxpayers are ~~also~~ available free of charge through our website at www.aircastle.com under “Investors — Tax Information (PFIC).”

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and Board of Directors committee charters (including the charters of the Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee) are available free of charge through our website under “Investors — Corporate Governance.” In addition, our Code of Ethics for the Chief Executive and Senior Financial Officers, which applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer and Controller, is available in print, free of charge, to any shareholder upon request to Investor Relations, Aircastle Limited, c/o Aircastle Advisor LLC, 201 Tresser Boulevard, Suite 400, Stamford, Connecticut 06901.

The information on the Company’s Internet website is not part of, ornor incorporated by reference, into this report, or any other report we file with, or furnish to, the SEC.

OVERVIEW

Aircastle acquires, leases, and sells commercial jet aircraft to airlines throughout the world. ~~As of September 30, 2017, we owned and managed on behalf of our joint ventures 205 aircraft leased to 71 lessees located in 38 countries.~~ Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are subject to net leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs. InHowever, in many cases ~~however,~~ we are obligated to pay a specified portion of ~~specified~~ maintenance or modification costs. During the six months ended August 31, 2023, we purchased 8 aircraft and sold 10 aircraft and other flight equipment. As of ~~September 30, 2017,~~August 31, 2023, we owned and managed on behalf of our joint venture 248 aircraft leased to 74 airline customers located in 43 countries. As of August 31, 2023, the ~~net book value (including flight equipment held~~Net Book Value of our fleet was $6.8 billion. The weighted average age of our fleet was 9.7 years, and the weighted average remaining lease term was 5.2 years. As of August 31, 2023, we had commitments to acquire 12 aircraft for ~~lease~~$402.4 million, which included estimated amounts for pre-delivery deposits, contractual price escalations and ~~net investment in finance and sales-type leases, or "net book value") was $5.98 billion compared to $6.51 billion at December 31, 2016.~~ other adjustments.

Our total revenues, ~~and~~ net income and Adjusted EBITDA were $386.4 million, $28.3 million and $343.1 million, respectively, for the ~~three and nine~~six months ended ~~September 30, 2017 were $191.4~~August 31, 2023. Cash flow provided by operating activities was $186.4 million for the six months ended August 31, 2023. Our leadership team and ~~$57.4 million,~~other senior professionals have extensive industry and ~~$619.2 million and $92.8 million, respectively.~~financial experience, including managing through downturns in the aviation industry.

~~Growth~~Historically, growth in commercial air traffic ~~is broadly~~has been correlated with world economic activity. ~~In recent years, it has been expanding~~Prior to the COVID-19 pandemic, commercial air traffic growth expanded at a rate one ~~and a half~~ to two times that of global GDP growth. ~~The~~This expansion of air travel has driven ~~a rise~~growth in the world aircraft ~~fleet. There~~fleet; and there are ~~currently~~ approximately ~~20,000~~26,000 commercial mainline passenger and freighter aircraft in ~~operation worldwide. This~~the world fleet ~~is expected to continue expanding at three to four percent average annual rate over the next twenty years.~~today. Aircraft leasing companies own approximately ~~41%~~49% of the world’s commercial jet aircraft. Under normal circumstances, we would expect the global fleet to continue expanding at a 2 to 3% average annual rate.

~~Notwithstanding the sector’s~~As a leading secondary market investor, we believe that our long-standing business strategy of maintaining conservative leverage and limiting long-term ~~growth, the aviation markets have been,~~financial commitments has enabled us to manage through recent crises. Our portfolio, primarily comprised of a balanced mix of new technology and ~~are expected~~mid-life, narrow-body aircraft, should remain attractive assets for our airline customers to remain, subject to economic variability due to changes in macroeconomic variables such as fuel price levels and foreign exchange rates. The aviation industry is also susceptible to external shocks, such as regional conflicts and terrorist events. Mitigating this risk is the portability of the assets, allowing aircraft to be redeployed to locations where demand is higher.

~~Air traffic data for the past several years has shown strong passenger market growth. According~~respond to the ~~International Air Transport Association, during the first eight months~~growing demand of ~~2017,~~ global ~~passenger traffic increased 7.9% compared to the same period in 2016. During the first eight months of 2017,~~ air ~~cargo traffic increased 10.5% compared to the same period in 2016, and capacity increased 3.8%, resulting in an increase in load factors to 43.3%.~~

Demand for air travel varies considerably by region. Emerging market economies have generally been experiencing greater increases in air traffic, driven by rising levels of per capita income. Air traffic growth is also being driven by the proliferation of low cost carriers, which have stimulated demand through lower prices. Mature markets, such as North America and Western Europe, are likely to grow more slowly in tandem with their economies. Persian Gulf-based Emirates, Qatar Airways and Etihad Airways are also showing signs of reaching maturity. Airlines operating in areas with political instability or weakening economies are under pressure, and their near-term outlook is more uncertain. On balance, we believe air travel will increase over time, and as a result, we expect demand for modern aircraft will continue to remain strong over the long-term.

Low fuel prices and interest rates have had a substantial effect on our industry. The price of oil dropped by $67 to $36 per barrel in the four years prior to December 2015. This allowed airlines to reduce ticket prices and stimulate aircraft traffic while retaining enough of this benefit to achieve record profit levels. A low interest rate environment and the strong overall performance of the aircraft financing sector attracted significant new capital, increasing competition for new investments. The downward trend in fuel prices and interest rates appears to have ended as fuel prices started rising in 2016. In 2017, the price of fuel has averaged approximately $50 per barrel. Likewise, interest rates have started to rise in the U.S., with Federal Reserve guidance suggesting multiple future rate hikes subsequent to the December 2016 increase in the Federal Funds rate.

Capital availability for aircraft has varied over time, and we consider this variability to be a basic characteristic of our business. If pursued properly, this represents an important source of opportunity. Both debt and equity markets have improved globally over the past several years with the recovery from the global financial crisis. Strong U.S. debt capital market conditions benefited borrowers by permitting access to financing at historic lows while higher fees have driven down ECA demand. Recently, ECA availability has been curtailed, both in the U.S. and in Europe, due to political issues and an investigation into possible irregularities, respectively. Commercial bank debt continues to play a critical role for aircraft finance, although we believe regulatory pressures may limit its role over time.

While financial markets conditions are currently attractive, heightened volatility stemming from global growth concerns and various geopolitical issues may increase capital costs and limit availability going forward. We believe these market forces should generate attractive new investment and trading opportunities for which we are well placed to capitalize given our access to different financing sources, our limited capital commitments and our reputation as a reliable trading partner.

Over the longer term, our strategy is to achieve an investment grade credit rating, which we believe will reduce our borrowing costs and enable more reliable access to debt capital throughout the business cycle.travel.

We believe that we have sufficient liquidity to meet our ~~business approach is differentiated from those~~contractual obligations over the next twelve months and as of ~~other large leasing companies. Our investment strategy is to seek out the best risk-adjusted return opportunities across the commercial jet market, so our acquisition targets~~October 6, 2023, total liquidity of $2.8 billion includes $1.9 billion of undrawn facilities, $0.5 billion of projected adjusted operating cash flow and ~~growth rates will vary with market conditions. We prefer to have capital resources available to capture investment opportunities that arise in the context~~contracted asset sales, $0.3 billion of ~~changing market circumstances. As such, we limit large, long-term capital~~equity commitments and ~~are therefore much less reliant on orders for new aircraft from aircraft manufacturers as a source~~$0.1 billion of ~~new investments.~~unrestricted cash through October 1, 2024.

We plan to grow our business and profits over the long-term while maintaining a countercyclical orientation, a bias towards limiting long-dated capital commitments and a conservative and flexible capital structure. Our business strategy entails the following elements:

~~Pursuing a disciplined and differentiated investment strategy.~~ In our view, aircraft values change in different ways over time. We carefully evaluate investments across different aircraft models, ages, lessees and acquisition sources and re-evaluate these choices as market conditions and relative investment values change. We believe the financing flexibility offered through unsecured debt and our team’s experience with a wide range of asset types enables our value oriented strategy and provides us with a competitive advantage. We view orders from equipment manufacturers to be part of our investment opportunity set, but choose to limit long term capital commitments unless we believe there is an adequate return premium to compensate for risks and opportunity costs. This approach sets us apart from most other large aircraft leasing companies.

~~Originating investments from many different sources across the globe.~~Our strategy is to seek out worthwhile investments by leveraging our team’s wide range of contacts around the world. We utilize a multi-channel approach to sourcing acquisitions and have purchased aircraft from a large number of airlines, lessors, original equipment manufacturers, lenders and other aircraft owners. Since our formation in 2004, we have acquired aircraft from 86 different sellers.

~~Selling assets when attractive opportunities arise.~~ We sell assets with the aim of realizing profits and reinvesting proceeds when a sale generates the greatest expected cash flow or when more accretive investments are available. We also use asset sales for portfolio management purposes, such as reducing lessee specific concentrations and lowering residual value exposures to certain aircraft types.

~~Maintaining efficient access to capital from a wide set of sources while targeting an investment grade credit rating.~~ We believe the aircraft investment market is influenced by the business cycle. Our strategy is to increase our purchase activity when prices are low and to emphasize asset sales when competition for assets is high. To implement this approach, we believe it is important to maintain access to a wide variety of financing sources. Our objective is to improve our corporate credit ratings to an investment grade level by maintaining strong portfolio and capital structure metrics while achieving a critical size through accretive growth. We believe improving our credit rating will not only reduce our borrowing costs but also facilitate more reliable access to both secured and unsecured debt capital throughout the business cycle.

~~Leveraging our strategic relationships.~~ We intend to capture the benefits provided through the extensive global contacts and relationships maintained by Marubeni, which is our biggest shareholder and one of the largest Japanese trading companies. Marubeni has already enabled greater access to Japanese-based financing and helped source and develop our joint venture with IBJL (“IBJ Air”). IBJ Air is targeted at newer narrow-body aircraft leased to premier airlines, providing Aircastle with increased access to this market sector and to these customers. Our joint venture with Teachers’ (“Lancaster”) provides us with an opportunity to pursue larger transactions, manage portfolio concentrations and improve our return on deployed capital.

~~Capturing the value of our efficient operating platform and strong operating track record.~~ We believe our team’s capabilities in the global aircraft leasing market places us in a favorable position to source and manage new income-generating activities. We intend to continue to focus our efforts in areas where we believe we have competitive advantages, including new direct investments as well as ventures with strategic business partners.

~~Intending to pay quarterly dividends to our shareholders based on the Company’s sustainable earnings levels.~~ Aircastle has paid dividends each quarter since our initial public offering in 2006. On August 4, 2017, our Board of Directors declared a regular quarterly dividend of $0.26 per common share, or an aggregate of $20.5 million for the three months ended September 30, 2017, which was paid on September 15, 2017 to holders of record on August 31, 2017. These dividends may not be indicative of the amount of any future dividends. Our ability to

~~pay quarterly dividends will depend upon many factors, including those as described in Item 1A. “Risk Factors” and elsewhere in our 2016 Annual Report on Form 10-K.~~

~~Revenues~~

Our revenues are comprised primarily of operating lease rentals on flight equipment held for lease, revenue from retained maintenance payments related to lease expirations, lease termination payments, lease incentive amortization and interest recognized from finance and sales-type leases.

Typically, our aircraft are subject to net leases whereby the lessee pays lease rentals and is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs arising during 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 and the amount of the contracted rent will depend upon the type, age, specification and condition of the aircraft and market conditions at the time the lease is committed. The amount of rent we receive will depend on a number of factors, including the creditworthiness of our lessees and the occurrence of restructurings 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 conditions and trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.

Under an operating lease, the lessee will be responsible for performing maintenance on the relevant aircraft and will typically 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 would be made either monthly in arrears or at the end of the lease term. For maintenance payments made monthly in arrears during a lease term, we will typically be required to reimburse all or a portion of these payments to the lessee upon their completion of the relevant heavy maintenance, overhaul or parts replacement. We record maintenance payments paid by the lessee during a lease as accrued maintenance liabilities in recognition of our obligation in the lease to refund such payments, and therefore we do not recognize maintenance revenue during the lease. Maintenance revenue recognition would occur at the end of a lease, when we are able to determine the amount, if any, by which reserve payments received exceed the amount we are required under the lease to reimburse to the lessee for heavy maintenance, overhaul or parts replacement. The amount of maintenance revenue we recognize in any reporting period is inherently volatile and is dependent upon a number of factors, including the timing of lease expiries, including scheduled and unscheduled expiries, the timing of maintenance events and the utilization of the aircraft by the lessee.

Many of our leases contain provisions which 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 cost of the maintenance event and the estimated amounts the lessee is responsible to pay.

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.

