UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~May~~August 31, 2021


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

For the transition period from to

Commission File number 001-32959

AIRCASTLE LIMITED

(Exact name of registrant as specified in its charter)


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
Connecticut
06901
(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (203) 504-1020

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Shares, par value $0.01 per share

N/A

NONE

Preference Shares, par value $0.01 per share

N/A

NONE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate market value of the Registrant’s Common Shares based upon the closing price on the New York Stock Exchange on August 31, ~~2020~~2021 (the last business day of registrant’s most recently completed second fiscal quarter), beneficially owned by non-affiliates of the Registrant was $0 because the Registrant’s Common Shares were not publicly traded as of that date. For purposes of the foregoing calculation, which is required by Form 10-K, the Registrant has included in the shares owned by affiliates those shares owned by directors and executive officers and shareholders owning 10% or more of the outstanding common shares of the Registrant, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.

As of ~~July 9,~~October 8, 2021, there were 14,048 outstanding shares of the registrant’s common shares, par value $0.01 per share.

~~Aircastle~~Aircastle Limited and Subsidiaries

Form 10-Q

Table of Contents


		Page No.
	PART I. – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of ~~May~~August 31, 2021 and February 28, 2021	3
	Consolidated Statements of ~~Loss~~Income (Loss) and Comprehensive ~~Loss~~Income (Loss) for the three and six months ended ~~May~~August 31, 2021 and 2020	34
	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~May~~August 31, 2021 and 2020	45
	Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended ~~May~~August 31, 2021 and 2020	67
	Notes to Unaudited Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3539
Item 4.	Controls and Procedures	3639
	PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	3740
Item 1A.	Risk Factors	3740
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3740
Item 3.	Defaults Upon Senior Securities	3740
Item 4.	Mine Safety Disclosures	3740
Item 5.	Other Information	3740
Item 6.	Exhibits	3842
SIGNATURE		4044

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)


		May 31, 2021		February 28, 2021			August 31, 2021		February 28, 2021

ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	642,910	$	578,004	Cash and cash equivalents	$	337,455	$	578,004
Restricted cash and cash equivalents	Restricted cash and cash equivalents	2,693		2,594		Restricted cash and cash equivalents	2,740		2,594
Accounts receivable	Accounts receivable	75,427		82,572		Accounts receivable	80,877		82,572

Flight equipment held for lease, net of accumulated depreciation of $2,161,998 and $2,076,972, respectively		6,392,594		6,492,471
Net investment in leases, net of allowance for credit losses of $870 and $864, respectively		191,457		195,376
Flight equipment held for lease, net of accumulated depreciation of $2,253,085 and $2,076,972, respectively						Flight equipment held for lease, net of accumulated depreciation of $2,253,085 and $2,076,972, respectively	6,573,891		6,492,471
Net investment in leases, net of allowance for credit losses of $876 and $864, respectively						Net investment in leases, net of allowance for credit losses of $876 and $864, respectively	187,299		195,376
Unconsolidated equity method investments	Unconsolidated equity method investments	35,664		35,377		Unconsolidated equity method investments	36,122		35,377
Other assets	Other assets	317,665		311,944		Other assets	326,575		311,944
Total assets	Total assets	$	7,658,410	$	7,698,338	Total assets	$	7,544,959	$	7,698,338

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts	Borrowings from secured financings, net of debt issuance costs and discounts	$	742,214	$	768,850	Borrowings from secured financings, net of debt issuance costs and discounts	$	723,054	$	768,850
Borrowings from unsecured financings, net of debt issuance costs and discounts	Borrowings from unsecured financings, net of debt issuance costs and discounts	4,365,260		4,366,261		Borrowings from unsecured financings, net of debt issuance costs and discounts	3,869,574		4,366,261
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	171,810		174,267		Accounts payable, accrued expenses and other liabilities	180,422		174,267
Lease rentals received in advance	Lease rentals received in advance	55,517		58,013		Lease rentals received in advance	57,692		58,013

Security deposits	Security deposits	78,254		80,699		Security deposits	77,104		80,699
Maintenance payments	Maintenance payments	524,038		519,178		Maintenance payments	518,289		519,178
Total liabilities	Total liabilities	5,937,093		5,967,268		Total liabilities	5,426,135		5,967,268

Commitments and Contingencies	Commitments and Contingencies	0		0		Commitments and Contingencies	0		0

SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding		0		0
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at May 31, 2021 and February 28, 2021		0		0
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, 2021 and no shares issued and outstanding at February 28, 2021						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, 2021 and no shares issued and outstanding at February 28, 2021	—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at August 31, 2021 and February 28, 2021						Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at August 31, 2021 and February 28, 2021	—		—
Additional paid-in capital	Additional paid-in capital	1,485,777		1,485,777		Additional paid-in capital	1,879,139		1,485,777
Retained earnings	Retained earnings	235,540		245,293		Retained earnings	239,685		245,293

Total shareholders’ equity	Total shareholders’ equity	1,721,317		1,731,070		Total shareholders’ equity	2,118,824		1,731,070

Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,658,410	$	7,698,338	Total liabilities and shareholders’ equity	$	7,544,959	$	7,698,338

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

Aircastle Limited and Subsidiaries

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

(Dollars in thousands)

(Unaudited)


		Three Months Ended May 31,			Three Months Ended August 31,						Six Months Ended August 31,
			2021			2020			2021		2020		2021		2020
Revenues:	Revenues:							Revenues:
Lease rental revenue	Lease rental revenue		$	132,125		$	183,178	Lease rental revenue	$	137,589	$	150,895	$	269,714	$	334,073
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue		2,877			5,317		Direct financing and sales-type lease revenue	2,776		4,747		5,653		10,064
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives		(5,325)			(7,347)		Amortization of lease premiums, discounts and incentives	(5,835)		(4,629)		(11,159)		(11,975)
Maintenance revenue	Maintenance revenue		26,477			76,630		Maintenance revenue	21,218		20,034		47,694		96,665
Total lease revenue	Total lease revenue		156,154			257,778		Total lease revenue	155,748		171,047		311,902		428,827
Gain on sale of flight equipment			9,021			12,078
Gain (loss) on sale of flight equipment								Gain (loss) on sale of flight equipment	1,502		(848)		10,524		11,230
Other revenue	Other revenue		635			12,670		Other revenue	402		1,123		1,036		13,793
Total revenues	Total revenues		165,810			282,526		Total revenues	157,652		171,322		323,462		453,850

Operating expenses:	Operating expenses:							Operating expenses:
Depreciation	Depreciation		82,391			89,212		Depreciation	83,391		86,749		165,782		175,961
Interest, net	Interest, net		58,037			58,726		Interest, net	55,413		55,324		113,450		114,050
Selling, general and administrative (including non-cash share-based payment expense of $0 and $28,049 for the three months ended May 31, 2021 and 2020, respectively)			15,589			47,451
Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the six months ended August 31, 2021 and 2020, respectively)								Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the six months ended August 31, 2021 and 2020, respectively)	15,996		13,555		31,585		61,006
Impairment of flight equipment	Impairment of flight equipment		20,583			77,298		Impairment of flight equipment	21,232		212,387		41,815		289,685
Maintenance and other costs	Maintenance and other costs		7,528			5,566		Maintenance and other costs	8,087		4,271		15,615		9,837
Total operating expenses	Total operating expenses		184,128			278,253		Total operating expenses	184,119		372,286		368,247		650,539

Other income (expense):	Other income (expense):							Other income (expense):
Loss on extinguishment of debt	Loss on extinguishment of debt		(24)			(8)		Loss on extinguishment of debt	(14,132)		(57)		(14,156)		(65)
Merger expenses	Merger expenses		0			(32,069)		Merger expenses	—		27		—		(32,042)
Other	Other		10			(17)		Other	57,609		(173)		57,619		(192)
Total other expense			(14)			(32,094)
Total other income (expense)								Total other income (expense)	43,477		(203)		43,463		(32,299)

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments			(18,332)			(27,821)
Income tax benefit			(8,292)			(551)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments								Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	17,010		(201,167)		(1,322)		(228,988)
Income tax provision (benefit)								Income tax provision (benefit)	7,665		13,020		(627)		12,469
Earnings of unconsolidated equity method investments, net of tax	Earnings of unconsolidated equity method investments, net of tax		287			731		Earnings of unconsolidated equity method investments, net of tax	458		674		745		1,405
Net loss			$	(9,753)		$	(26,539)
Net income (loss)								Net income (loss)	$	9,803	$	(213,513)	$	50	$	(240,052)
Preference share dividends								Preference share dividends	(5,658)		—		(5,658)		—
Net income (loss) available to common shareholders								Net income (loss) available to common shareholders	$	4,145	$	(213,513)	$	(5,608)	$	(240,052)