~~2017~~Fiscal Year 2023 Lease Expirations and Lease Placements

~~At September 30, 2017,~~As of October 6, 2023, we had ~~two~~3 off-lease aircraft ~~accounting~~and 8 aircraft with leases expiring in fiscal year 2023, which combined account for ~~less than 1%~~3% of our ~~net book value that are scheduled~~Net Book Value at August 31, 2023, still to ~~come off lease during 2017 for which we have not yet secured lease~~be placed or ~~sales commitments. We are marketing these aircraft for sale.~~

~~2018-2021 Lease Expirations and Lease Placements~~sold.

Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the ~~period 2018-2021,~~fiscal years 2024 to 2027, representing the percentage of our ~~net book value~~Net Book Value as of ~~flight equipment~~

~~(including flight equipment held for lease and net investment in finance and sales-type leases) at September 30, 2017,~~August 31, 2023, specified below:

~~2018: 10~~•2024: 35 aircraft, representing 6%12%;

~~2019:~~•2025: 27 aircraft, representing 11%;

•2026: 24 aircraft, representing 8%; and

•2027: 28 aircraft, representing ~~18%;~~12%.

~~2020: 25 aircraft, representing 9%; and~~

~~2021: 23 aircraft, representing 12%.~~

~~Operating Expenses~~

Operating expenses are comprised of depreciation of flight equipment held for lease, interest expense, selling, general and administrative expenses, aircraft impairment charges and maintenance and other costs. Because our operating lease terms generally require the lessee to pay for operating, maintenance and insurance costs, our portion of maintenance and other costs relating to aircraft reflected in our statement of income primarily relates to expenses for unscheduled lease terminations.

~~Income Tax Provision~~

We obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event 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 2035, 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, Singapore 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. The aircraft owning subsidiaries resident in Ireland, Mauritius and Singapore are subject to tax in those respective jurisdictions.

We 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. 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.

Acquisitions and Sales

During the ~~first nine~~six months ~~of 2017,~~ended August 31, 2023, we acquired 288 aircraft for ~~$635.1~~$341.7 million. As of ~~October~~August 31, ~~2017, we have acquired 37 aircraft for approximately $760 million. At September 30, 2017,~~2023, we had commitments to acquire ~~64 additional~~12 aircraft for ~~$1.80 billion, including~~$402.4 million, with delivery through the ~~acquisition~~second quarter of ~~25 new E-Jet E2 aircraft from Embraer,~~2025, which ~~are scheduled to deliver in 2019 to 2021.~~includes estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments. As of October ~~31, 2017,~~6, 2023, we have acquired 2 additional aircraft and have commitments to acquire 5512 aircraft for ~~$1.68 billion.~~$400.2 million.

During the ~~first nine~~six months ~~of 2017,~~ended August 31, 2023, we sold 2910 aircraft and other flight equipment for ~~$765.0~~net proceeds of $126.0 million ~~which resulted in~~and recognized a net gain on sale of ~~$35.9 million. During~~$14.3 million for these aircraft. As of October ~~2017,~~6, 2023, we have sold ~~one narrow-body aircraft and one classic narrow-body~~1 additional aircraft.

~~The following table sets forth certain information with respect to the aircraft owned by us as of~~ ~~September 30, 2017~~:

~~AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)~~

Owned Aircraft
As of
September 30,
2017⁽¹⁾

As of
September 30,
2016⁽¹⁾
Net Book Value of Flight Equipment $ 5,979
$ 6,270
Net Book Value of Unencumbered Flight Equipment $ 4,572
$ 4,343
Number of Aircraft 192
175
Number of Unencumbered Aircraft 163
139
Number of Lessees 71
65
Number of Countries 38
35
Weighted Average Age (years)⁽²⁾
8.7
7.6
Weighted Average Remaining Lease Term (years)⁽²⁾
4.7
5.3
Weighted Average Fleet Utilization during the three months ended September 30, 2017 and 2016⁽³⁾
100.0 % 98.2 %
Weighted Average Fleet Utilization during the nine months ended September 30, 2017 and 2016⁽³⁾
99.2 % 98.9 %
Portfolio Yield for the three months ended September 30, 2017 and 2016⁽⁴⁾
12.3 % 12.4 %
Portfolio Yield for the nine months ended September 30, 2017 and 2016⁽⁴⁾
12.3 % 12.4 %

Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment $ 661
$ 629
Number of Aircraft 13
11


~~(1)~~	~~Calculated using net book value at period end.~~


~~(2)~~	~~Weighted by net book value.~~


~~(3)~~	~~Aircraft on-lease days as a percent of total days in period weighted by net book value.~~


~~(4)~~	Lease rental revenue, interest income and cash collections on our net investment in finance and sales-type leases for the period as a percent of the average net book value for the period; quarterly information is annualized.

~~Our owned aircraft portfolio as of~~ ~~September 30, 2017~~ ~~is listed in Exhibit 99.1 to this report.~~

~~PORTFOLIO DIVERSIFICATION~~

Owned Aircraft as of
September 30, 2017
Owned Aircraft as of
September 30, 2016

Number of
Aircraft

% of Net
Book Value⁽¹⁾
Number of
Aircraft
% of Net
Book Value⁽¹⁾
Aircraft Type
Passenger:
Narrow-body 159
60 % 134
52 %
Wide-body 28
34 % 32
40 %
Total Passenger 187
94 % 166
92 %
Freighter 5
6 % 9
8 %
Total 192
100 % 175
100 %

Manufacturer
Airbus 108
53 % 87
50 %
Boeing 79
45 % 83
48 %
Embraer 5
2 % 5
2 %
Total 192
100 % 175
100 %

Regional Diversification
Asia and Pacific 54
31 % 55
39 %
Europe 67
28 % 57
22 %
Middle East and Africa 13
9 % 14
11 %
North America 34
11 % 24
8 %
South America 24
21 % 23
19 %
Off-lease —
— % 2
⁽²⁾
1 %
Total 192
100 % 175
100 %


~~(1)~~	~~Calculated using net book value at period end.~~


~~(2)~~	~~Consisted of two Boeing 737-800 aircraft that were delivered to a customer in China in October 2016.~~

~~Our largest single customer represents over 6% of the net book value at~~ ~~September 30, 2017. Our top fifteen customers for aircraft we owned at~~ ~~September 30, 2017, representing 87 aircraft and 58% of the net book value, are as follows:~~



~~Percent of Net Book Value~~	~~Customer~~	~~Country~~	~~Number of~~ ~~Aircraft~~
~~Greater than 6% per customer~~	~~Avianca Brazil~~	~~Brazil~~	10

~~3% to 6% per customer~~	~~LATAM~~	~~Chile~~	3
	~~Lion Air~~	~~Indonesia~~	10
	~~TAP Portugal~~⁽¹⁾	~~Portugal~~	8
	~~South African Airways~~	~~South Africa~~	4
	~~Aerolineas Argentina~~	~~Argentina~~	5
	~~AirBridgeCargo~~⁽²⁾	~~Russia~~	2
	~~Iberia~~	~~Spain~~	10
	~~Jet Airways~~	~~India~~	8

~~Less than 3% per customer~~	~~Interjet~~	~~Mexico~~	9
	~~AirAsia X~~	~~Malaysia~~	2
	~~Avianca~~	~~Colombia~~	2
	~~Thai Airways~~	~~Thailand~~	1
	~~easyJet~~	~~United Kingdom~~	10
	~~Air Canada~~	~~Canada~~	3
	~~Total top fifteen customers~~		87
	~~All other customers~~		~~105~~
	~~Total all customers~~		~~192~~


~~(1)~~	~~Combined with an affiliate.~~


~~(2)~~	~~Guaranteed by Volga-Dnepr Airlines. We have one additional aircraft on lease with an affiliate.~~

Finance

We ~~believe that~~operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital from debt and equity investors. Since our inception in late 2004, we have raised $2.3 billion in equity capital from private and public investors. We also raised $20.7 billion in debt capital from a variety of sources including export credit agency-backed debt, commercial bank debt, the aircraft securitization markets and the unsecured bond market. The diversity and global nature of our financing sources demonstrates our ability to adapt to changing market conditions and seize new growth opportunities.

We intend to fund new investments through cash on hand, funds generated from operations, maintenance payments received from lessees, ~~and other funds generated from operations,~~unsecured bond offerings, borrowings secured ~~borrowings for~~by our aircraft, ~~borrowings~~draws under our revolving credit facilities and ~~other borrowings and~~ proceeds from any future aircraft ~~sales will be sufficient to satisfy our liquidity and capital resource needs over the next twelve months.~~sales. We may repay all or a portion of such borrowings from time to time with the net proceeds from subsequent long-term debt financings, additional equity offerings or cash generated from operations and asset sales. Therefore, our ability to execute our business strategy, particularly the acquisition of additional commercial jet aircraft or other aviation assets, depends to a significant degree on our ability to obtain additional debt and equity capital on terms we deem attractive.

See “Liquidity and Capital Resources” below.

AIRCASTLE AIRCRAFT INFORMATION

The following table sets forth certain information with respect to the aircraft owned by us as of August 31, 2023 and 2022:


Owned Aircraft	As of August 31, 2023			As of August 31, 2022
	(Dollars in millions)
Net Book Value of Flight Equipment	$	6,751		$	6,493

Net Book Value of Unencumbered Flight Equipment	$	5,208		$	5,447
Number of Aircraft	239			243
Number of Unencumbered Aircraft	201			212
Number of Lessees	73			74
Number of Countries	43			45
Weighted Average Age (Years)(1)	9.7			10.3
Weighted Average Remaining Lease Term (Years)(1)	5.2			5.0
Weighted Average Fleet Utilization during the three months ended August 31, 2023 and 2022(2)	98.3		%	94.9		%
Weighted Average Fleet Utilization during the six months ended August 31, 2023 and 2022(2)	97.4		%	94.8		%
Portfolio Yield for the three months ended August 31, 2023 and 2022(3)	9.1		%	9.2		%
Portfolio Yield for the six months ended August 31, 2023 and 2022(3)	9.0		%	9.2		%

Managed Aircraft on behalf of Joint Venture
Net Book Value of Flight Equipment	$	278		$	292
Number of Aircraft	9			9

(1)Weighted by Net Book Value.

(2)Aircraft on-lease days as a percent of total days in period weighted by Net Book Value (excludes aircraft undergoing freighter conversion).

(3)Lease rental revenue, interest income and cash collections on our net investment in leases for the period as a percent of the average Net Book Value for the period; quarterly information is annualized.

PORTFOLIO DIVERSIFICATION


	Owned Aircraft as of August 31, 2023				Owned Aircraft as of August 31, 2022
	Number of Aircraft		% of Net Book Value		Number of Aircraft	% of Net Book Value
Aircraft Type
Passenger:
Narrow-body - new technology(1)	50		32	%	31	21	%

Narrow-body - current technology	168		54	%	186	61	%
Wide-body - current technology	17		12	%	21	15	%

Total Passenger	235		98	%	238	97	%
Freighter - current technology	4		2	%	5	3	%
Total	239		100	%	243	100	%

Manufacturer
Airbus	153		65	%	159	66	%
Boeing	67		27	%	72	29	%
Embraer	19		8	%	12	5	%
Total	239		100	%	243	100	%

Regional Diversification
Asia and Pacific	62		28	%	65	29	%
Europe	90		30	%	90	29	%
Middle East and Africa	7		2	%	10	4	%
North America	43		23	%	37	19	%
South America	31		15	%	26	13	%
Off-lease	6	(2)	2	%	15	6	%

Total	239		100	%	243	100	%

(1) Includes Airbus A320-200neo and A321-200neo, Boeing 737-MAX8 and Embraer E2 aircraft.

(2) Of the 6 off-lease aircraft at August 31, 2023, we currently have 3 narrow-body aircraft that are undergoing freighter conversion which we are marketing for lease.

The top ten customers for our owned aircraft at August 31, 2023 were as follows:


Customer	Country	Percent of Net Book Value	Number of Aircraft
IndiGo	India	8.7%	13
LATAM	Chile	6.8%	13
KLM	Netherlands	5.4%	11
Lion Air(1)	Indonesia	4.5%	10
Viva Aerobus	Mexico	4.1%	7
American Airlines	United States	3.6%	9
Aerolineas Argentinas	Argentina	3.3%	6
Volaris	Mexico	3.2%	6
Air Canada	Canada	3.2%	5
Frontier Airlines	United States	2.8%	4

Total top ten customers		45.6%	84
All other customers		54.4%	155

Total all customers		100.0%	239

(1) Includes 4 aircraft on lease with 3 affiliated airlines.

COMPARATIVE RESULTS OF OPERATIONS

Comparison of the three months ended ~~September 30, 2017~~ August 31, 2023, to the three months ended ~~September 30, 2016:~~ August 31, 2022:


	Three Months Ended August 31,
	2023		2022
	(Dollars in thousands)
Revenues:
Lease rental revenue	$	150,351	$	146,508
Direct financing and sales-type lease revenue	5,085		2,265
Amortization of lease premiums, discounts and incentives	(7,124)		(5,518)
Maintenance revenue	15,046		20,114
Total lease revenue	163,358		163,369
Gain on sale of flight equipment	4,453		10,049
Other revenue	145		161
Total revenues	167,956		173,579
Operating expenses:
Depreciation	86,328		82,106
Interest, net	57,035		50,587
Selling, general and administrative	18,882		17,393
Provision for credit losses	(834)		109
Impairment of flight equipment	1,100		33,671
Maintenance and other costs	8,854		5,212
Total operating expenses	171,365		189,078

Other income:


Other	3,372		2,072
Total other income	3,372		2,072

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investment	(37)		(13,427)
Income tax benefit	(5,099)		(4,068)
Earnings of unconsolidated equity method investment, net of tax	456		666

Net income (loss)	$	5,518	$	(8,693)

Three Months Ended September 30,
2017 2016
(Dollars in thousands)
Revenues:
Lease rental revenue $ 171,687
$ 181,975
Finance and sales-type lease revenue 6,412
5,354
Amortization of net lease discounts and lease incentives (2,388 ) (521 )
Maintenance revenue 14,507
6,829
Total lease revenue 190,218
193,637
Other revenue 1,193
1,015
Total revenues 191,411
194,652
Operating expenses:
Depreciation 70,018
76,201
Interest, net 60,636
61,797
Selling, general and administrative 17,137
15,985
Impairment of aircraft —
10,462
Maintenance and other costs 2,572
1,834
Total operating expenses 150,363
166,279
Other income (expense):
Gain (loss) on sale of flight equipment 21,642
(73 )
Other (360 ) (210 )
Total other income (expense) 21,282
(283 )
Income from continuing operations before income taxes and earnings of unconsolidated
equity method investments
62,330
28,090
Income tax provision 6,195
2,458
Earnings of unconsolidated equity method investments, net of tax 1,296
1,805
Net income $ 57,431
$ 27,437

Revenues

Total revenuesdecreased ~~by $3.2~~$5.6 million, ~~for the~~ ~~three months endedSeptember 30, 2017~~ ~~as compared to the~~ ~~three months endedSeptember 30, 2016~~.attributable to:

Lease rental revenue~~. The decrease in lease rental revenue~~ increased $3.8 million, primarily attributable to an increase of ~~$10.3~~$21.9 million ~~for the~~ ~~three months endedSeptember 30, 2017, as compared~~related to ~~the same period in~~ ~~2016~~,29 aircraft purchased since June 1, 2022.

This was ~~primarily the result of:~~partially offset by:

•a ~~$32.8 million decrease due to the sale of 40 aircraft since September 30, 2016; and~~

~~a $6.7~~$9.8 million decrease due to lease extensions, amendments, transitions and other ~~changes.~~changes;

~~This~~•a $5.5 million decrease ~~was partially offset by an increase in revenue of $29.2 million due~~related to the ~~acquisition~~sale of 5013 aircraft since ~~September 30, 2016.~~June 1, 2022; and

~~Finance~~•a $2.8 million decrease related to aircraft lease terminations.

Direct financing and sales-type lease ~~revenue.~~ ~~For the~~ ~~three months endedSeptember 30, 2017, $6.4~~revenue increased $2.8 million, ~~of interest income from finance and sales-type leases was recognized, as compared to $5.4 million of interest income from finance and sales-type leases recorded for the same period in~~ ~~2016, due~~primarily related to the ~~addition~~reclassification of ~~fifteen~~10 aircraft to sales-type leases, partially offset by the sale of ~~two~~7 aircraft ~~over the last twelve months.~~since June 1, 2022.

Amortization of ~~net~~ lease premiums, discounts and lease incentives ~~consisted of the following:~~:


	Three Months Ended August 31,
	2023		2022
	(Dollars in thousands)
Amortization of lease premiums	$	(2,795)	$	(2,723)
Amortization of lease discounts	223		126
Amortization of lease incentives	(4,552)		(2,921)

Amortization of lease premiums, discounts and incentives	$	(7,124)	$	(5,518)

Three Months Ended September 30,
2017 2016
(Dollars in thousands)
Amortization of lease incentives $ (1,810 ) $ 42
Amortization of lease premiums (2,266 ) (2,894 )
Amortization of lease discounts 1,688
2,331
Amortization of net lease discounts and lease incentives $ (2,388 ) $ (521 )

Maintenance revenue. For the three months ended August 31, 2023, we recorded $15.0 million of maintenance revenue primarily related to maintenance payments received by us and ~~conversely, if~~recognized into income as a result of scheduled lease expirations.

For the three months ended August 31, 2022, we recorded $20.1 million of maintenance revenue, comprised primarily of $7.5 million related to the scheduled lease ~~terminates,~~expirations of 2 narrow-body aircraft and $11.9 million related to the early lease termination of 1 freighter aircraft as a result of a new wave of sanctions against Russia in the United Kingdom (“U.K.”).

Gain on sale of flight equipment. During the three months ended August 31, 2023, we sold 6 aircraft and other flight equipment for gains totaling $4.5 million. We sold 5 aircraft during the three months ended August 31, 2022, for gains totaling $10.0 million.

Operating expenses

Total operating expenses decreased $17.7 million, attributable to:

Depreciation expense increased $4.2 million primarily attributable to an increase of $9.6 million related ~~unused lease incentive liability will reduce the amortization~~to 29 aircraft acquired since June 1, 2022, partially offset by a decrease of ~~lease incentives. The~~$5.5 million related to 20 aircraft sold since June 1, 2022.

Interest, net increased $6.4 million due to a higher average cost of borrowing and higher weighted average debt outstanding of $247.7 million.

Selling, general and administrative expenses increased $1.5 million, primarily due to an increase in ~~amortization~~personnel costs and ongoing Russian litigation expenses.

Impairment of aircraft. We recorded an impairment charge of $1.1 million during the three months ended August 31, 2023.

During the three months ended August 31, 2022, the Company wrote off the remaining book value of 1 freighter aircraft in Russia that had not been returned to us, totaling $27.5 million.

The Company also recorded impairment charges totaling $6.2 million related to the scheduled lease ~~incentives~~expiration of ~~$1.9~~1 narrow-body aircraft and other flight equipment during the three months ended August 31, 2022. The Company recognized $6.1 million of maintenance revenue for this 1 aircraft.

Maintenance and other costs increased $3.6 million, primarily attributable to higher aircraft insurance premiums and higher costs due to the timing of transition of aircraft to new lessees.Higher transition costs are largely related to aircraft for which the previous lease was terminated early, and the aircraft was repossessed from the prior operator.

Other income

Total other income was $3.4 million and $2.1 million for the three months ended ~~September 30, 2017, as compared to the same period in 2016, was~~August 31, 2023 and 2022, respectively, and primarily ~~attributable to the reversal~~consists of ~~lease incentives associated with one freighter aircraft due to changes in estimate and the reclassification of one aircraft from an operating lease to a finance lease.~~

~~Maintenance revenue.~~ For the three months ended September 30, 2017, we recorded $14.5 million of maintenance revenue primarily due to the transition of one narrow-body and one wide-body aircraft of $13.1 million. For the same period in 2016, we recorded $6.8 million of maintenance revenue, including $5.6 million related to maintenance reserves taken into income for three freighter aircraft.

~~Other revenue.~~ ~~For the three months ended September 30, 2017, we recorded $1.2 million of other revenue, primarily from fees earned from one lessee~~cash received in connection with ~~the early termination of a lease. For the same period in 2016, we recorded $1.0~~claims settlements from various airline customers that had entered into bankruptcy proceedings or similar-type restructurings.

Income tax benefit

Income tax benefit. Our income tax benefit was $5.1 million ~~of other revenue.~~

~~Operating expenses~~

~~Total operating expenses~~ ~~decreased by $15.9 million for the~~ ~~three months endedSeptember 30, 2017, as compared to the~~ ~~three months endedSeptember 30, 2016~~.

~~Depreciation expense~~ ~~decreased by $6.2 million for the~~ ~~three months endedSeptember 30, 2017~~ ~~as compared to the same period in~~ ~~2016. The decrease is primarily the result of lower depreciation of $18.8 million due to 40 aircraft sold.~~

~~This decrease was partially offset by increases of:~~

~~$11.0 million due to 50 aircraft acquired; and~~

~~$1.6 million due to changes in asset lives, residual values~~ and ~~other changes.~~

~~Interest, net~~ ~~consisted of the following:~~

Three Months Ended September 30,
2017 2016
(Dollars in thousands)
Interest on borrowings, net of settlements on interest rate derivatives, and other liabilities⁽¹⁾
$ 54,527
$ 57,589
Amortization of interest rate derivatives related to deferred losses 569
705
Amortization of deferred financing fees and debt discount⁽²⁾
6,735
4,097
Interest expense 61,831
62,391
Less: Interest income (1,061 ) (546 )
Less: Capitalized interest (134 ) (48 )
Interest, net $ 60,636
$ 61,797

~~(1) Includes $1.1 million of loan prepayment fees related to the sale of aircraft during the three months ended September 30, 2017.~~

~~(2) Includes $3.0 million in deferred financing fees written off related to the prepayment of debt in connection with the sale of aircraft during the three months ended September 30, 2017.~~

Interest, net decreased by $1.2 million over the three months ended September 30, 2016. The net decrease is primarily a result of lower interest on borrowings of $3.1 million, primarily due to lower weighted average debt outstanding, and higher interest income of $0.5 million, partially offset by higher amortization of deferred financing fees and debt discount of $2.6 million during the three months ended September 30, 2017 as compared to a year ago.

~~Selling, general and administrative expenses~~ ~~for the~~ ~~three months endedSeptember 30, 2017~~ ~~increased by $1.2 million over the same period in 2016.~~

~~Impairment of Aircraft.~~ ~~See “Summary of Impairments and Recoverability Assessment” below for a detailed discussion of impairment charges related to certain aircraft.~~

~~Other income (expense)~~

~~Gain (loss) on sale of flight equipment~~ ~~increased by $21.7 million to $21.6~~$4.1 million for the three months ended September 30, 2017, compared with a loss of $0.1 million for the same period in 2016. During the third quarter of 2017, we sold fifteen aircraft. During the third quarter of 2016, we recorded gains totaling $7.8 millionAugust 31, 2023 and ~~losses totaling $7.9 million, primarily due to a loss of $5.2 million for a wide-body aircraft’s lease extension classified as a sales-type lease.~~

~~Income tax provision~~

~~Our~~ ~~provision for income taxes~~ ~~for the~~ ~~three months ended~~ ~~September 30, 2017 and 2016 was~~ ~~$6.2 million~~ ~~and~~ ~~$2.5 million~~,2022, respectively. Income taxes have been provided based on the applicable tax laws and rates of those countries in which operations are conducted and income is earned, primarily Ireland, Singapore and the United States. The increase in ~~our income~~the tax ~~provision~~benefit is attributable to changes in the mix of ~~approximately $3.7 million~~pre-tax losses in taxable and non-taxable jurisdictions. The three months ended August 31, 2022, included certain net non-cash impairment charges, which were recorded in a low tax jurisdiction.

Results of Operations for the ~~three~~six months ended~~September 30, 2017~~, August 31, 2023, as compared to the ~~same period in~~ ~~2016, was~~six months ended August 31, 2022:


	Six Months Ended August 31,
	2023		2022
	(Dollars in thousands)
Revenues:
Lease rental revenue	$	297,086	$	290,652
Direct financing and sales-type lease revenue	6,158		4,863
Amortization of lease premiums, discounts and incentives	(14,331)		(10,906)
Maintenance revenue	49,566		47,213
Total lease revenue	338,479		331,822
Gain on sale of flight equipment	47,047		13,736
Other revenue	921		3,585
Total revenues	386,447		349,143
Operating expenses:
Depreciation	175,117		163,424
Interest, net	113,926		100,881
Selling, general and administrative	39,717		37,309
Provision for credit losses	6,125		689
Impairment of flight equipment	2,197		38,099
Maintenance and other costs	17,387		13,277
Total operating expenses	354,469		353,679

Other income (expense):
Loss on extinguishment of debt	—		(463)

Other	4,709		2,072
Total other income	4,709		1,609

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment	36,687		(2,927)
Income tax provision (benefit)	9,261		(739)
Earnings of unconsolidated equity method investment, net of tax	862		1,177

Net income (loss)	$	28,288	$	(1,011)

Revenues

Total revenues increased $37.3 million, attributable to:

Lease rental revenue increased $6.4 million, primarily attributable to ~~changes in operating income subject to tax in Ireland, Singapore, the United States and other jurisdictions.~~

~~All~~an increase 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. The aircraft owning subsidiaries resident in Ireland, Mauritius and Singapore are subject to tax in those respective jurisdictions.

We 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. In addition, we 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.

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. 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 the United States and Ireland.