Total comprehensive loss			$	(9,753)		$	(26,539)
Total comprehensive income (loss) available to common shareholders								Total comprehensive income (loss) available to common shareholders	$	4,145	$	(213,513)	$	(5,608)	$	(240,052)

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)


		Three Months Ended May 31,					Six Months Ended August 31,
		2021		2020			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss		$	(9,753)	$	(26,539)
Adjustments to reconcile net loss to net cash and restricted cash provided by operating activities:
Net income (loss)						Net income (loss)	$	50	$	(240,052)
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:
Depreciation	Depreciation	82,391		89,212		Depreciation	165,782		175,961
Amortization of deferred financing costs	Amortization of deferred financing costs	4,191		3,311		Amortization of deferred financing costs	8,384		6,713
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	5,325		7,347		Amortization of lease premiums, discounts and incentives	11,159		11,975
Deferred income taxes	Deferred income taxes	1,850		5,404		Deferred income taxes	4,240		4,374
Non-cash share-based payment expense	Non-cash share-based payment expense	0		28,049		Non-cash share-based payment expense	—		28,049

Collections on net investment in leases	Collections on net investment in leases	3,913		5,032		Collections on net investment in leases	8,065		8,670
Security deposits and maintenance payments included in earnings	Security deposits and maintenance payments included in earnings	(13,139)		(81,634)		Security deposits and maintenance payments included in earnings	(30,420)		(102,523)
Gain on sale of flight equipment	Gain on sale of flight equipment	(9,021)		(12,078)		Gain on sale of flight equipment	(10,524)		(11,230)
Loss on extinguishment of debt	Loss on extinguishment of debt	24		8		Loss on extinguishment of debt	14,156		65
Impairment of flight equipment	Impairment of flight equipment	20,583		77,298		Impairment of flight equipment	41,815		289,685
Provision for credit losses	Provision for credit losses	6		3,307		Provision for credit losses	12		4,513
Other	Other	(290)		(715)		Other	(745)		(1,386)
Changes in certain assets and liabilities:	Changes in certain assets and liabilities:					Changes in certain assets and liabilities:
Accounts receivable	Accounts receivable	1,661		(46,088)		Accounts receivable	(5,479)		(45,747)
Other assets	Other assets	(11,651)		(62,590)		Other assets	(15,413)		(57,441)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	(3,604)		(24,059)		Accounts payable, accrued expenses and other liabilities	(10,664)		(3,723)
Lease rentals received in advance	Lease rentals received in advance	(2,496)		(9,740)		Lease rentals received in advance	(704)		(42,311)
Net cash and restricted cash provided by (used in) operating activities		69,990		(44,475)
Net cash and restricted cash provided by operating activities						Net cash and restricted cash provided by operating activities	179,714		25,592
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Acquisition and improvement of flight equipment	Acquisition and improvement of flight equipment	(70,834)		(28,426)		Acquisition and improvement of flight equipment	(370,187)		(33,643)
Proceeds from sale of flight equipment	Proceeds from sale of flight equipment	63,420		51,881		Proceeds from sale of flight equipment	77,900		53,229

Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits		11,963		(5,198)
Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits						Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits	10,003		(3,463)

Other	Other	0		(409)		Other	(64)		(594)
Net cash and restricted cash provided by investing activities		4,549		17,848
Net cash and restricted cash (used in) provided by investing activities						Net cash and restricted cash (used in) provided by investing activities	(282,348)		15,529
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repurchase of shares	Repurchase of shares	0		(25,536)		Repurchase of shares	—		(25,536)
Parent contribution at Merger	Parent contribution at Merger	0		25,536		Parent contribution at Merger	—		25,536
Net proceeds from preference share issuance						Net proceeds from preference share issuance	393,362		—
Proceeds from secured and unsecured debt financings	Proceeds from secured and unsecured debt financings	0		550,000		Proceeds from secured and unsecured debt financings	—		1,193,871
Repayments of secured and unsecured debt financings	Repayments of secured and unsecured debt financings	(27,224)		(323,910)		Repayments of secured and unsecured debt financings	(546,903)		(851,404)
Debt extinguishment costs	Debt extinguishment costs	(24)		(8)		Debt extinguishment costs	(13,372)		(65)
Deferred financing costs	Deferred financing costs	(4,604)		0		Deferred financing costs	(4,748)		(5,508)

Security deposits and maintenance payments received	Security deposits and maintenance payments received	22,793		15,318		Security deposits and maintenance payments received	44,111		33,553
Security deposits and maintenance payments returned	Security deposits and maintenance payments returned	(475)		(31,140)		Security deposits and maintenance payments returned	(10,219)		(38,710)

Dividends paid	Dividends paid	0		(24,025)		Dividends paid	—		(24,025)

Net cash and restricted cash (used in) provided by financing activities	Net cash and restricted cash (used in) provided by financing activities	(9,534)		186,235		Net cash and restricted cash (used in) provided by financing activities	(137,769)		307,712
Net decrease in cash and restricted cash:		65,005		159,608
Net (decrease) increase in cash and restricted cash:						Net (decrease) increase in cash and restricted cash:	(240,403)		348,833
Cash and restricted cash at beginning of period	Cash and restricted cash at beginning of period	580,598		171,437		Cash and restricted cash at beginning of period	580,598		171,437

Cash and restricted cash at end of period	Cash and restricted cash at end of period	$	645,603	$	331,045	Cash and restricted cash at end of period	$	340,195	$	520,270

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

Aircastle Limited and Subsidiaries

Consolidated Statements of Cash Flows (Continued)

(Dollars in thousands)

(Unaudited)


		Three Months Ended May 31,					Six Months Ended August 31,
		2021		2020			2021		2020
Reconciliation to Consolidated Balance Sheets:	Reconciliation to Consolidated Balance Sheets:					Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents	Cash and cash equivalents	$	642,910	$	325,691	Cash and cash equivalents	$	337,455	$	514,917
Restricted cash and cash equivalents	Restricted cash and cash equivalents	2,693		5,354		Restricted cash and cash equivalents	2,740		5,353

Unrestricted and restricted cash and cash equivalents	Unrestricted and restricted cash and cash equivalents	$	645,603	$	331,045	Unrestricted and restricted cash and cash equivalents	$	340,195	$	520,270

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid for interest		$	44,948	$	74,457
Cash paid for interest, net of amounts capitalized						Cash paid for interest, net of amounts capitalized	$	107,102	$	116,137
Cash paid for income taxes	Cash paid for income taxes	$	891	$	159	Cash paid for income taxes	$	1,201	$	730
Supplemental disclosures of non-cash investing activities:	Supplemental disclosures of non-cash investing activities:					Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	$	0	$	29,869	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	$	1,158	$	29,869

Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	$	12,138	$	252	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	$	12,506	$	263
Transfers from flight equipment held for lease to Net investment in leases and Other assets	Transfers from flight equipment held for lease to Net investment in leases and Other assets	$	3,554	$	81,600	Transfers from flight equipment held for lease to Net investment in leases and Other assets	$	3,554	$	54,324

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)


		Three Months Ended May 31, 2021
					Additional Paid-In Capital		Retained Earnings		Total Shareholders’ Equity
		Common Shares										Common Shares			Preference Shares			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Shareholders’ Equity
		Shares	Amount									Shares	Amount		Shares	Amount
Balance, February 28, 2021	Balance, February 28, 2021	14,048	$	0	$	1,485,777	$	245,293	$	1,731,070	Balance, February 28, 2021	14,048	$	—	—	$	—	$	1,485,777	$	245,293	$	1,731,070
Net loss	Net loss	—	—		—		(9,753)		(9,753)		Net loss	—	—		—	—		—		(9,753)		(9,753)
Balance, May 31, 2021	Balance, May 31, 2021	14,048	$	0	$	1,485,777	$	235,540	$	1,721,317	Balance, May 31, 2021	14,048	$	—	—	$	—	$	1,485,777	$	235,540	$	1,721,317