~~Other comprehensive income~~

~~Other comprehensive income~~ ~~consisted of the following:~~

Three Months Ended September 30,
2017 2016
(Dollars in thousands)
Net income $ 57,431
$ 27,437
Derivative loss reclassified into earnings 569
705
Total comprehensive income $ 58,000
$ 28,142

~~Other comprehensive income~~ ~~increased by $29.9~~$44.7 million for the three months ended September 30, 2017, as a result of a $30.0 million increase in net income, partially offset by a decrease of $0.1 million in amortization of deferred net losses reclassified into earnings related to ~~terminated interest rate derivatives.~~

30 aircraft purchased since March 1, 2022.

~~RESULTS OF OPERATIONS~~

~~Comparison of the nine months ended September 30, 2017 to the nine months ended September 30, 2016:~~

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Revenues:
Lease rental revenue $ 551,371
$ 537,670
Finance and sales-type lease revenue 16,363
13,026
Amortization of lease premiums, discounts and incentives (8,780 ) (5,419 )
Maintenance revenue 55,738
20,603
Total lease revenue 614,692
565,880
Other revenue 4,526
2,425
Total revenues 619,218
568,305
Operating expenses:
Depreciation 227,446
227,918
Interest, net 185,376
188,490
Selling, general and administrative 55,491
46,883
Impairment of flight equipment 80,430
27,185
Maintenance and other costs 7,846
5,504
Total operating expenses 556,589
495,980
Other income (expense):
Gain on sale of flight equipment 35,926
14,932
Other (3,069 ) (136 )
Total other income 32,857
14,796
Income from continuing operations before income taxes and earnings of unconsolidated equity
method investments
95,486
87,121
Income tax provision 8,536
8,782
Earnings of unconsolidated equity method investments, net of tax 5,804
5,390
Net income $ 92,754
$ 83,729

~~Revenues~~

~~Total revenues~~ ~~increased by $50.9 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.~~

~~Lease rental revenue~~. The increase in lease rental revenue of $13.7 million for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily the result of increases in revenue of $102.1 million due to the acquisition of 64 aircraft since September 30, 2016. This ~~increase~~ was partially offset ~~by decreases of:~~by:

~~$71.8~~•an $18.4 million ~~due to the sale of 55 aircraft since September 30, 2016; and~~

~~$16.6 million~~decrease due to lease extensions, amendments, transitions and other ~~changes.~~changes;

~~Finance~~•an $11.5 million decrease related to the sale of 16 aircraft since March 1, 2022; and

•an $8.4 million decrease related to lease terminations.

Direct financing and sales-type lease ~~revenue.~~ ~~For the nine months ended September 30, 2017, $16.4~~revenue increased $1.3 million, ~~of interest income from finance and sales-type leases was recognized as compared to $13.0 million of interest income from finance and sales-type leases recorded for the same period in 2016 due~~primarily related to the ~~addition~~reclassification of ~~fifteen~~10 aircraft to sales-type leases, partially offset by the sale of ~~two~~9 aircraft ~~over the last twelve months.~~since March 1, 2022.

Amortization of ~~net~~ lease premiums, discounts and lease ~~incentives.~~incentives:


	Six Months Ended August 31,
	2023		2022
	(Dollars in thousands)
Amortization of lease premiums	$	(5,782)	$	(5,278)
Amortization of lease discounts	467		255
Amortization of lease incentives	(9,016)		(5,883)

Amortization of lease premiums, discounts and incentives	$	(14,331)	$	(10,906)

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Amortization of lease incentives $ (7,124 ) $ (3,989 )
Amortization of lease premiums (7,935 ) (8,571 )
Amortization of lease discounts 6,279
7,141
Amortization of lease premiums, discounts and incentives $ (8,780 ) $ (5,419 )

As more fully described above under “Revenues,” lease incentives represent our estimated portion of the lessee’s cost for heavy maintenance, overhaul or replacement of certain high-value components which is amortized over the life of the related lease. As we enter into new leases, theThe amortization of lease incentives generally increases and, conversely, if a related lease terminates, the related unused lease incentive liability will reduce the amortization of lease incentives. The increase in amortization of lease incentives ofincreased $3.1 million, ~~for~~due to the ~~nine~~transition of aircraft to new lessees.

Maintenance revenue. For the six months ended September 30, 2017 as compared to the same period in 2016 was primarily attributable to the reversal of lease incentives associated with two freighter aircraft due to changes in estimate and the reclassification of one aircraft from an operating lease to a finance lease.

~~Maintenance revenue.~~ ~~For the nine months ended September 30, 2017,~~August 31, 2023, we recorded ~~$55.7~~$49.6 million of maintenance revenue primarily ~~due~~related to ~~the transition~~maintenance payments received by us and recognized into income as a result of ~~four narrow-body, four wide-body and one freighter aircraft for $50.6 million.~~ scheduled lease expirations.

For the ~~same period in 2016,~~six months ended August 31, 2022, we recorded ~~$20.6~~$47.2 million of maintenance revenue, ~~from one scheduled lease termination~~of which $23.9 million related to payments received on maintenance letters of credit for ~~$6.9~~our former Russian lessees and $11.9 million ~~and maintenance reserves taken into income for three freighter aircraft and one wide-body aircraft totaling $13.2 million.~~

~~Other revenue.~~ ~~For the nine months ended September 30, 2017, we recorded $4.5 million of other revenue, primarily from fees earned from two lessees in connection with~~related to the early ~~terminations~~termination of ~~two leases. For the same period in 2016, we recorded $2.4 million of other revenue.~~

~~Operating expenses~~

~~Total operating expenses~~ ~~increased by $60.6 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.~~

~~Depreciation expense~~ ~~decreased by $0.5 million for the nine months ended September 30, 2017 as compared to the same period in 2016. The decrease is primarily the result of lower depreciation of $44.0 million due to 55~~1 freighter aircraft ~~sold.~~

~~This decrease was partially offset by increases of:~~

~~$40.2 million due to 64 aircraft acquisitions, and;~~

~~$3.3 million due to changes in asset lives, residual values and other changes.~~

~~Interest, net~~ ~~consisted of the following:~~

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Interest on borrowings and other liabilities⁽¹⁾
$ 170,225
$ 166,692
Amortization of interest rate derivatives related to deferred losses 1,725
9,074
Amortization of deferred financing fees and debt discount⁽²⁾
15,860
13,567
Interest expense 187,810
189,333
Less: Interest income (2,089 ) (768 )
Less: Capitalized interest (345 ) (75 )
Interest, net $ 185,376
$ 188,490


~~(1)~~	~~Includes $2.1 million and $1.5 million of loan prepayment fees related to the sale of aircraft during the nine months ended September 30, 2017 and 2016, respectively.~~


~~(2)~~	Includes $4.0 million and $2.0 million in deferred financing fees written off related to the prepayment of debt in connection with the sale of aircraft during the nine months ended September 30, 2017 and 2016, respectively.

Interest, net decreased by $3.1 million as compared to the nine months ended September 30, 2016. The net decrease is primarily a result of lower amortization of deferred losses on terminated interest rate derivatives of $7.3 million and higher interest income of $1.3 million, partially offset by higher interest on borrowings of $3.5 million, primarily due to higher weighted average debt outstanding during the nine months ended September 30, 2017 and higher amortization of deferred financing fees and debt discount of $2.3 million as compared to a year ago.

~~Selling, general and administrative expenses~~ ~~for the nine months ended September 30, 2017 increased $8.6 million over the same period in 2016, primarily~~ as a result of ~~$5.1 million~~a new wave of ~~separation and disability compensation expense related to our former Chief Executive Officer under~~sanctions against Russia in the ~~terms~~U.K. We also recorded maintenance revenue of ~~his employment and share-based award agreements.~~

~~Impairment of Aircraft.~~ ~~See “Summary of Impairments and Recoverability Assessment” below for a detailed discussion of impairment charges related to certain aircraft.~~

~~Maintenance and other costs~~ ~~were $7.8 million for the nine months ended September 30, 2017, an increase of $2.3 million over the same period in 2016. The net increase is primarily related to higher maintenance costs of $2.2~~$9.6 million related to ~~terminations and transitions for the nine months ended September 30, 2017 versus the same period in 2016.~~scheduled lease expirations.

~~Other income (expense)~~

Gain on sale of flight equipment ~~increased by $21.0 million to $35.9 million for~~. During the ~~nine~~six months ended ~~September 30, 2017, as compared~~August 31, 2023, we sold 10 aircraft and other flight equipment for gains totaling $14.3 million. We sold 9 aircraft during the six months ended August 31, 2022, for gains totaling $13.7 million.

We also recognized selling profit totaling $32.7 million related to ~~gains~~the reclassification of ~~$14.9 million for~~10 aircraft from operating leases to sales-type leases during the ~~same period~~six months ended August 31, 2023 – see Note 5 in ~~2016.~~ the Notes to Unaudited Consolidated Financial Statements.

Other revenue. During the ~~nine~~six months ended ~~September 30, 2017,~~August 31, 2022, we ~~sold 29 aircraft. During~~received $1.5 million of payments on general security letters of credit for aircraft that were previously leased to Russian airlines and $1.8 million of security deposits retained by us in connection with an aircraft lease amendment. We collected the ~~nine~~remaining general security letters of credit totaling $0.6 million during the six months ended ~~September 30, 2016, we recorded gains totaling $26.7~~August 31, 2023.

Operating expenses

Total operating expenses increased $0.8 million, ~~that were offset by losses totaling $11.8~~attributable to:

Depreciation expense increased $11.7 million, ~~including a loss of $5.2 million for a wide-body aircraft’s lease extension classified as a sales-type lease.~~

~~Income tax provision~~

~~Our~~ ~~provision for income taxes~~ for the nine months ended September 30, 2017 and 2016 was $8.5 million and $8.8 million, respectively. Income taxes have been provided based on the applicable tax laws and rates of those countries in which operations are conducted and income is earned, primarily Ireland, Singapore and the United States. The decrease in our income tax provision of approximately $0.2 million for the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily attributable to ~~changes in operating income subject~~an increase of $20.0 million related to ~~tax in Ireland, Singapore, the United States and other jurisdictions.~~

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. The30 aircraft ~~owning subsidiaries resident in Ireland, Mauritius and Singapore are subject to tax in those respective jurisdictions.~~

We 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. 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.

~~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~~acquired since March 2035. 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 the United States and Ireland.

~~Other comprehensive income~~

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Net income $ 92,754
$ 83,729
Net change in fair value of derivatives, net of tax expense of $0 for both periods presented —
(1 )
Derivative loss reclassified into earnings 1,725
9,074
Total comprehensive income $ 94,479
$ 92,802

~~Other comprehensive income~~ ~~increased by $1.7 million for the nine months ended September 30, 2017, as a result of a $9.0 million increase in net income,~~1, 2022, partially offset by a decrease of ~~$7.3~~$11.1 million resulting from 20 aircraft sold since March 1, 2022.

Interest, net increased $13.0 million due to a higher average cost of borrowing and higher weighted average debt outstanding of $201.1 million.

Selling, general and administrative expenses increased $2.4 million, primarily due to an increase in ~~amortization of deferred net~~personnel costs and ongoing Russian litigation expenses.

Provision for credit losses ~~reclassified into earnings~~ increased $5.4 million, primarily related to ~~terminated interest rate derivatives.~~an allowance for credit losses of $6.2 million recorded during the six months ended August 31, 2023, resulting from the reclassification of 10 aircraft from operating leases to sales-type leases – see Note 5 in the Notes to Unaudited Consolidated Financial Statements.

~~Summary~~Impairment of ~~Recoverability Assessment and Other Impairments~~

~~Transactional Impairments~~aircraft. We recorded impairment charges of $2.2 million during the six months ended August 31, 2023.

During the ~~second quarter~~six months ended August 31, 2022, the Company wrote off the remaining book value of ~~2017, we entered into agreements to sell two Boeing 747-400 production~~8 narrow-body

and 1 freighter aircraft ~~at the end~~in Russia, that had not been returned to us, totaling $31.9 million. The Company recognized $9.5 million of ~~their respective leases~~maintenance and ~~one older Boeing 747-400 converted freighter~~other revenue for these 9 aircraft related to ~~its lessee, resulting in~~payments received on maintenance and general security letters of credit.

The Company also recorded impairment charges totaling ~~$79.2~~$6.2 million ~~partially offset by~~related to the scheduled lease expiration of 1 narrow-body aircraft and other flight equipment during the six months ended August 31, 2022. The Company recognized $6.1 million of maintenance revenue for this 1 aircraft.

Maintenance and other costs increased $4.1 million, primarily attributable to higher aircraft insurance premiums and higher costs due to the timing of ~~$13.5 million. During~~transition of aircraft to new lessees.Higher transition costs are largely related to aircraft for which the ~~third quarter~~previous lease was terminated early, and the aircraft was repossessed from the prior operator.

Other income (expense)

Total other income increased by $3.1 million, primarily consisting of ~~2017, we sold one production freighter~~cash received in connection with claims settlements from various airline customers that had entered into bankruptcy proceedings or similar-type restructurings.

Income tax provision (benefit)

Income tax provision (benefit). We recognized an income tax provision of $9.3 million for the six months ended August 31, 2023, as compared to an income tax benefit of $0.7 million for the six months ended August 31, 2022. Our effective tax rate was 25.2% for each of the six months ended August 31, 2023 and ~~one converted freighter aircraft. We expect~~2022. The increase is primarily attributable to ~~sell one production freighter~~profits generated during the six months ended August 31, 2023, and the mix of such profits in taxable and non-taxable jurisdictions. The six months ended August 31, 2023, included gains on the sale of aircraft, which were recorded in ~~the first quarter of 2018.~~a low tax jurisdiction. The six months ended August 31, 2022, included net non-cash impairment charges, which were recorded in a low tax jurisdiction.

Aircraft Valuation

Annual Recoverability Assessment

We ~~completed~~plan to perform our annual recoverability assessment of all our aircraft induring the ~~second~~third quarter ~~this year. We~~of 2023.

Additional customer and aircraft specific recoverability assessments are also performed ~~aircraft-specific analyses where there were changes~~whenever indicators suggest the carrying amount of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, a significant change in ~~circumstances, such as approaching~~an aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production, or a significant airworthiness directive is issued. We have focused and will continue to focus on aircraft with near-term lease ~~expirations. Other than the transactional impairments discussed above, no~~expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other ~~impairments were recorded as a result of our annual recoverability assessment.~~customers or aircraft variants that are more susceptible to value deterioration.

The recoverability assessment is a comparison of the carrying value of ~~each~~an aircraft to its estimated undiscounted ~~expected~~ future cash flows. We develop the assumptions used in the recoverability ~~assessment, including those relating to~~analysis based on current and future expectations of the global demand for ~~each~~a particular aircraft type ~~based on management’s~~and historical experience in the aircraft leasing market and aviation industry, as well as information received from third-party industry sources. ~~Estimates of~~The factors considered in estimating the undiscounted cash flows ~~for each aircraft type~~ are impacted by changes in ~~contracted~~future periods due to changes in projected lease rental and ~~future expected lease rates,~~maintenance payments, residual ~~values, expected scrap~~ values, economic conditions, technology, airline demand for a particular aircraft type and other ~~factors.~~

~~Management believes that~~factors, such as the ~~net book value~~location of ~~each aircraft is currently supported by~~ the ~~estimated future undiscounted cash flows expected to be generated by that~~ aircraft and ~~accordingly, no aircraft were impaired as a consequence of our annual recoverability assessment. However, if~~accessibility to records and technical documentation.

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

~~Aircraft Monitoring List~~

At September 30, 2017, we considered one Boeing 747-400 production freighter model and five Airbus A330 passenger aircraft with a total net book value of $407.3 million, or 6.8%, to be more susceptible to failing our recoverability assessments due to their sensitivity to changes in contractual cash flows, future cash flow estimates and aircraft residual or scrap values.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note 1 -– “Summary of Significant Accounting Policies –Organization and Basis of Presentation” in the Notes to Unaudited Consolidated Financial Statements above.

~~RECENTLY~~RECENT UNADOPTED ACCOUNTING PRONOUNCEMENTS

See Note 1 -– “Summary of Significant Accounting Policies – Recent Accounting Pronouncements” in the Notes to Unaudited Consolidated Financial Statements above.

LIQUIDITY AND CAPITAL RESOURCES

Our business is very capital intensive, requiring significant investments in order to expand our fleet and to maintain and improve our existing portfolio. Our operations ~~generate~~have historically generated a significant amount of cash, primarily from lease rentals and maintenance collections. We have also met our liquidity and capital resource needs by utilizing several sources over time, including:

•various forms of borrowing secured by our aircraft, including ~~bank~~ term facilities, term financings and limited recourse securitization financings ~~and ECA-backed financings~~ for new aircraft acquisitions;

•unsecured indebtedness, including our current unsecured revolving credit facilities, term loan and senior notes;

•asset sales; and

~~sales~~•issuance of common and preference shares.

Going forward, we expect to continue to seek liquidity from these sources and other sources, subject to pricing and conditions we consider satisfactory.

During the ~~first nine~~six months ~~of 2017,~~ended August 31, 2023, we met our liquidity and capital resource needs with ~~$393.5~~$186.4 million of cash ~~flow~~flows from operations ~~$500.0~~and $126.0 million ~~in gross~~of proceeds from the ~~issuance~~sale of ~~our Senior Notes due 2024~~aircraft and ~~$765.0 million of cash from aircraft sales.~~other flight equipment.

As of ~~September 30, 2017,~~August 31, 2023, the weighted-average maturity of our secured and unsecured debt financings was ~~3.9~~2.7 years, and we ~~are~~were in compliance with all applicable covenants.

We believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of October 6, 2023, total liquidity of $2.8 billion includes $1.9 billion of undrawn facilities, $0.5 billion of projected adjusted operating cash ~~on hand,~~flow and contracted asset sales, $0.3 billion of equity commitments and $0.1 billion of unrestricted cash through October 1, 2024. In addition, we believe payments received from lessees and other funds generated from operations, unsecured bond offerings, borrowings secured ~~borrowings for~~by our aircraft, borrowings under our revolving credit facilities and other borrowings and proceeds from future aircraft sales will be sufficient to satisfy our liquidity and capital resource needs over the next twelve months. Our liquidity and capital resource needs include payments due under our aircraft purchase obligations, required principal and interest payments under our long-term debt facilities, expected capital expenditures, lessee maintenance payment reimbursements and lease incentive ~~payments over the next twelve months.~~payments.

Cash Flows

Nine Months Ended September 30,
2017 2016
(Dollars in thousands)
Net cash flow provided by operating activities $ 393,458
$ 367,413
Net cash flow provided by (used in) investing activities 173,821
(395,533 )
Net cash flow (used in) provided by financing activities (392,911 ) 484,326


	Six Months Ended August 31,
	2023		2022
	(Dollars in thousands)
Net cash flow provided by operating activities	$	186,415	$	215,616
Net cash flow used in investing activities	(250,512)		(195,405)
Net cash flow provided by financing activities	558,664		56,470

Operating Activities:

Cash flow provided by ~~operations~~operating activities was ~~$393.5~~$186.4 million and ~~$367.4 million~~ ~~for the~~ ~~nine months ended~~ ~~September 30, 2017 and 2016, respectively. The increase in cash flow provided by operations of approximately $26.0~~$215.6 million for the ~~nine~~six months ended~~September 30, 2017~~ ~~versus~~ August 31, 2023 and 2022, respectively.

The six months ended August 31, 2022, included $25.4 million of payments received on maintenance and general security letters of credit for our former Russian lessees, as well as additional customer collections related to the ~~same period in~~ ~~2016~~ ~~was~~repayment of lease deferrals and other outstanding receivables. Excluding the impact of these letters of credit, cash provided by operating activities decreased slightly, primarily ~~a result of:~~

~~a $30.7 million increase in cash received from maintenance revenue;~~

~~a $12.0 million increase in cash from lease rentals, net of finance and sales-type leases; and~~

~~a $9.3 million decrease in cash paid for taxes.~~

~~These inflows were offset by a $10.9 million decrease in cash from working capital and a $14.8 million increase in cash paid for interest.~~due to higher interest costs on our debt financings.

Investing Activities:

Cash ~~flow provided by investing activities was $173.8 million for the nine months ended September 30, 2017 as compared to cash~~ flow used in investing activities ~~of $395.5~~was $250.5 million and $195.4 million for the ~~nine~~six months ended~~September 30, 2016.~~ August 31, 2023 and 2022, respectively. The ~~net~~ increase ~~in cash flow provided by investing activities~~ of ~~$569.4~~$55.1 million ~~for the~~ ~~nine months endedSeptember 30, 2017~~ ~~versus the same period in~~ ~~2016~~ was primarily ~~a result of:~~

~~a $280.1 million net decrease in the acquisition and improvement of flight equipment and net investments in finance and sales-type leases;~~

~~a $276.2 million increase in~~attributable to lower proceeds from the sale of aircraft and other flight ~~equipment; and~~

•~~a $12.7~~equipment of $45.1 million ~~decrease in unconsolidated equity method investments.~~during the six months ended August 31, 2023.

Financing Activities:

Cash ~~flow used in financing activities was $392.9 million for the~~ ~~nine months ended~~ ~~September 30, 2017 as compared to cash~~ flow provided by financing activities ~~of $484.3~~was $558.7 million and $56.5 million for the ~~nine~~six months ended~~September 30, 2016.~~ August 31, 2023 and 2022, respectively. The net increase ~~in cash flow used in financing activities~~ of ~~$877.2~~$502.2 million ~~for the nine months ended September 30, 2017 versus the same period in 2016~~ was primarily ~~a result of:~~

~~a $499.4~~attributable to an increase of $293.6 million ~~decrease~~ in proceeds from secured and unsecured ~~financings;~~

~~a $363.3 million increase in securitization and term debt financing repayments; and~~

~~a $52.4 million increase in maintenance and security deposits returned,~~financings, net of ~~deposits received.~~repayments, as well as $200.0 million in proceeds from the issuance of our common stock.

~~These outflows were partially offset by a $31.7 million decrease in shares repurchased and an $8.7 million decrease in deferred financing costs.~~

Debt Obligations

For complete information on our debt obligations, ~~please~~ refer to Note ~~7 - “Secured and Unsecured Debt Financings”~~8 in the Notes to Unaudited Consolidated Financial ~~Statements above.~~Statements.

Contractual Obligations

Our contractual obligations consist of principal and interest payments on debt ~~payments on interest rate derivatives, other~~financings, aircraft ~~acquisition agreements~~acquisitions and rent payments ~~related~~pursuant to our office leases. Total contractual obligations increased to ~~$6.86~~$6.1 billion at ~~September 30, 2017~~August 31, 2023 from ~~$6.50~~$6.0 billion at ~~December 31, 2016~~February 28, 2023, due ~~primarily~~ to ~~an increase in purchase obligations for aircraft to be acquired,~~higher outstanding debt and the related interest thereon, partially offset by ~~the amortization of our other financings.~~lower aircraft purchase commitments.

~~The following table presents our actual contractual obligations and their payment due dates as of~~ ~~September 30, 2017~~:

Payments Due by Period as of September 30, 2017
Contractual Obligations Total
1 year
or less
2-3 years 4-5 years
More than
5 years
(Dollars in thousands)
Principal payments:

Senior Notes due 2018 - 2024 $ 3,200,000
$ —
$ 1,200,000
$ 1,000,000
$ 1,000,000
Unsecured Term Loan 120,000
—
120,000
—
—
Revolving Credit Facilities —
—
—
—
—
ECA Financings 236,879
38,071
80,321
80,475
38,012
Bank Financings 652,138
76,123
134,734
125,244
316,037
Total principal payments 4,209,017
114,194
1,535,055
1,205,719
1,354,049

Interest payments on debt obligations⁽¹⁾
827,298
211,809
356,308
178,026
81,155
Office leases⁽²⁾
21,335
1,259
4,971
4,901
10,204
Purchase obligations⁽³⁾
1,803,810
896,818
765,349
141,643
—
Total $ 6,861,460
$ 1,224,080
$ 2,661,683
$ 1,530,289
$ 1,445,408


~~(1)~~	~~Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at September 30, 2017.~~


~~(2)~~	~~Represents contractual payment obligations for our office leases in Stamford, Connecticut; Dublin, Ireland and Singapore.~~


~~(3)~~	At September 30, 2017, we had commitments to acquire 64 aircraft for $1.80 billion, including 25 new E-Jet E2 aircraft from Embraer S.A. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments. As of October 31, 2017, we have commitments to acquire 55 aircraft for $1.68 billion.

Capital Expenditures

From time to time, we make capital expenditures to maintain or improve our aircraft. These expenditures include the cost of major overhauls necessary to place an aircraft in service and modifications made at the request of lessees. For the ~~nine~~six months ended ~~September 30, 2017~~August 31, 2023 and ~~2016,~~2022, we incurred a total of ~~$24.4~~$44.3 million and ~~$27.0~~$49.4 million, respectively, of capital expenditures, ~~(including~~including lease ~~incentives)~~incentives, related to the ~~acquisition and~~ improvement of aircraft.