Net income											Net income	—	—		—	—		—		9,803		9,803
Issuance of preference shares											Issuance of preference shares	—	—		400	—		393,362		—		393,362
Preference share dividends											Preference share dividends	—	—		—	—		—		(5,658)		(5,658)
Balance, August 31, 2021											Balance, August 31, 2021	14,048	$	—	400	$	—	$	1,879,139	$	239,685	$	2,118,824
		Three Months Ended May 31, 2020
					Additional Paid-In Capital		Retained Earnings		Total Shareholders’ Equity
		Common Shares										Common Shares			Preference Shares			Additional Paid-In Capital		Retained Earnings (Deficit)		Total Shareholders’ Equity
		Shares	Amount									Shares	Amount		Shares	Amount
Balance, February 29, 2020	Balance, February 29, 2020	75,076,794	$	751	$	1,456,977	$	578,461	$	2,036,189	Balance, February 29, 2020	75,076,794	$	751	—	$	—	$	1,456,977	$	578,461	$	2,036,189
Amortization of share-based payments	Amortization of share-based payments	—	—		28,049		—		28,049		Amortization of share-based payments	—	—		—	—		28,049		—		28,049
Net loss	Net loss	—	—		—		(26,539)		(26,539)		Net loss	—	—		—	—		—		(26,539)		(26,539)
Payment of unvested shares at Merger	Payment of unvested shares at Merger	(101,809)	(1)		(25,535)		—		(25,536)		Payment of unvested shares at Merger	(101,809)	(1)		—	—		(25,535)		—		(25,536)
Parent contribution at Merger	Parent contribution at Merger	—	—		25,536		—		25,536		Parent contribution at Merger	—	—		—	—		25,536		—		25,536
Share cancellation and re-issuance at Merger	Share cancellation and re-issuance at Merger	(74,960,937)	(750)		750		—		0		Share cancellation and re-issuance at Merger	(74,960,937)	(750)		—	—		750		—		—
Balance, May 31, 2020	Balance, May 31, 2020	14,048	$	0	$	1,485,777	$	551,922	$	2,037,699	Balance, May 31, 2020	14,048	$	—	—	$	—	$	1,485,777	$	551,922	$	2,037,699
Net loss											Net loss	—	—		—	—		—		(213,513)		(213,513)
Balance, August 31, 2020											Balance, August 31, 2020	14,048	$	—	—	$	—	$	1,485,777	$	338,409	$	1,824,186

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)

~~May~~August 31, 2021

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 is acquiring, leasing, managing and selling commercial jet aircraft.

On March 27, 2020, the Company successfully completed its merger (the “Merger”) and is now controlled by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited (“Mizuho Leasing”).

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle directly or indirectly owns all outstanding common shares of its subsidiaries. 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 based on 1 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, 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 February 28, 2021.

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 ~~May~~August 31, 2021, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

Principles of Consolidation

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

Risk and Uncertainties

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

Use of Estimates

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

COVID-19 Pandemic

COVID-19 has had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic. While there have been some improvements in certain markets recently, according to IATA, as of ~~May~~August 31, 2021, air travel was still down to approximately ~~37% of~~44% compared to normal levels and a full recovery to pre-pandemic levels is not expected for several years. Substantially all the world’s airlines have experienced financial difficulties and liquidity challenges, including many of our customers. While we believe long-term demand for air travel will return to historical trends over time, the near-term impacts of COVID-19’s economic shock are material; the extent and duration of those impacts cannot currently be determined.

AsEven as the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection. As of ~~July 9,~~October 8, 2021, ~~we have agreed to $111,720 in~~our total deferrals, net of ~~lease payments with NaN customers.~~repayments, were $101,844. These deferrals have been granted to 20 customers for an average of six to nine months of lease rentals and represent ~~19%~~18% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended ~~May~~August 31, 2021. Of the total deferrals, ~~$89,400~~$89,777 is included in Accounts receivable or Other assets as of ~~May~~August 31, 2021, with the balance representing future lease payments. Approximately ~~76%~~77% of our total deferrals as of ~~July 9,~~October 8, 2021, have been agreed to as part of broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions. Some have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.

If air traffic remains depressed and if our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to ~~some of our~~certain customers or extend the period of repayment for deferrals we have already made. We may ultimately not be able to collect all the amounts we have deferred.

As of ~~July 9,~~October 8, 2021, 6 of our customers are subject to judicial insolvency proceedings or similar protection. These customers lease 22 aircraft, which represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and ~~11%~~10% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended May 31, 2021. LATAM, our second largest customer, is included in this group and represents 8% of our net book value of flight equipment and 7% of our Lease rental revenue as of and for the twelve months ended MayAugust 31, 2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.

LATAM, our second largest customer, is included in the above group and represents 7% of our net book value of flight equipment and 6% of our Lease rental revenue as of and for the twelve months ended August 31, 2021. We have signed restructured leases for all 13 of the LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process. During the three months ended August 31, 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered) (the “LATAM Bankruptcy”). The allowed amount of our unsecured claims was approved by the Bankruptcy Court and proceeds from the sales of these claims in the amount of $55,213 were received during the three and six months ended August 31, 2021 and recognized in Other income (expense).

Lease Revenue Recognition

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

In certain instances, we may provide lease concessions to customers, generally in the form of lease rental deferrals. While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease term is generally the same as that which was required under the original lease agreement. We account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other assets.

Should we determine that the collectability of rental payments is no longer probable (including any deferral thereof), we will recognize lease rental revenue using a cash basis of accounting rather than an accrual method. In the

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~

period we conclude that collection of lease payments is no longer probable, we recognize any difference between revenue amounts recognized to date under the accrual method and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to lease rental revenue.

Impairment of Flight Equipment

We perform an annual recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis. A recoverability assessment is also performed whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in an aircraft ~~model’s~~type’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. When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2 – Fair Value Measurements.

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

We continue to closely monitor the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and have and will continue to perform additional customer and aircraft specific reviews should changes in facts and circumstances arise that may impact the recoverability of our aircraft. We will focus on our customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of COVID-19 and value deterioration.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform Topic 848 (“ASC 848”), in response to the market transition from the LIBOR and other interbank offered rates (“IBORs”) to alternative reference rates. U.S. GAAP requires entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform. The standard provides this temporary election through December 31, 2022, and cannot be applied to contract modifications that occur after December 31, 2022. Reference rate reform will primarily impact our lease and debt arrangements for which floating-rate lease rentals and interest expense are based on LIBOR. As of ~~May~~August 31, 2021, less than 1% of our fleet have floating-rate lease rentals and, for the three and six months ended ~~May~~August 31, 2021, 5%4% of our interest expense was derived from floating-rate debt which is referenced to LIBOR. We have not adopted ASC 848 and are currently evaluating the election available to us under the standard.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Effective, March 1, 2021, the Company adopted FASB ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the current guidance and by clarifying and amending the current guidance. The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. This adoption did not have a material impact on our consolidated financial statements.

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~

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 use of unobservable inputs.

The following tables set forth our financial assets as of ~~May~~August 31, 2021 and February 28, 2021 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 May 31, 2021 Using Fair Value Hierarchy										Fair Value Measurements at August 31, 2021 Using Fair Value Hierarchy
		Fair Value as of May 31, 2021		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 August 31, 2021		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:										Assets:
Cash and cash equivalents	Cash and cash equivalents	$	642,910	$	642,910	$	0	$	0	Market	Cash and cash equivalents	$	337,455	$	337,455	$	—	$	—	Market
Restricted cash and cash equivalents	Restricted cash and cash equivalents	2,693		2,693		0		0		Market	Restricted cash and cash equivalents	2,740		2,740		—		—		Market

Total	Total	$	645,603	$	645,603	$	0	$	0		Total	$	340,195	$	340,195	$	—	$	—


				Fair Value Measurements at February 28, 2021 Using Fair Value Hierarchy										Fair Value Measurements at February 28, 2021 Using Fair Value Hierarchy
		Fair Value as of February 28, 2021		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, 2021		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:										Assets:
Cash and cash equivalents	Cash and cash equivalents	$	578,004	$	578,004	$	0	$	0	Market	Cash and cash equivalents	$	578,004	$	578,004	$	—	$	—	Market
Restricted cash and cash equivalents	Restricted cash and cash equivalents	2,594		2,594		0		0		Market	Restricted cash and cash equivalents	2,594		2,594		—		—		Market

Total	Total	$	580,598	$	580,598	$	0	$	0		Total	$	580,598	$	580,598	$	—	$	—

Our cash and cash equivalents, and restricted cash and cash equivalents balances, consist largely of money market securities that are highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.

For the three and six months ended ~~May~~August 31, 2021, we had 0no 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 the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. 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 that uses Level 2 inputs, which include third party appraisal data and an income approach that uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

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

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~

Aircraft Valuation

Impairment of Flight Equipment

During the three months ended ~~May~~August 31, 2021, the Company recorded ~~transactional~~ impairment charges totaling ~~$20,583~~$21,232, of which $18,012 were transactional impairments primarily related to 2 narrow-body aircraft ~~and were the result of an~~resulting from early lease ~~termination and a scheduled lease expiration.~~terminations. The Company recognized ~~$21,061~~$16,085 of maintenance revenue for these 2 aircraft.

During the six months ended August 31, 2021, the Company recorded impairment charges totaling $41,815, of which $38,594 were transactional impairments, primarily related to 4 narrow-body aircraft resulting from 3 early lease terminations and 1 scheduled lease expiration. The Company recognized $37,146 of maintenance revenue for these 4 aircraft.

During the three months ended ~~May~~August 31, 2020, the Company recorded ~~transactional~~ impairment charges totaling ~~$77,298,~~$212,387, of which $169,346 were transactional impairments, primarily related to 104 wide-body aircraft and 2 narrow-body aircraft. The Company recognized $9,267 of maintenance revenue for these 6 aircraft. The impairment charges were attributable to early lease terminations, judicial insolvency proceedings, or as a result of our annual recoverability assessment.

During the six months ended August 31, 2020, the Company recorded impairment charges totaling $289,685, of which $246,644 were transactional impairments primarily related to 12 narrow-body and 15 wide-body aircraft. The Company recognized ~~$83,342~~$92,193 of maintenance and security deposits into revenue for these 1117 aircraft. The impairment charges ~~and revenue~~ were ~~recognized~~attributable to early lease terminations, scheduled lease expirations, lessee defaults, judicial insolvency proceedings, or as a result of ~~the early lease terminations of 9 aircraft and scheduled lease expirations of 2 aircraft.~~our annual recoverability assessment.

Annual Recoverability Assessment

We plan to perform our annual recoverability assessment of all our aircraft during the fiscal third quarter for the nine months ended November 30, 2021. We continue to closely monitor the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and have and will continue to perform additional customer and aircraft specific reviews should changes in facts and circumstances arise that may impact the recoverability of our aircraft. We have and will focus on our customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of the COVID-19 pandemic and value deterioration.

The recoverability assessment is a comparison of the carrying value of each aircraft to its undiscounted expected future cash flows. We develop 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 in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors.

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 our recoverability assessments are appropriate, actual results could differ from those estimates.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and amounts borrowed under 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 all our other financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of our financial instruments at ~~May~~August 31, 2021 and February 28, 2021 were as follows:


		May 31, 2021				February 28, 2021					August 31, 2021				February 28, 2021
		Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability			Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Credit Facilities	Credit Facilities	$	0	$	0	$	0	$	0	Credit Facilities	$	—	$	—	$	—	$	—
Unsecured Term Loan	Unsecured Term Loan	215,000		210,767		215,000		210,290		Unsecured Term Loan	215,000		211,245		215,000		210,290
Export Credit Agency (“ECA”) Financings	Export Credit Agency (“ECA”) Financings	27,163		28,422		36,423		37,942		Export Credit Agency (“ECA”) Financings	25,316		26,377		36,423		37,942
Bank Financings	Bank Financings	720,389		721,859		738,353		740,086		Bank Financings	702,557		729,616		738,353		740,086
Senior Notes	Senior Notes	4,200,000		4,448,863		4,200,000		4,402,722		Senior Notes	3,700,000		3,972,066		4,200,000		4,402,722

All our financial instruments are classified as Level 2 except for our Senior Notes, which are classified as Level 1.

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~

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 ~~May~~August 31, 2021 were as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount(1)		Year Ending February 28/29,	Amount(1)
Remainder of 2021	Remainder of 2021	$	445,308	Remainder of 2021	$	303,127
2022	2022	566,477		2022	590,132
2023	2023	506,285		2023	535,087
2024	2024	377,617		2024	404,218
2025	2025	233,328		2025	259,143
Thereafter	Thereafter	523,563		Thereafter	665,907
Total	Total	$	2,652,578	Total	$	2,757,614

_______________

(1)Reflects impact of lessee lease rental deferrals.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Geographic concentration of lease rental revenue earned from flight equipment held for lease was as follows:


		Three Months Ended May 31,			Three Months Ended August 31,						Six Months Ended August 31,
Region	Region		2021			2020		Region	2021		2020		2021		2020
Asia and Pacific	Asia and Pacific		34	%		45	%	Asia and Pacific	32	%	39	%	33	%	42	%
Europe	Europe		34	%		27	%	Europe	36	%	33	%	35	%	29	%
Middle East and Africa	Middle East and Africa		6	%		8	%	Middle East and Africa	5	%	5	%	5	%	7	%
North America	North America		14	%		10	%	North America	15	%	11	%	15	%	11	%
South America	South America		12	%		10	%	South America	12	%	12	%	12	%	11	%

Total	Total		100	%		100	%	Total	100	%	100	%	100	%	100	%

The classification of regions in the table above and in the tables and discussion below is determined based on the principal location of the lessee of each aircraft.

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

Three Months Ended May 31,
2021 2020
Number of Lessees Combined % of Lease
Rental Revenue Number of Lessees Combined % of Lease
Rental Revenue
Largest lessees by lease rental revenue 5 34% 3 20%

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~


	Three Months Ended August 31,				Six Months Ended August 31,
	2021		2020		2021		2020
	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	30%	4	36%	5	34%	4	30%

The following table sets forth revenue attributable to individual countries representing at least 10% of Total revenue (including maintenance and other revenue) based on each lessee’s principal place of business for the periods indicated:


		Three Months Ended May 31,				Three Months Ended August 31,											Six Months Ended August 31,
			2021	2020					2021						2020				2021				2020
Country	Country			Revenue			% of Total Revenue			Revenue		% of Total Revenue		Country	Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue
India(1)	India(1)			$	20,202		12	%		$	0	0	%	India(1)	$	20,316	13	%	$	28,876	17	%	$	40,518	13	%	$	53,496	12	%
Mexico(2)	Mexico(2)			0			0	%		69,508		25	%	Mexico(2)	—		—	%	—		—	%	—		—	%	80,745		18	%
South Korea(3)				21,043			13	%		0		0	%
Chile														Chile	—		—	%	17,102		10	%	—		—	%	—		—	%

_______________

(1)For the three and six months ended ~~May~~August 31, 2021, total revenue attributable to India included maintenance revenue totaling ~~$654. Total~~$1,346 and $2,000. For the three and six months ended August 31, 2020, total revenue attributable to India ~~was less than 10% for~~included maintenance, gain on the ~~three months ended May 31, 2020.~~sale of flight equipment and other revenue totaling $10,171 and $10,402.

(2)For the ~~three~~six months ended ~~May~~August 31, 2020, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling ~~$67,265.~~$76,637. Total revenue attributable to Mexico was less than 10% for the three and six months ended ~~May 31, 2021.~~

~~(3)For the three months ended May~~August 31, 2021 ~~total revenue attributable to South Korea included maintenance revenue totaling $13,253. Total revenue attributable to South Korea was less than 10%~~and for the three months ended ~~May~~August 31, 2020.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Geographic concentration of net book value of flight equipment (including flight equipment held for lease and net investment in leases, or “net book value”) was as follows:


		May 31, 2021				February 28, 2021					August 31, 2021				February 28, 2021
Region	Region	Number of Aircraft		Net Book Value %		Number of Aircraft		Net Book Value %		Region	Number of Aircraft		Net Book Value %		Number of Aircraft		Net Book Value %
Asia and Pacific	Asia and Pacific	77		36	%	79		37	%	Asia and Pacific	74		33	%	79		37	%
Europe	Europe	92		28	%	92		27	%	Europe	96		29	%	92		27	%
Middle East and Africa	Middle East and Africa	10		4	%	11		4	%	Middle East and Africa	10		4	%	11		4	%
North America	North America	28		12	%	28		12	%	North America	33		15	%	28		12	%
South America	South America	26		13	%	26		13	%	South America	25		13	%	26		13	%
Off-lease	Off-lease	17	(1)	7	%	16	(2)	7	%	Off-lease	17	(1)	6	%	16	(2)	7	%
Total	Total	250		100	%	252		100	%	Total	255		100	%	252		100	%

_______________

(1)~~Consisted of 1 Airbus A320-200~~Of the 17 off-lease aircraft ~~1 Airbus A330-200~~at August 31, 2021, we have 2 narrow-body aircraft and 1 Boeing 737-800 aircraft, all of which were delivered to lessees in Europe during the second quarter of 2021, 1 Airbus A321-200 aircraft which was delivered to a lessee in North America during the second quarter of 2021, 4 Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, 1 Boeing 737-800 aircraft which is subject to an executed lease with a lessee in Europe, and 1 Airbus A320-200 aircraft, 3 ~~Airbus A330-200 aircraft, and 4 Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

(2)~~Consisted of 1 Airbus A320-200~~Of the 16 off-lease aircraft ~~1 Airbus A330-200 aircraft and 1 Boeing 737-800 aircraft, each of which was delivered to a lessee in Europe during the first half of~~at February 28, 2021, we have 3 Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, and 1 Boeing 737-800 aircraft which is subject to a lease commitment with a customer in Europe, and 1 Airbus A320-200 aircraft, 3 Airbus A330-200 aircraft, and 5 Boeing 737-800wide-body aircraft which we are currently marketing for lease or sale.