As of ~~September 30, 2017,~~August 31, 2023, the weighted average age by ~~net book value~~Net Book Value of our aircraft was approximately ~~8.7~~9.7 years. In general, the costs of operating an aircraft, including maintenance expenditures, increase with the age of the aircraft. Our lease agreements call for the lessee to be primarily responsible for maintaining the aircraft. ~~We may incur additional maintenance and modification costs in the future in the event we~~Maintenance reserves are ~~required to remarket an aircraft or a lessee fails to meet its maintenance obligations under the lease agreement. These maintenance reserves are~~generally paid by the lessee to provide for future maintenance events. Provided a lessee performs scheduled maintenance of the aircraft, we are required to reimburse the lessee for scheduled maintenance payments. In certain cases, we are also required to make lessor contributions, in excess of amounts a lessee may have paid, towards the costs of maintenance

events performed by or on behalf of the lessee. We may incur additional maintenance and modification costs in the future in the event we are required to remarket an aircraft, such as in the event of a lessee default or a lessee fails to meet its maintenance obligations under the lease agreement.

Actual maintenance payments to us by lessees in the future may be less than projected as a result of several factors, such as in the event of a ~~number of factors, including defaults by the lessees.~~lessee default. Maintenance reserves may not cover the entire amount of actual maintenance expenses

incurred and, where these expenses are not otherwise covered by the lessees, there can be no assurance that our operational cash flow and maintenance reserves will be sufficient to fund maintenance requirements, particularly as our aircraft age. See Item 1A. “Risk Factors -– Risks Related to Our Business -– Risks related to our leases -– If lessees are unable to fund their maintenance obligations on our aircraft, we may incur increased costs at the conclusion of the applicable lease” in our ~~2016~~ Annual Report on Form ~~10-K.~~10-K for the year ended February 28, 2023.

Off-Balance Sheet Arrangements

We entered into ~~two~~a joint venture ~~arrangements~~arrangement in order to help expand our base of new business opportunities. ~~None of these~~This joint ~~ventures qualifies~~venture does not qualify for consolidated accounting treatment. The assets and liabilities of ~~these entities~~this entity are not included in our ~~Consolidated Balance Sheets~~consolidated balance sheets, and we record our net investment under the equity method of accounting. See Note ~~5 - “Unconsolidated Equity Method Investments”~~7 in the Notes to Unaudited Consolidated Financial ~~Statements above.~~Statements.

We hold ~~a 30% equity interest in our Lancaster joint venture and~~ a 25% equity interest in our ~~IBJ Air~~ joint ~~venture. At September 30, 2017,~~venture with Mizuho Leasing and as of August 31, 2023, the net book value of ~~our two joint ventures’ thirteen~~its 9 aircraft was ~~approximately $661~~$278.5 million.

Foreign Currency Risk and Foreign Operations

At ~~September 30, 2017, all~~August 31, 2023, more than 99% of our leases ~~are~~were payable to us in U.S. dollars. However, we incur Euro and Singapore dollar-denominated expenses in connection with our subsidiaries in Ireland and Singapore. For the ~~nine~~six months ended~~September 30, 2017~~, August 31, 2023, expenses, such as ~~payroll~~personnel and office costs, denominated in currencies other than the U.S. dollar ~~aggregated approximately $14.2~~totaled $10.8 million in U.S. dollar equivalents and represented ~~approximately 26%~~27% of total selling, general and administrative expenses. Our international operations are a significant component of our business strategy and permit us to ~~more~~ effectively source new aircraft, service the aircraft we own and maintain contact with our lessees. Therefore, our international operations and our exposure to foreign currency risk will likely increase over time. Although we have not yet entered into foreign currency hedges, ~~because our exposure to date has not been significant,~~ if our foreign currency exposure increases, we may enter into hedging transactions in the future to mitigate this risk. For the ~~nine~~six months ended ~~September 30, 2017~~ August 31, 2023 and ~~2016,~~2022, we incurred insignificant net gains and losses on foreign currency transactions.

~~Hedging~~

~~For complete information on our derivative instruments, please refer to Note 16 - “Accumulated Other Comprehensive Loss” in the Notes to Unaudited Consolidated Financial Statements above.~~

Management’s Use of EBITDA and Adjusted EBITDA

We define EBITDA as income (loss) from continuing operations before interest expense, income taxes, ~~interest expense,~~ and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-U.S. GAAP measure is helpful in identifying trends in our performance.

This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals, as well as achieving optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.

EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure, or expenses, of the organization. EBITDA is one of the metrics used by senior management and the Board of Directors to review the consolidated financial performance of our business.

We define Adjusted EBITDA as EBITDA (as defined above) further adjusted to give effect to adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes. Adjusted EBITDA is a material component of these covenants.

The table below shows the reconciliation of net income to EBITDA and Adjusted EBITDA for the three and ~~nine~~six months ended ~~September 30, 2017~~ August 31, 2023 and ~~2016:~~2022:


	Three Months Ended August 31,				Six Months Ended August 31,
	2023		2022		2023		2022

Net income (loss)	$	5,518	$	(8,693)	$	28,288	$	(1,011)
Depreciation	86,328		82,106		175,117		163,424
Amortization of lease premiums, discounts and incentives	7,124		5,518		14,331		10,906
Interest, net	57,035		50,587		113,926		100,881
Income tax provision (benefit)	(5,099)		(4,068)		9,261		(739)
EBITDA	150,906		125,450		340,923		273,461
Adjustments:
Impairment of flight equipment	1,100		33,671		2,197		38,099

Loss on extinguishment of debt	—		—		—		463





Adjusted EBITDA	$	152,006	$	159,121	$	343,120	$	312,023

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands)
Net income $ 57,431
$ 27,437
$ 92,754
$ 83,729
Depreciation 70,018
76,201
227,446
227,918
Amortization of lease premiums, discounts and incentives 2,388
521
8,780
5,419
Interest, net 60,636
61,797
185,376
188,490
Income tax provision 6,195
2,458
8,536
8,782
EBITDA 196,668
168,414
522,892
514,338
Adjustments:
Impairment of flight equipment —
10,462
80,430
27,185
Non-cash share-based payment expense 2,506
2,059
10,636
5,796
Loss on mark-to-market of interest rate derivative contracts 361
210
3,073
141
Adjusted EBITDA $ 199,535
$ 181,145
$ 617,031
$ 547,460

~~Management’s Use of Adjusted Net Income (“ANI”)~~

Management believes that ANI, when viewed in conjunction with the Company’s results under U.S. GAAP and the below reconciliation, provides useful information about operating and period-over-period performance and additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting elements related to interest rate derivative accounting, changes related to refinancing activity and non-cash share-based payment expense.

~~The table below shows the reconciliation of net income to ANI for the three and nine months ended September 30, 2017 and 2016:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands)
Net income $ 57,431
$ 27,437
$ 92,754
$ 83,729
Loan termination fee⁽¹⁾
1,070
—
2,058
1,509
Loss on mark-to-market of interest rate derivative contracts⁽²⁾
361
210
3,073
141
Write-off of deferred financing fees⁽¹⁾
3,019
—
4,005
1,972
Non-cash share-based payment expense⁽³⁾
2,506
2,059
10,636
5,796
Hedge loss amortization charges ⁽¹⁾
—
—
—
4,855
Adjusted net income $ 64,387
$ 29,706
$ 112,526
$ 98,002

~~(1) Included in Interest, net.~~

~~(2) Included in Other income (expense).~~

~~(3) Included in Selling, general and administrative expenses.~~

Three Months Ended September 30, Nine Months Ended September 30,
Weighted-average shares: 2017 2016 2017 2016
Common shares outstanding 78,237,199
77,989,933
78,197,091
78,230,011
Restricted common shares 569,617
680,249
569,453
646,299
Total weighted-average shares 78,806,816
78,670,182
78,766,544
78,876,310

Three Months Ended September 30, �� Nine Months Ended September 30,
Percentage of weighted-average shares: 2017 2016 2017 2016
Common shares outstanding 99.28 % 99.14 % 99.28 % 99.18 %
Restricted common shares⁽¹⁾
0.72 % 0.86 % 0.72 % 0.82 %
Total percentage of weighted-average shares 100.00 % 100.00 % 100.00 % 100.00 %

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Weighted-average common shares outstanding – Basic 78,237,199
77,989,933
78,197,091
78,230,011
Effect of dilutive shares⁽²⁾
137,810
32,235
169,053
35,804
Weighted average common shares outstanding – Diluted 78,375,009
78,022,168
78,366,144
78,265,815

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(Dollars in thousands, except per share amounts)
Adjusted net income allocation:
Adjusted net income $ 64,387
$ 29,706
$ 112,526
$ 98,002
Less: Distributed and undistributed earnings allocated to restricted common shares⁽²⁾
(465 ) (257 ) (814 ) (803 )
Adjusted net income allocable to common shares – Basic and Diluted $ 63,922
$ 29,449
$ 111,712
$ 97,199

Adjusted net income per common share – Basic and Diluted $ 0.82
$ 0.38
$ 1.43
$ 1.24

~~(1)~~

For the three months ended September 30, 2017 and 2016, distributed and undistributed earnings to restricted shares were 0.72% and 0.86%, respectively, of net income. For the nine months ended September 30, 2017 and 2016, distributed and undistributed earnings to restricted shares were 0.72% and 0.82%, respectively, of net income. The amount of restricted share forfeitures for all periods present is immaterial to the allocation of distributed and undistributed earnings.


~~(2)~~	~~For all periods presented, dilutive shares represented contingently issuable shares.~~

Limitations of EBITDA and Adjusted EBITDA ~~and ANI~~

An investor or potential investor may find EBITDA and Adjusted EBITDA ~~and ANI~~ important measures in evaluating our performance, results of operations and financial position. We use these non-U.S. GAAP measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.

EBITDA and Adjusted EBITDA ~~and ANI~~ have limitations as analytical tools and should not be viewed in isolation or as substitutes for U.S. GAAP measures of earnings (loss). Material limitations in making the adjustments to our earnings (loss) to calculate EBITDA and Adjusted EBITDA, ~~and ANI,~~ and using these non-U.S. GAAP measures as compared to U.S. GAAP net income (loss), income (loss) from continuing operations and cash flows provided by or used in operations, include:

•depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our aircraft, which affects the aircraft’s availability for use and may be indicative of future needs for capital expenditures;

•the cash portion of income tax provision (benefit) ~~provision~~ generally represents charges (gains), which may significantly affect our financial results; and

~~elements of our interest rate derivative accounting may be used to evaluate the effectiveness of our hedging policy;~~

~~hedge loss amortization charges; and~~

•adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured ~~notes.~~

notes which may not be comparable to similarly titled measures used by other companies.

EBITDA and Adjusted EBITDA ~~and ANI~~ are not alternatives to net income (loss), income (loss) from operations or cash flows provided by or used in operations as calculated and presented in accordance with U.S. GAAP. You should not rely on these non-U.S. GAAP measures as a substitute for any such U.S. GAAP financial measure. We strongly urge you to review the reconciliations to U.S. GAAP net income (loss), along with our consolidated financial statements included elsewhere in this report. We also strongly urge you not to ~~not~~ rely on any single financial measure to evaluate our business. In addition, because EBITDA and Adjusted EBITDA ~~and ANI~~ are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, EBITDA and Adjusted EBITDA ~~and ANI~~ as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. These risks are highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our ~~lease agreements, floating rate~~floating-rate debt ~~obligations and interest rate derivatives.~~obligations. Rent payments under our aircraft lease agreements typically do not vary

during the term of the lease according to changes in interest rates. However, our borrowing agreements generally require payments based on a variable interest rate index, such as ~~LIBOR.~~SOFR or an alternative reference rate. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities.

Changes in interest rates may also impact our net book value as our interest rate derivatives are periodically marked-to-market through shareholders’ equity. Generally, we are exposed to loss on our fixed pay interest rate derivatives to the extent interest rates decrease below their contractual fixed rate.

The relationship between spreads on derivative instruments may vary from time to time, resulting in a net aggregate book value increase or decrease. Changes in the general level of interest rates can also affect our ability to acquire new investments and our ability to realize gains from the settlement of such assets.

Sensitivity Analysis

The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential interest expense impacts on our financial ~~instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives.~~instruments. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

A hypothetical 100-basis point increase/decrease in our variable interest rates would increase/decrease the minimum contracted rentals on our portfolio as of September 30, 2017 by $2.3 million and $2.3 million, respectively, over the next twelve months. As of ~~September 30, 2017,~~August 31, 2023, a hypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would result in an interest expense increase/decrease of ~~$3.9~~$4.2 million and ~~$5.3~~$4.2 million, respectively, ~~net of amounts received from our interest rate derivatives,~~ over the next twelve months. In September 2016, we purchased an interest rate cap for $2.3 million to hedge approximately 70% of our floating rate interest exposure. The interest rate cap is set at 2% and has a current notional balance of $405.0 million and reduces over time to $215.0 million. The cap matures in September 2021.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by

a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures as of ~~September 30, 2017~~.August 31, 2023. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of ~~September 30, 2017~~.August 31, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f), that occurred during the quarter ended ~~September 30, 2017~~August 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. — OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to any material legal or adverse regulatory proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes to the disclosure related to the risk factors described in our Annual Report on Form 10-K ~~filed with the SEC~~ for the year ended ~~December 31, 2016.~~February 28, 2023, as filed with the SEC.