The following table sets forth the net book value of flight equipment (includes net book value of flight equipment held for lease and net investment in leases) attributable to individual countries representing at least 10% of net book value of flight equipment based on each lessee’s principal place of business as of:

May 31, 2021 February 28, 2021
Country Net Book
Value Net Book
Value % Number
of
Lessees Net Book
Value Net Book
Value % Number
of
Lessees
India $ 730,449 11% 3 $ 756,514 11% 3

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2021~~


	August 31, 2021				February 28, 2021
Country	Net Book Value		Net Book Value %	Number of Lessees	Net Book Value		Net Book Value %	Number of Lessees
India	$	704,238	11%	3	$	756,514	11%	3

At ~~May~~August 31, 2021 and February 28, 2021, the amounts of lease incentive liabilities recorded in maintenance payments on our Consolidated Balance Sheets were ~~$16,097~~$17,577 and $14,673, respectively.

Note 4. Net Investment in Leases

At ~~May~~August 31, 2021 and February 28, 2021, our net investment in leases consisted of 15 and 15 aircraft, respectively. The components of our net investment in leases at ~~May~~August 31, 2021 and February 28, 2021, were as follows:


		May 31, 2021		February 28, 2021			August 31, 2021		February 28, 2021
Lease receivable	Lease receivable	$	61,321	$	67,075	Lease receivable	$	55,232	$	67,075
Unguaranteed residual value of flight equipment	Unguaranteed residual value of flight equipment	131,006		129,165		Unguaranteed residual value of flight equipment	132,943		129,165
Net investment leases	Net investment leases	192,327		196,240		Net investment leases	188,175		196,240
Allowance for credit losses	Allowance for credit losses	(870)		(864)		Allowance for credit losses	(876)		(864)
Net investment in leases, net of allowance	Net investment in leases, net of allowance	$	191,457	$	195,376	Net investment in leases, net of allowance	$	187,299	$	195,376

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

The activity in the allowance for credit losses related to our net investment in leases for the ~~three~~six months ended ~~May~~August 31, 2021 is as follows:


	Amount
Balance at February 28, 2021	$	864
Provision for credit losses	612


Balance at ~~May~~August 31, 2021	$	~~870~~876

At ~~May~~August 31, 2021, future lease payments on net investment in leases are as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount		Year Ending February 28/29,	Amount
Remainder of 2021	Remainder of 2021	$	17,073	Remainder of 2021	$	10,145
2022	2022	13,470		2022	13,470
2023	2023	12,568		2023	12,568
2024	2024	6,989		2024	6,989
2025	2025	6,060		2025	6,060
Thereafter	Thereafter	15,414		Thereafter	15,414
Total lease payments to be received	Total lease payments to be received	71,574		Total lease payments to be received	64,646
Present value of lease payments - lease receivable	Present value of lease payments - lease receivable	(61,321)		Present value of lease payments - lease receivable	(55,232)
Difference between undiscounted lease payments and lease receivable	Difference between undiscounted lease payments and lease receivable	$	10,253	Difference between undiscounted lease payments and lease receivable	$	9,414

Note 5. Unconsolidated Equity Method Investments

We have a joint venture with Mizuho Leasing which has 9 aircraft with a net book value of ~~$308,640~~$305,251 at ~~May~~August 31, 2021.


	Amount
Investment in joint ventures at February 28, 2021	$	35,377

Earnings from joint venture, net of tax	~~287~~745
Investment in joint ventures at ~~May~~August 31, 2021	$	~~35,664~~36,122

1416

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

Note 6. Secured and Unsecured Debt Financings

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


		At May 31, 2021					At February 28, 2021			At August 31, 2021					At February 28, 2021
Debt Obligation	Debt Obligation	Outstanding Borrowings		Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings		Debt Obligation	Outstanding Borrowings		Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings
Secured Debt Financings:	Secured Debt Financings:								Secured Debt Financings:
ECA Financings	ECA Financings	$	27,163	1	3.49%	11/30/24	$	36,423	ECA Financings	$	25,316	1	3.49%	11/30/24	$	36,423
Bank Financings(1)	Bank Financings(1)	720,389		31	2.25% to 4.55%	06/17/23 to 03/06/25	738,353		Bank Financings(1)	702,557		31	2.19% to 4.55%	06/17/23 to 03/06/25	738,353
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(5,338)		—			(5,926)		Less: Debt issuance costs and discounts	(4,819)		—			(5,926)
Total secured debt financings, net of debt issuance costs and discounts	Total secured debt financings, net of debt issuance costs and discounts	742,214		32			768,850		Total secured debt financings, net of debt issuance costs and discounts	723,054		32			768,850

Unsecured Debt Financings:	Unsecured Debt Financings:								Unsecured Debt Financings:
Senior Notes due 2022	Senior Notes due 2022	500,000			5.50%	02/15/22	500,000		Senior Notes due 2022	—			5.50%	02/15/22	500,000
Senior 5.00% Notes due 2023	Senior 5.00% Notes due 2023	500,000			5.00%	04/01/23	500,000		Senior 5.00% Notes due 2023	500,000			5.00%	04/01/23	500,000
Senior 4.40% Notes due 2023	Senior 4.40% Notes due 2023	650,000			4.40%	09/25/23	650,000		Senior 4.40% Notes due 2023	650,000			4.40%	09/25/23	650,000
Senior Notes due 2024	Senior Notes due 2024	500,000			4.125%	05/01/24	500,000		Senior Notes due 2024	500,000			4.125%	05/01/24	500,000
Senior Notes due 2025	Senior Notes due 2025	650,000			5.25%	08/11/25	650,000		Senior Notes due 2025	650,000			5.25%	08/11/25	650,000
Senior Notes due 2026	Senior Notes due 2026	650,000			4.25%	06/15/26	650,000		Senior Notes due 2026	650,000			4.25%	06/15/26	650,000
Senior Notes due 2028	Senior Notes due 2028	750,000			2.85%	01/26/28	750,000		Senior Notes due 2028	750,000			2.85%	01/26/28	750,000
Unsecured Term Loans	Unsecured Term Loans	215,000			1.65%	02/27/22 to 02/27/24	215,000		Unsecured Term Loans	215,000			1.59%	02/27/22 to 02/27/24	215,000
Revolving Credit Facilities	Revolving Credit Facilities	0			1.575% to 2.00%	12/27/21 to 04/26/25	0		Revolving Credit Facilities	—			N/A	12/27/21 to 04/26/25	—
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(49,740)					(48,739)		Less: Debt issuance costs and discounts	(45,426)					(48,739)
Total unsecured debt financings, net of debt issuance costs and discounts	Total unsecured debt financings, net of debt issuance costs and discounts	4,365,260					4,366,261		Total unsecured debt financings, net of debt issuance costs and discounts	3,869,574					4,366,261

Total secured and unsecured debt financings, net of debt issuance costs and discounts	Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	5,107,474				$	5,135,111	Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	4,592,628				$	5,135,111

(1)The borrowings under these financings at ~~May~~August 31, 2021 have a weighted-average fixed rate of interest of ~~3.22%~~3.21%.

Unsecured Debt Financings:

Revolving Credit Facilities

On April 1, 2021, we entered into an amendment that split the $300,000 commitment of 1 of our unsecured revolving credit facilities into 2 tranches: $160,000 was allocated to Tranche A, which will mature on the facility’s previously stated maturity date of December 27, 2021, and $140,000 was allocated to Tranche B, which will mature on February 28, 2023. On May 24, 2021, the revolving credit facility was expanded to $330,000, with $155,000 and $175,000 of the commitment allocated to Tranche A and Tranche B, respectively.

On April 26, 2021, we entered into an amendment that increased the size of 1 of our revolving credit facilities from $800,000 to $1,000,000. The stated maturity date for $900,000 of the total commitment was extended to April 26, 2025, and the remaining $100,000 commitment will mature on the facility’s previously stated maturity date of June 27, 2022.

On April 26, 2021, we entered into an amendment that reduced the size of our revolving credit facility with Mizuho Bank Ltd., a related party, from $150,000 to $50,000 and extended its maturity date to July 30, 2022. Mizuho Bank, Ltd. is now a lender for our $1,000,000 revolving credit facility with a commitment in the amount of $100,000.

1517

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

~~On June 29, 2021, we elected to redeem the outstanding balance of our 5.5% Senior Notes due 2022, including accrued interest and a call premium on July 30, 2021.~~

As of ~~May~~August 31, 2021, we had 0no borrowings outstanding under our revolving credit facilities and had $1,380,000 available for borrowing.