~~ITEM 2.~~	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Issuer Purchases of Equity Securities~~

~~In February 2016, our Board of Directors authorized the repurchase of $100.0 million of the Company’s common shares. During the third quarter of~~ ~~2017, we purchased our common shares as follows:~~None.

Period
Total
Number
of Shares
Purchased

Average
Price
Paid
per Share

Total Number
of Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs⁽¹⁾

Maximum Number
(or Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
Under the Plans or
Programs ⁽¹⁾
(Dollars in thousands, except per share amounts)
July 1 through July 31 —
$ —
—
$ 95,888
August 1 through August 31 104,594
0.01
—
95,888
September 1 through September 30 —
—
—
95,888
Total 104,594
$ 0.01
—
$ 95,888


~~(1)~~	~~Under our current repurchase program, we have repurchased an aggregate of 217,574 common shares at an aggregate cost of $4.1 million, including commissions.~~


~~ITEM 3.~~	~~DEFAULTS UPON SENIOR SECURITIES~~

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.


~~ITEM 5.~~	~~OTHER INFORMATION~~

~~None.~~ITEM 5. OTHER INFORMATION

Environmental, Social and Governance (“ESG”)

Information on our ESG initiatives can be found on our website at www.aircastle.com under “About – ESG.” The information on the Company’s website regarding our ESG initiatives is not part of, nor incorporated by reference, into this report, or any other report we file with, or furnish to, the SEC.

ITEM 6. EXHIBITS


~~ITEM 6.~~Exhibit No.			~~EXHIBITS~~

Description of Exhibit

~~Exhibit No.~~		~~Description of Exhibit~~
3.1
~~3.1~~	Amended and Restated Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s ~~Registration Statement~~Current Report on Form ~~S-1 (Amendment No. 2) (No. 333-134669)~~8-K filed with the SEC on ~~July 25, 2006)~~March 27, 2020).

3.2			Amended and Restated Bye-laws (incorporated by reference to Exhibit 3.2 to the Company’s ~~Registration Statement~~Current Report on Form ~~S-3 (No. 333-182242)~~8-K filed with the SEC on March 27, 2020).

3.3			Certificate of Designations, dated June 8, 2021 (incorporated by reference to Exhibit 3 .1 to the Company’s Current Report on Form 8-K filed on June ~~20, 2012)~~8, 2021).

4.1			Specimen Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 2) (No. 333-134669) filed on July 25, 2006).

4.2			Indenture, dated as of ~~April 4, 2012,~~December 5, 2013, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on ~~April 5, 2012).~~

~~4.3~~	Indenture, dated as of November 30, 2012, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 30, 2012).

~~4.4~~	Amended and Restated Shareholder Agreement, dated as of February 18, 2015, by and between Aircastle Limited and Marubeni Corporation (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2015).

~~4.5~~	Amendment No. 1 to the Amended and Restated Shareholder Agreement, dated as of September 23, 2016, by and among Aircastle Limited, Marubeni Corporation, and Marubeni Aviation Holding Coöperatief U.A. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 26, 2016).

~~4.6~~	Indenture, dated as of December 5, 2013, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee Citigroup Global Markets, Inc., Goldman, Sachs & Co., J.P. Morgan Securities LLC and RBC Capital Markets, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 6, 2013).

~~4.7~~4.3			First Supplemental Indenture, dated as of December 5, 2013, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on December 6, 2013).

~~4.8~~	Second Supplemental Indenture, dated as of March 26, 2014, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 26, 2014).

~~4.9~~	Third Supplemental Indenture, dated as of January 15, 2015, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 15, 2015).

~~4.10~~	Fourth Supplemental Indenture, dated as of March 24, 2016, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 24, 2016).

~~4.11~~	Fifth Supplemental Indenture, dated as of March 20, 2017, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 20, 2017).

~~10.1~~4.4			~~Separation Agreement,~~Sixth Supplemental Indenture, dated ~~June 30, 2017,~~as of September 25, 2018, between Aircastle ~~Advisor LLC~~Limited and ~~Ron Wainshal~~Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit ~~10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 8, 2017). #~~

~~10.2~~	~~Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2~~4.1 to the Company’s Current Report on Form 8-K filed on ~~May~~September 25, ~~2017)~~2018).

~~10.3~~4.5			Seventh Supplemental Indenture, dated as of June 13, 2019, between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 13, 2019).

4.6			Indenture, dated as of ~~Employment~~August 11, 2020, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 11, 2020).

4.7			Indenture, dated as of January 26, 2021, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 26, 2021).

4.8			Deposit Agreement, dated June 8, 2021, among Aircastle Limited, Computer share Inc. and Computershare Trust Company, N.A., acting jointly as depositary, and the holders from time to time of depositary receipts issued thereunder (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 8, 2021).

4.9			Indenture, dated as of July 18, 2023, between Aircastle Limited and Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 18, 2023).

10.1			Subscription Agreement, dated July 5, 2023, by and among Aircastle Limited, MM Air Ltd. And Marubeni Aviation Holdings Coöperatief U.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on ~~September 8, 2017)~~July 7, 2023). #

~~10.4~~31.1			~~Amendment No. 4 to Purchase Agreement COM0270-15, dated as of August 11, 2017, by and between Aircastle Holding Corporation and Embraer S.A. *Ø~~

~~10.5~~	~~Amendment No. 2 to Letter Agreement COM0271-15 in Purchase Agreement COM0270-15, dated as of August 11, 2017, by and between Aircastle Holding Corporation and Embraer S.A. *Ø~~

~~31.1~~	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. *

31.2			Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. *



~~Exhibit No.~~		~~Description of Exhibit~~
32.1
~~32.1~~	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

~~99.1~~101			Owned Aircraft Portfolio at September 30, 2017. *

~~101~~	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~August 31, 2023, formatted in ~~XBRL (eXtensible~~iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of ~~September 30, 2017~~August 31, 2023 and ~~December 31, 2016;~~February 28, 2023; (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September 30, 2017~~August 31, 2023 and ~~2016;~~2022; (iii) ~~Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016; (iv)~~ Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September 30, 2017~~August 31, 2023 and ~~2016;~~2022; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended August 31, 2023 and 2022; and (v) Notes to Unaudited Consolidated Financial Statements.*



104			Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.

~~# Management contract or compensatory plan or arrangement.~~

* Filed herewith.

~~Ø Portions of this exhibit have been omitted pursuant to a request for confidential treatment.~~

SIGNATURE

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

Dated: ~~November 2, 2017~~

October 11, 2023



			AIRCASTLE LIMITED
			(Registrant)
			By:			/s/ ~~Jose Maronilla, Jr.~~Dane Silverman
						~~Jose Maronilla, Jr.~~Dane Silverman
						Chief Accounting Officer and Authorized Officer

5038


Bermuda		98-0444035
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

~~Bermuda~~			~~98-0444035~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(IRS Employer~~ ~~Identification No.)~~

c/o Aircastle Advisor LLC
201 Tresser Boulevard, Suite 400 ~~Stamford, CT~~			~~06901~~
Stamford
Connecticut
06901
(Address of ~~principal executive offices)~~			~~(Zip Code)~~Principal Executive Offices)



Large accelerated filer	þ☐	Accelerated filer	¨☐
Non-accelerated filer	o ~~(Do not check if a smaller reporting company)~~ ☑	Smaller reporting company	¨☐
		Emerging growth company	¨☐



				Page No.
			PART I. – FINANCIAL INFORMATION
Item 1.			Consolidated Financial Statements
			Consolidated Balance Sheets as of ~~September 30, 2017~~August 31, 2023 and ~~December 31, 2016~~February 28, 2023	3
			Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three and ~~nine~~six months ended ~~September 30, 2017~~August 31, 2023 and ~~2016~~2022	4
			~~Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016~~	5
	Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September 30, 2017~~August 31, 2023 and ~~2016~~2022	65
			Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended August 31, 2023 and 2022	7
			Notes to Unaudited Consolidated Financial Statements	8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations	2320
Item 3.			Quantitative and Qualitative Disclosures about Market Risk	4534
Item 4.			Controls and Procedures	4535
			PART II. – OTHER INFORMATION
Item 1.			Legal Proceedings	4735
Item 1A.			Risk Factors	4735
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds	4735
Item 3.			Defaults Upon Senior Securities	4736
Item 4.			Mine Safety Disclosures	4736
Item 5.			Other Information	4736
Item 6.			Exhibits	4837
SIGNATURE				5038


	September 30, 2017			December 31, 2016				August 31, 2023		February 28, 2023
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Cash and cash equivalents	$	662,649		$	455,579		Cash and cash equivalents	$	726,428	$	231,861
Restricted cash and cash equivalents	20,536			53,238

Accounts receivable	5,708			6,035			Accounts receivable	11,729		12,855
Flight equipment held for lease, net of accumulated depreciation of $1,168,064 and $1,224,899, respectively	5,490,164			6,247,585
Net investment in finance and sales-type leases	488,408			260,853
Unconsolidated equity method investments	76,098			72,977

Flight equipment held for lease, net							Flight equipment held for lease, net	6,501,828		6,567,606
Net investment in leases, net							Net investment in leases, net	248,734		67,694
Unconsolidated equity method investment							Unconsolidated equity method investment	41,367		40,505
Other assets	131,395			148,398			Other assets	318,851		346,330

Total assets	$	6,874,958		$	7,244,665		Total assets	$	7,848,937	$	7,266,851

LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES							LIABILITIES
Borrowings from secured financings, net of debt issuance costs	$	874,874		$	1,219,034
Borrowings from unsecured financings, net of debt issuance costs	3,286,240			3,287,211
Borrowings from secured financings, net							Borrowings from secured financings, net	$	913,864	$	752,298
Borrowings from unsecured financings, net							Borrowings from unsecured financings, net	3,991,875		3,842,454
Accounts payable, accrued expenses and other liabilities	145,691			127,527			Accounts payable, accrued expenses and other liabilities	211,810		206,473
Lease rentals received in advance	51,937			62,225			Lease rentals received in advance	53,486		66,816

Security deposits	120,320			122,597			Security deposits	62,067		61,734
Maintenance payments	523,922			591,757			Maintenance payments	526,589		465,618

Total liabilities	5,002,984			5,410,351			Total liabilities	5,759,691		5,395,393

Commitments and Contingencies							Commitments and Contingencies

SHAREHOLDERS’ EQUITY							SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding	—			—
Common shares, $0.01 par value, 250,000,000 shares authorized, 78,707,968 shares issued and outstanding at September 30, 2017; and 78,593,133 shares issued and outstanding at December 31, 2016	787			786
Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at August 31, 2023 and February 28, 2023							Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at August 31, 2023 and February 28, 2023	—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 15,564 and 14,048 shares issued and outstanding at August 31, 2023 and February 28, 2023, respectively							Common shares, $0.01 par value, 250,000,000 shares authorized, 15,564 and 14,048 shares issued and outstanding at August 31, 2023 and February 28, 2023, respectively	—		—
Additional paid-in capital	1,525,766			1,521,190			Additional paid-in capital	2,078,774		1,878,774
Retained earnings	347,248			315,890
Accumulated other comprehensive loss	(1,827		)	(3,552		)
Retained earnings (accumulated deficit)							Retained earnings (accumulated deficit)	10,472		(7,316)

Total shareholders’ equity	1,871,974			1,834,314			Total shareholders’ equity	2,089,246		1,871,458

Total liabilities and shareholders’ equity	$	6,874,958		$	7,244,665		Total liabilities and shareholders’ equity	$	7,848,937	$	7,266,851


Year Ending February 28/29,	Amount(1)
2024 (Remainder of fiscal year)	$	302,190
2025	540,128
2026	426,677
2027	361,015
2028	290,367
Thereafter	862,123
Total	$	2,782,500



x☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended August 31,				Six Months Ended August 31,
	2017			2016			2017			2016				2023		2022		2023		2022
Revenues:													Revenues:
Lease rental revenue	$	171,687		$	181,975		$	551,371		$	537,670		Lease rental revenue	$	150,351	$	146,508	$	297,086	$	290,652
Finance and sales-type lease revenue	6,412			5,354			16,363			13,026
Direct financing and sales-type lease revenue													Direct financing and sales-type lease revenue	5,085		2,265		6,158		4,863
Amortization of lease premiums, discounts and incentives	(2,388		)	(521		)	(8,780		)	(5,419		)	Amortization of lease premiums, discounts and incentives	(7,124)		(5,518)		(14,331)		(10,906)
Maintenance revenue	14,507			6,829			55,738			20,603			Maintenance revenue	15,046		20,114		49,566		47,213
Total lease revenue	190,218			193,637			614,692			565,880			Total lease revenue	163,358		163,369		338,479		331,822
Gain on sale of flight equipment													Gain on sale of flight equipment	4,453		10,049		47,047		13,736
Other revenue	1,193			1,015			4,526			2,425			Other revenue	145		161		921		3,585
Total revenues	191,411			194,652			619,218			568,305			Total revenues	167,956		173,579		386,447		349,143