Senior Notes due 2022

On July 30, 2021, we redeemed all of the $500,000 outstanding aggregate principal amount of our 5.5% Senior Notes due 2022, including $12,604 of accrued interest and a $13,314 call premium.

As of ~~May~~August 31, 2021, we were in compliance with all applicable covenants in our financings.

Note 7. Shareholders' Equity

On June 8, 2021, the Company issued ~~400,000 depositary~~400 shares ~~(the “Depositary Shares”), each representing a 0.001 interest in a share~~ of 5.250% Series A Cumulative Redeemable Perpetual Preference Shares, $0.01 par value, ~~$0.01~~with a liquidation preference of $1,000 per share ~~with a $1,000 liquidation preference per share (equivalent to $1,000 per Depositary Share)~~ (the “Preference Shares”). The Preference Shares are perpetual and have no maturity date.

Dividends on the Preference Shares, when, as and if declared by the Company’s board of directors ~~or any duly authorized committee thereof, will be~~are payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. Dividends will be payable: (i) from the date of original issue to, but excluding September 15, 2026 (the “original reset date”) at a fixed rate per annum of 5.250%; (ii) from, and including, the original reset date to, but excluding, September 15, 2031 (the “2031 reset date”), at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.410%; (iii) from, and including, the 2031 reset date to, but excluding, September 15, 2046 (the “2046 reset date”), during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.660%; and (iv) from, and including, the 2046 reset date, during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 5.410%. Dividends on the Preference Shares will accumulate daily and be cumulative from, and including, the date of original issuance of the Preference Shares.

The Company may not redeem the Preference Shares before the date that is 90-days prior to the original reset date. The Company may, at its option, redeem the Preference Shares, in whole or in part, from time to time during the period beginning 90-days prior to each reset date and ending on such reset date at a redemption price in cash equal to ~~$1,000,000~~$1,000 per Preference Share, ~~(equivalent to $1,000 per Depositary Share),~~ plus all accumulated and unpaid dividends (whether or not declared) to, but excluding, such redemption date. In addition, the Company may redeem the Preference Shares, in whole but not in part, at the Company’s option under certain other limited conditions.

Except with respect to certain amendments to the terms of the Preference Shares, in the case of certain dividend non-payments and as otherwise required by applicable law, the Preference Shares ~~will~~do not have voting rights.

~~The Company intends to use~~On August 19, 2021, the ~~net proceeds from~~Company’s Board of Directors approved a quarterly dividend for the ~~Offering for general corporate purposes,~~Company’s Preference Shares in the amount of $5,658, which ~~may include the repayment, refinancing or redemption of its existing indebtedness.~~

was paid on September 15, 2021.

Note 8. Related Party Transactions

On April 26, 2021, the Company entered into an amendment that reduced the size and extended the term of our unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 6 for additional information.

During the three and six months ended ~~May~~August 31, 2021, the Company incurred ~~$980~~$935 and $1,915, respectively, in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides ~~company-sponsored benefits,~~certain management and administrative services to the Company. The Company also entered into a parts management services ~~strategy consultancy,~~ and ~~general administrative support to~~supply agreement with an affiliate of Marubeni under which we purchased parts totaling $1,441 and $1,958 during the ~~Company.~~three and six months ended August 31, 2021, respectively.

1618

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

Note 9. Income Taxes

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received 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 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.

The sources of ~~loss~~income (loss) from continuing operations before income taxes and earnings of our unconsolidated equity method investments for the three and six months ended ~~May~~August 31, 2021 and 2020 were as follows:


		Three Months Ended May 31,			Three Months Ended August 31,						Six Months Ended August 31,
			2021			2020			2021		2020		2021		2020
U.S. operations	U.S. operations		$	3,711		$	4,046	U.S. operations	$	4,479	$	8,851	$	8,190	$	12,897
Non-U.S. operations	Non-U.S. operations		(22,043)			(31,867)		Non-U.S. operations	12,531		(210,018)		(9,512)		(241,885)
Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments			$	(18,332)		$	(27,821)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments								Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	$	17,010	$	(201,167)	$	(1,322)	$	(228,988)

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

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

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation and technical correction to the tax depreciation methods for qualified improvement property. The CARES Act did not materially impact the Company’s effective tax rate for the ~~three~~six months ended ~~May~~August 31, 2021.

The Company’s effective tax rates (“ETRs”) for the three and six months ended ~~May~~August 31, 2021 and 2020 were ~~45.2%~~45.1% and (6.5)%, and ~~2.0%~~47.4%, and (5.4)%, respectively. The movement in the ETR is primarily caused by changes in the mix of the Company’s pre-tax earnings/(losses) in its taxable and non-tax jurisdictions. The six months ended August 31, 2021 included income from the sale of unsecured claims related to the LATAM Bankruptcy, which was recorded in a low tax jurisdiction. Further, the ~~three-month period~~six months ended ~~May~~August 31, 2020 included discrete items related to stock compensation and the impact of the CARES act.

Note 10. Interest, Net

The following table shows the components of interest, net:


		Three Months Ended May 31,			Three Months Ended August 31,						Six Months Ended August 31,
			2021			2020			2021		2020		2021		2020
Interest on borrowings and other liabilities	Interest on borrowings and other liabilities		$	54,033		$	55,739	Interest on borrowings and other liabilities	$	51,807	$	52,638	$	106,135	$	108,483

Amortization of deferred financing fees and debt discount	Amortization of deferred financing fees and debt discount		4,191			3,311		Amortization of deferred financing fees and debt discount	4,193		3,402		8,384		6,713
Interest expense	Interest expense		58,224			59,050		Interest expense	56,000		56,040		114,519		115,196
Less: Interest income	Less: Interest income		(35)			(324)		Less: Interest income	(382)		(716)		(712)		(1,146)
Less: Capitalized interest	Less: Capitalized interest		(152)			0		Less: Capitalized interest	(205)		—		(357)		—

Interest, net	Interest, net		$	58,037		$	58,726	Interest, net	$	55,413	$	55,324	$	113,450	$	114,050

1719

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

Note 11. Commitments and Contingencies

Rent expense, primarily for the corporate offices and sales and marketing offices, was ~~$413~~$395 and ~~$411~~$808 for the three and six months ended ~~May~~August 31, 2021, and $390 and $801 for the three and six months ended August 31, 2020, respectively.

As of ~~May~~August 31, 2021, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut; Dublin, Ireland; and Singapore for future minimum lease payments as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount		Year Ending February 28/29,	Amount
Remainder of 2021	Remainder of 2021	$	1,446	Remainder of 2021	$	979
2022	2022	1,789		2022	1,780
2023	2023	1,721		2023	1,713
2024	2024	1,752		2024	1,744
2025	2025	1,783		2025	1,775
Thereafter	Thereafter	4,387		Thereafter	4,375
Total	Total	$	12,878	Total	$	12,366

At ~~May~~August 31, 2021, we had commitments to acquire 2324 aircraft for ~~$779,372.~~$801,841.

Commitments, including ~~$101,933~~$97,784 of remaining progress payments, contractual price escalations and other adjustments for these aircraft, at ~~May~~August 31, 2021, net of amounts already paid, are as follows:

Year Ending February 28/29, Amount
Remainder of 2021 $ 134,520
2022 360,828
2023 132,699
2024 39,404
2025 111,921
Thereafter 0
Total $ 779,372


Year Ending February 28/29,	Amount
Remainder of 2021	$	152,314
2022	177,850
2023	287,860
2024	71,667
2025	112,150
Thereafter	—

Total	$	801,841

Note 12. Other Assets

The following table describes the principal components of other assets on our Consolidated Balance Sheets as of:


		May 31, 2021		February 28, 2021			August 31, 2021		February 28, 2021
Deferred income tax asset	Deferred income tax asset	$	602	$	637	Deferred income tax asset	$	623	$	637
Lease incentives and lease premiums, net of amortization of $79,265 and $75,126, respectively		67,471		75,169
Lease incentives and lease premiums, net of amortization of $82,684 and $75,126, respectively						Lease incentives and lease premiums, net of amortization of $82,684 and $75,126, respectively	61,649		75,169
Flight equipment held for sale	Flight equipment held for sale	53,618		53,289		Flight equipment held for sale	47,263		53,289
Aircraft purchase deposits and Embraer E-2 progress payments	Aircraft purchase deposits and Embraer E-2 progress payments	41,279		52,092		Aircraft purchase deposits and Embraer E-2 progress payments	44,932		52,092

Right-of-use asset(1)	Right-of-use asset(1)	7,769		8,056		Right-of-use asset(1)	7,767		8,056
Deferred rent receivable	Deferred rent receivable	75,287		69,103		Deferred rent receivable	72,350		69,103
Other assets	Other assets	71,639		53,598		Other assets	91,991		53,598