Operating expenses:													Operating expenses:
Depreciation	70,018			76,201			227,446			227,918			Depreciation	86,328		82,106		175,117		163,424
Interest, net	60,636			61,797			185,376			188,490			Interest, net	57,035		50,587		113,926		100,881
Selling, general and administrative (including non-cash share-based payment expense of $2,506 and $2,059 for the three months ended, and $10,636 and $5,796 for the nine months ended September 30, 2017 and 2016, respectively)	17,137			15,985			55,491			46,883
Selling, general and administrative													Selling, general and administrative	18,882		17,393		39,717		37,309
Provision for credit losses													Provision for credit losses	(834)		109		6,125		689
Impairment of flight equipment	—			10,462			80,430			27,185			Impairment of flight equipment	1,100		33,671		2,197		38,099
Maintenance and other costs	2,572			1,834			7,846			5,504			Maintenance and other costs	8,854		5,212		17,387		13,277
Total expenses	150,363			166,279			556,589			495,980
Total operating expenses													Total operating expenses	171,365		189,078		354,469		353,679

Other income (expense):													Other income (expense):
Gain (loss) on sale of flight equipment	21,642			(73		)	35,926			14,932
Loss on extinguishment of debt													Loss on extinguishment of debt	—		—		—		(463)

Other	(360		)	(210		)	(3,069		)	(136		)	Other	3,372		2,072		4,709		2,072
Total other income (expense)	21,282			(283		)	32,857			14,796
Total other income													Total other income	3,372		2,072		4,709		1,609

Income from continuing operations before income taxes and earnings of unconsolidated equity method investments	62,330			28,090			95,486			87,121
Income tax provision	6,195			2,458			8,536			8,782
Earnings of unconsolidated equity method investments, net of tax	1,296			1,805			5,804			5,390
Net income	$	57,431		$	27,437		$	92,754		$	83,729
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment													Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment	(37)		(13,427)		36,687		(2,927)
Income tax provision (benefit)													Income tax provision (benefit)	(5,099)		(4,068)		9,261		(739)
Earnings of unconsolidated equity method investment, net of tax													Earnings of unconsolidated equity method investment, net of tax	456		666		862		1,177

Earnings per common share — Basic:
Net income per share	$	0.73		$	0.35		$	1.18		$	1.06
Net income (loss)													Net income (loss)	$	5,518	$	(8,693)	$	28,288	$	(1,011)

Earnings per common share — Diluted:
Net income per share	$	0.73		$	0.35		$	1.18		$	1.06
Preference share dividends													Preference share dividends	(10,500)		(10,500)		(10,500)		(10,500)

Dividends declared per share	$	0.26		$	0.24		$	0.78		$	0.72
Net income (loss) available to common shareholders													Net income (loss) available to common shareholders	$	(4,982)	$	(19,193)	$	17,788	$	(11,511)

Total comprehensive income (loss) available to common shareholders													Total comprehensive income (loss) available to common shareholders	$	(4,982)	$	(19,193)	$	17,788	$	(11,511)



			Fair Value Measurements at September 30, 2017 Using Fair Value Hierarchy
	Fair Value as of September 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	662,649	$	662,649	$	—	$	—	Market
Restricted cash and cash equivalents	20,536		20,536		—		—		Market
Derivative assets	2,663		—		2,663		—		Market
Total	$	685,848	$	683,185	$	2,663	$	—



	September 30, 2017				December 31, 2016
	Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Unsecured Term Loan	$	120,000	$	120,000	$	120,000	$	120,000
ECA Financings	236,879		243,880		305,276		316,285
Bank Financings	651,434		649,557		933,541		925,783
Senior Notes	3,200,000		3,422,824		3,200,000		3,387,125



Year Ending December 31,	Amount
Remainder of 2017	$	163,587
2018	630,237
2019	532,026
2020	424,140
2021	350,093
Thereafter	830,674
Total	$	2,930,757



	Three Months Ended September 30,				Nine Months Ended September 30,
Region	2017		2016		2017		2016
Asia and Pacific	35	%	40	%	38	%	40	%
Europe	24	%	22	%	23	%	23	%
Middle East and Africa	12	%	12	%	12	%	12	%
North America	9	%	7	%	8	%	6	%
South America	20	%	19	%	19	%	19	%
Total	100	%	100	%	100	%	100	%


	August 31, 2023		February 28, 2023
Lease receivable	$	133,663	$	31,674
Unguaranteed residual value of flight equipment	122,184		37,287
Net investment leases	255,847		68,961
Allowance for credit losses	(7,113)		(1,267)
Net investment in leases, net	$	248,734	$	67,694



	Amount
Total lease payments to be received	$	297,061
Less: Unearned income	(153,253		)
Estimated residual values of leased flight equipment (unguaranteed)	344,600
Net investment in finance and sales-type leases	$	488,408


	Amount
Balance at February 28, 2023	$	1,267
Provision for credit losses	6,125
Write-offs	(279)

Balance at August 31, 2023	$	7,113


~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~



	Amount
Investment in joint ventures at December 31, 2016	$	72,977
Investment in joint ventures	2,117
Earnings from joint ventures, net of tax	5,804
Distributions	(4,800		)
Investment in joint ventures at September 30, 2017	$	76,098


	At August 31, 2023					At February 28, 2023
Debt Obligation	Outstanding Borrowings		Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings
Secured Debt Financings:

Term Financings(1)	$	922,688	38	2.36% to 7.74%	09/13/24 to 06/27/32	$	761,283
Less: Debt issuance costs and discounts	(8,824)		—			(8,985)

Total secured debt financings, net of debt issuance costs and discounts	913,864		38			752,298

Unsecured Debt Financings:
5.000% Senior Notes due 2023	—			5.00%	04/01/23	500,000
4.400% Senior Notes due 2023	650,000			4.40%	09/25/23	650,000
Senior Notes due 2024	500,000			4.125%	05/01/24	500,000
Senior Notes due 2025	650,000			5.25%	08/11/25	650,000
Senior Notes due 2026	650,000			4.25%	06/15/26	650,000
2.850% Senior Notes due 2028	750,000			2.85%	01/26/28	750,000
6.500% Senior Notes due 2028	650,000			6.50%	07/18/28	—
Unsecured Term Loans	155,000			6.90%	02/27/24	155,000
Revolving Credit Facilities	20,000			7.21%	02/28/24 to 05/24/25	20,000
Less: Debt issuance costs and discounts	(33,125)					(32,546)

Total unsecured debt financings, net of debt issuance costs and discounts	3,991,875					3,842,454

Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	4,905,739				$	4,594,752



	At September 30, 2017						At December 31, 2016
Debt Obligation	Outstanding Borrowings			Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings
Secured Debt Financings:
ECA Financings⁽¹⁾	$	236,879		6	3.02% to 3.96%	12/03/21 to 11/30/24	$	305,276
Bank Financings⁽²⁾	651,434			23	2.22% to 4.45%	9/11/18 to 01/19/26	933,541
Less: Debt Issuance Costs	(13,439		)	—			(19,783		)
Total secured debt financings, net of debt issuance costs	874,874			29			1,219,034

Unsecured Debt Financings:
Senior Notes due 2017	—				6.75%	04/15/17	500,000
Senior Notes due 2018	400,000				4.625%	12/15/18	400,000
Senior Notes due 2019	500,000				6.25%	12/01/19	500,000
Senior Notes due 2020	300,000				7.625%	04/15/20	300,000
Senior Notes due 2021	500,000				5.125%	03/15/21	500,000
Senior Notes due 2022	500,000				5.50%	02/15/22	500,000
Senior Notes due 2023	500,000				5.00%	04/01/23	500,000
Senior Notes due 2024	500,000				4.125%	05/01/24	—
Unsecured Term Loan	120,000				3.320%	04/28/19	120,000
Revolving Credit Facilities	—				N/A	11/21/19 to 05/13/20	—
Less: Debt Issuance Costs	(33,760		)				(32,789		)
Total unsecured debt financings, net of debt issuance costs	3,286,240						3,287,211

Total secured and unsecured debt financings, net of debt issuance costs	$	4,161,114					$	4,506,245


~~(1)~~	~~The borrowings under these financings at September 30, 2017 have a weighted-average rate of interest of 3.59%.~~



Declaration Date	Dividend per Common Share		Aggregate Dividend Amount		Record Date	Payment Date
August 4, 2017	$	0.26	$	20,464	August 31, 2017	September 15, 2017
May 2, 2017	$	0.26	$	20,482	May 31, 2017	June 15, 2017
February 9, 2017	$	0.26	$	20,466	February 28, 2017	March 15, 2017
October 28, 2016	$	0.26	$	20,434	November 29, 2016	December 15, 2016
August 2, 2016	$	0.24	$	18,872	August 26, 2016	September 15, 2016


~~(1)~~	Includes $1,070 and $2,058 of loan prepayment fees related to the sale of aircraft during the three and nine months ended September 30, 2017, respectively, and $0 and $1,509 of loan prepayment fees related to the sale of aircraft during the three and nine months ended September 30, 2016.



	September 30, 2017		December 31, 2016
Accounts payable and accrued expenses	$	33,499	$	24,337
Deferred income tax liability	42,706		44,241
Accrued interest payable	56,611		43,107
Lease discounts, net of amortization of $35,296 and $29,016, respectively	12,875		15,842
Total accounts payable, accrued expenses and other liabilities	$	145,691	$	127,527



Owned Aircraft	As of September 30, 2017⁽¹⁾			As of September 30, 2016⁽¹⁾
Net Book Value of Flight Equipment	$	5,979		$	6,270
Net Book Value of Unencumbered Flight Equipment	$	4,572		$	4,343
Number of Aircraft	192			175
Number of Unencumbered Aircraft	163			139
Number of Lessees	71			65
Number of Countries	38			35
Weighted Average Age (years)⁽²⁾	8.7			7.6
Weighted Average Remaining Lease Term (years)⁽²⁾	4.7			5.3
Weighted Average Fleet Utilization during the three months ended September 30, 2017 and 2016⁽³⁾	100.0		%	98.2		%
Weighted Average Fleet Utilization during the nine months ended September 30, 2017 and 2016⁽³⁾	99.2		%	98.9		%
Portfolio Yield for the three months ended September 30, 2017 and 2016⁽⁴⁾	12.3		%	12.4		%
Portfolio Yield for the nine months ended September 30, 2017 and 2016⁽⁴⁾	12.3		%	12.4		%

Managed Aircraft on behalf of Joint Ventures
Net Book Value of Flight Equipment	$	661		$	629
Number of Aircraft	13			11



	Owned Aircraft as of September 30, 2017			Owned Aircraft as of September 30, 2016
	Number of Aircraft	% of Net Book Value⁽¹⁾		Number of Aircraft		% of Net Book Value⁽¹⁾
Aircraft Type
Passenger:
Narrow-body	159	60	%	134		52	%
Wide-body	28	34	%	32		40	%
Total Passenger	187	94	%	166		92	%
Freighter	5	6	%	9		8	%
Total	192	100	%	175		100	%

Manufacturer
Airbus	108	53	%	87		50	%
Boeing	79	45	%	83		48	%
Embraer	5	2	%	5		2	%
Total	192	100	%	175		100	%

Regional Diversification
Asia and Pacific	54	31	%	55		39	%
Europe	67	28	%	57		22	%
Middle East and Africa	13	9	%	14		11	%
North America	34	11	%	24		8	%
South America	24	21	%	23		19	%
Off-lease	—	—	%	2	⁽²⁾	1	%
Total	192	100	%	175		100	%



	Three Months Ended September 30,		Nine Months Ended September 30,
Weighted-average shares:	2017	2016	2017	2016
Common shares outstanding	78,237,199	77,989,933	78,197,091	78,230,011
Restricted common shares	569,617	680,249	569,453	646,299
Total weighted-average shares	78,806,816	78,670,182	78,766,544	78,876,310



	Three Months Ended September 30,				��	Nine Months Ended September 30,
Percentage of weighted-average shares:	2017		2016			2017		2016
Common shares outstanding	99.28	%	99.14	%		99.28	%	99.18	%
Restricted common shares⁽¹⁾	0.72	%	0.86	%		0.72	%	0.82	%
Total percentage of weighted-average shares	100.00	%	100.00	%		100.00	%	100.00	%



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽¹⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾
	(Dollars in thousands, except per share amounts)
July 1 through July 31	—	$	—	—	$	95,888
August 1 through August 31	104,594	0.01		—	95,888
September 1 through September 30	—	—		—	95,888
Total	104,594	$	0.01	—	$	95,888