Total other assets	Total other assets	$	317,665	$	311,944	Total other assets	$	326,575	$	311,944

______________

(1)Net of lease incentives and tenant allowances.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May~~August 31, 2021

Note 13. Accounts Payable, Accrued Expenses and Other Liabilities

The following table describes the principal components of accounts payable, accrued expenses and other liabilities recorded on our Consolidated Balance Sheets as of:


		May 31, 2021		February 28, 2021			August 31, 2021		February 28, 2021
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	30,186	$	43,088	Accounts payable, accrued expenses and other liabilities	$	47,271	$	43,088
Deferred income tax liability	Deferred income tax liability	76,939		75,124		Deferred income tax liability	79,349		75,124
Accrued interest payable	Accrued interest payable	52,904		43,676		Accrued interest payable	42,350		43,676
Lease liability	Lease liability	10,636		11,003		Lease liability	10,534		11,003
Lease discounts, net of amortization of $45,118 and $44,887, respectively		1,145		1,376
Lease discounts, net of amortization of $45,344 and $44,887, respectively						Lease discounts, net of amortization of $45,344 and $44,887, respectively	918		1,376

Total accounts payable, accrued expenses and other liabilities	Total accounts payable, accrued expenses and other liabilities	$	171,810	$	174,267	Total accounts payable, accrued expenses and other liabilities	$	180,422	$	174,267

Note 14. Subsequent Event

During the fiscal ~~second~~third quarter of 2021, the Company ~~entered into claims sale~~will record impairment charges, net of maintenance and ~~purchase agreements with~~other revenue, approximating $48,000 related to 3 aircraft as a ~~third party for the sale~~result of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered) (the “Bankruptcy Case”). Proceeds from the sales of these claims were received during the fiscal second quarter of 2021. The allowed amount of our unsecured claims has been approved by the Bankruptcy Court so that such claims are now approved claims in the Bankruptcy Case subject to customary conditions.a lessee default.

1921

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 February 28, 2021. 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 and Adjusted 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 Securities and Exchange Commission (the “SEC”) and previously disclosed under “Risk Factors” in Part I - Item 1A of Aircastle’s Annual Report on Form 10-K ~~fir~~for the year ended February 28, 2021. 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

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

The information on the Company’s Internet website is not part of, nor incorporated by reference, into this report, or any other report we file with, or furnish to, the SEC.

2022

OVERVIEW

Aircastle acquires, leases, and sells commercial jet aircraft to airlines throughout the world. As of ~~May~~August 31, 2021, we owned and managed on behalf of our joint ventures ~~259~~264 aircraft leased to 7776 lessees located in 4342 countries. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are generally subject to net leases whereby the lessee is responsible for maintaining the aircraft and paying operational, maintenance and insurance costs. However, in many cases we are obligated to pay a specified portion of maintenance or modification costs. As of ~~May~~August 31, 2021, the net book value of our flight equipment (including flight equipment held for lease and net investment in leases, or “net book value”) was ~~$6.58~~$6.76 billion compared to $6.69 billion at February 28, 2021. Our total revenues, net ~~loss~~income (loss) and Adjusted EBITDA for the three and six months ended August 31, 2021 were ~~$165.8~~$157.7 million and $323.5 million, $9.8 million and ~~$148.3 million for the three months ended May 31, 2021, and $282.5 million, $26.5~~$0.1 million, and ~~$268.2~~$197.5 million ~~for the three months ended May 31, 2020,~~and $345.8 million, respectively.

Historically, growth in commercial air traffic has been correlated with world economic activity. Prior to the COVID-19 pandemic, commercial air traffic growth expanded at a rate 1.3 to 2 times that of global GDP growth. This expansion of air travel has driven ~~the~~ growth in the world aircraft fleet; and there are approximately 24,000 commercial mainline passenger and freighter aircraft in the world fleet today. Aircraft leasing companies own approximately 52% of the world’s commercial jet aircraft. Under normal circumstances, we would expect the global fleet to continue expanding at a two to four percent average annual rate.

AsEven as the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection. As of ~~July 9,~~October 8, 2021, ~~we have agreed to $111.7 million in~~our total deferrals, net of ~~lease payments with 22 customers.~~repayments, were $101.8 million. These deferrals have been granted to twenty customers for an average of six to nine months of lease rentals and represent ~~19%~~18% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended ~~May~~August 31, 2021. Of the total deferrals, ~~$89.4~~$89.8 million is included in Accounts receivable or Other assets as of ~~May~~August 31, 2021, with the balance representing future lease payments. Approximately ~~76%~~77% of our total deferrals as of ~~July 9,~~October 8, 2021, have been agreed to as part of broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions. Some have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.

As of ~~July 9,~~October 8, 2021, six of our customers are subject to judicial insolvency proceedings or similar protection. These customers lease 22 aircraft, which represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and ~~11%~~10% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended May 31, 2021. LATAM, our second largest customer, is included in this group and represents 8% of our net book value of flight equipment and 7% of our Lease rental revenue as of and for the twelve months ended MayAugust 31, 2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done

on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.

signed restructured leases for all thirteen of the LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process. During the three months ended August 31, 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered). The allowed amount of our unsecured claims was approved by the Bankruptcy Court. Proceeds from the sales of these claims in the amount of $55.2 million were received during the three and six months ended August 31, 2021 and recognized in Other income (expense).

We believe that our long-standing business strategy of maintaining conservative leverage, limiting long-term financial commitments and focusing our portfolio on more liquid narrow-body aircraft will enable us to manage through the COVID-19 crisis. Our portfolio of primarily mid-life, narrow-body aircraft should remain attractive relative to new technology aircraft due to their lower capital costs in an environment of tight airline margins and low fuel prices.

~~In addition, we~~We believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of ~~July~~October 1, 2021, total liquidity of ~~$2.88~~$2.4 billion includes ~~$1.38~~$1.4 billion of undrawn credit facilities, ~~$1.02~~$0.3 billion of unrestricted cash, ~~$103 million~~$0.3 billion of contracted asset sales and ~~$375 million~~$0.4 billion of projected operating cash flows through ~~June~~September 30, 2022. As of ~~May~~August 31, 2021, we have commitments to acquire 2324 aircraft for ~~$779.4~~$801.8 million between 2021-2025.

We also believe our platform and personnel position us to effectively manage through the COVID-19 crisis and will enable us to take advantage of new investment opportunities when they arise. Our Company employs a team of experienced senior professionals with extensive industry and financial experience. Our leadership team members have an average of more than twenty years of relevant industry experience, including managing through prior downturns in the aviation industry, like the 2008 global financial crisis and the September 11, 2001 terror attacks.

Fiscal Year 2021 Lease Expirations and Lease Placements

At ~~May~~August 31, 2021, the Company had seventeen off-lease aircraft and 22seventeen aircraft with scheduled lease expirations in fiscal 2021. As of ~~July 9,~~October 8, 2021, of these 3934 aircraft, we have ~~eighteen~~eleven aircraft, which account for 7%4.2% of our net book value at ~~May~~August 31, 2021, still to be placed or sold.

Fiscal Years 2022-2025 Lease Expirations and Lease Placements

Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the fiscal years 2022-2025, representing the percentage of our net book value of flight equipment (including flight equipment held for lease and net investment in leases) at ~~May~~August 31, 2021, specified below:

•2022: 1918 aircraft, representing 6%5%;

•2023: 4544 aircraft, representing 13%;

•2024: 53 aircraft, representing ~~21%~~20%; and

•2025: 38 aircraft, representing ~~17%~~16%.

2224

Acquisitions and Sales

During the ~~three~~six months ended ~~May~~August 31, 2021, we acquired ~~two~~eight aircraft for ~~$63.9~~$353.3 million. As of ~~July 9,~~October 8, 2021, we acquired ~~one~~no additional aircraft. At ~~May~~August 31, 2021, we had commitments to acquire 2324 aircraft for ~~$779.4~~$801.8 million. Of this amount, ~~approximately $134.5~~$152.3 million represents commitments for the remainder of fiscal year 2021.

During the ~~three~~six months ended ~~May~~August 31, 2021, we sold ~~three~~four aircraft and other flight equipment for net proceeds of ~~$63.4~~$77.9 million, and recognized net gains on sales of ~~$9.0~~$10.5 million. As of ~~July 9,~~October 8, 2021, we have sold one additional aircraft.

The following table sets forth certain information with respect to the aircraft owned by us as of ~~May~~August 31, 2021:

AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)


Owned Aircraft	Owned Aircraft	As of May 31, 2021(1)			As of May 31, 2020(1)			Owned Aircraft	As of August 31, 2021(1)			As of August 31, 2020(1)
Net Book Value of Flight Equipment	Net Book Value of Flight Equipment	$	6,584		$	7,421		Net Book Value of Flight Equipment	$	6,761		$	7,121
Net Book Value of Unencumbered Flight Equipment	Net Book Value of Unencumbered Flight Equipment	$	5,400		$	5,679		Net Book Value of Unencumbered Flight Equipment	$	5,593		$	5,578
Number of Aircraft	Number of Aircraft	250			274			Number of Aircraft	255			273
Number of Unencumbered Aircraft	Number of Unencumbered Aircraft	218			234			Number of Unencumbered Aircraft	223			237
Number of Lessees	Number of Lessees	76			81			Number of Lessees	76			80
Number of Countries	Number of Countries	42			45			Number of Countries	42			45
Weighted Average Age (years)(2)	Weighted Average Age (years)(2)	10.8			10.2			Weighted Average Age (years)(2)	10.6			10.5
Weighted Average Remaining Lease Term (years)(2)	Weighted Average Remaining Lease Term (years)(2)	4.5			4.4			Weighted Average Remaining Lease Term (years)(2)	4.6			4.2

Weighted Average Fleet Utilization during the three months ended May 31, 2021 and 2020(3)		93.1		%	96.7		%

Portfolio Yield for the three months ended May 31, 2021 and 2020(4)		8.4		%	10.3		%
Weighted Average Fleet Utilization during the three months ended August 31, 2021 and 2020(3)								Weighted Average Fleet Utilization during the three months ended August 31, 2021 and 2020(3)	94.1		%	93.6		%
Weighted Average Fleet Utilization during the six months ended August 31, 2021 and 2020(3)								Weighted Average Fleet Utilization during the six months ended August 31, 2021 and 2020(3)	93.6		%	95.1		%
Portfolio Yield for the three months ended August 31, 2021 and 2020(4)								Portfolio Yield for the three months ended August 31, 2021 and 2020(4)	8.7		%	8.8		%
Portfolio Yield for the six months ended August 31, 2021 and 2020(4)								Portfolio Yield for the six months ended August 31, 2021 and 2020(4)	8.5		%	9.5		%

Managed Aircraft on behalf of Joint Venture	Managed Aircraft on behalf of Joint Venture							Managed Aircraft on behalf of Joint Venture
Net Book Value of Flight Equipment	Net Book Value of Flight Equipment	$	309		$	322		Net Book Value of Flight Equipment	$	305		$	319
Number of Aircraft	Number of Aircraft	9			9			Number of Aircraft	9			9

(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. The decrease from our historical utilization rate for the three months ended ~~May~~August 31, 2021 and 2020, was primarily due to off-lease aircraft as a result of early lease terminations and scheduled lease expirations.

(4)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. The calculation of portfolio yield includes our net investment in leases in the average net book value, and the interest income and cash collections from our net investment in lease rentals.

2325

PORTFOLIO DIVERSIFICATION


		Owned Aircraft as of May 31, 2021				Owned Aircraft as of May 31, 2020					Owned Aircraft as of August 31, 2021				Owned Aircraft as of August 31, 2020
		Number of Aircraft		% of Net Book Value(1)		Number of Aircraft		% of Net Book Value(1)			Number of Aircraft		% of Net Book Value(1)		Number of Aircraft		% of Net Book Value(1)
Aircraft Type	Aircraft Type									Aircraft Type
Passenger:	Passenger:									Passenger:
Narrow-body	Narrow-body	224		78	%	246		75	%	Narrow-body	229		79	%	245		78	%

Wide-body	Wide-body	22		18	%	24		21	%	Wide-body	22		17	%	24		18	%
Total Passenger	Total Passenger	246		96	%	270		96	%	Total Passenger	251		96	%	269		96	%
Freighter	Freighter	4		4	%	4		4	%	Freighter	4		4	%	4		4	%
Total	Total	250		100	%	274		100	%	Total	255		100	%	273		100	%

Manufacturer	Manufacturer									Manufacturer
Airbus	Airbus	166		64	%	186		63	%	Airbus	171		65	%	185		64	%
Boeing	Boeing	77		34	%	83		36	%	Boeing	77		33	%	83		34	%
Embraer	Embraer	7		2	%	5		1	%	Embraer	7		2	%	5		2	%
Total	Total	250		100	%	274		100	%	Total	255		100	%	273		100	%

Regional Diversification	Regional Diversification									Regional Diversification
Asia and Pacific	Asia and Pacific	77		36	%	89		38	%	Asia and Pacific	74		33	%	89		39	%
Europe	Europe	92		28	%	99		26	%	Europe	96		29	%	99		28	%
Middle East and Africa	Middle East and Africa	10		4	%	11		4	%	Middle East and Africa	10		4	%	11		4	%
North America	North America	28		12	%	28		10	%	North America	33		15	%	28		10	%
South America	South America	26		13	%	26		16	%	South America	25		13	%	26		13	%
Off-lease	Off-lease	17	(2)	7	%	21	(3)	6	%	Off-lease	17	(2)	6	%	20	(3)	6	%

Total	Total	250		100	%	274		100	%	Total	255		100	%	273		100	%

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

(2) ~~Consisted of one Airbus A320-200~~Of the seventeen off-lease aircraft ~~one Airbus A330-200~~at August 31, 2021, we have two narrow-body aircraft and one Boeing 737-800 aircraft, all of which were delivered to lessees in Europe during the second quarter of 2021, one Airbus A321-200 aircraft which was delivered to a lessee in North America during the second quarter of 2021, four Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, one Boeing 737-800 aircraft which is subject to an executed lease with a lessee in Europe, and one Airbus A320-200 aircraft, three ~~Airbus A330-200 aircraft, and four Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

(3) ~~Consisted of one Airbus A319-100~~Of the twenty off-lease aircraft ~~which was sold in the second quarter of~~at August 31, 2020, one Airbus A320-200 which was delivered to a lessee in North America in the second quarter of 2021, one Airbus A330-200 aircraft which was delivered to a lessee in Europe in the second quarter of 2020, one Airbus A330-200 aircraft which was delivered to a lessee in Europe in the second quarter of 2021, two Airbus A320-200 aircraft which are subject to confirmed letters of intent with a customer in South America, nine Airbus A320-200 and one Airbus A330-200 aircraft whichwe have ~~been consigned for sale, and~~ three ~~Airbus A330-200 aircraft and two Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

2426

Our largest customer represents approximately 8%7% of ~~the~~our net book value at~~May~~ August 31, 2021. The top ten customers for aircraft we owned at ~~May~~August 31, 2021, are as follows:


Customer	Customer	Percent of Net Book Value	Country	Number of Aircraft	Customer	Country	Percent of Net Book Value	Number of Aircraft
IndiGo	IndiGo	8.0%	India	12	IndiGo	India	7.5%	11
LATAM(1)	LATAM(1)	7.7%	Chile	13	LATAM(1)	Chile	7.4%	13
Iberia					Iberia	Spain	3.8%	15
easyJet	easyJet	4.1%	United Kingdom	22	easyJet	United Kingdom	3.8%	21
Iberia		3.9%	Spain	15
Air Canada	Air Canada	3.7%	Canada	5	Air Canada	Canada	3.6%	5
Lion Air	Lion Air	3.5%	Indonesia	7	Lion Air	Indonesia	3.4%	7
Frontier Airlines					Frontier Airlines	United States	3.0%	4
Aerolineas Argentinas	Aerolineas Argentinas	3.0%	Argentina	5	Aerolineas Argentinas	Argentina	2.9%	5
American Airlines	American Airlines	2.8%	United States	7	American Airlines	United States	2.7%	7
AirBridgeCargo(2)	AirBridgeCargo(2)	2.6%	Russia	2	AirBridgeCargo(2)	Russia	2.5%	2
Jeju Air		2.5%	South Korea	7

Total top ten customers	Total top ten customers	41.8%		95	Total top ten customers		40.6%	90
All other customers	All other customers	58.2%		155	All other customers		59.4%	165

Total all customers	Total all customers	100.0%		250	Total all customers		100.0%	255

(1) LATAM filed for Chapter 11 in May 2020. We have signed restructured leases for all thirteen of the LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process.

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

Finance

We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital over the last sixteen years. Since our inception in late 2004, we have raised ~~$2.1~~$2.09 billion in equity capital from private and public investors. We also raised ~~$18.9~~$18.92 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, secured and unsecured borrowings for aircraft, draws on our revolving credit facilities and proceeds from any future aircraft 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 — Secured Debt Financings” and “Liquidity and Capital Resources — Unsecured Debt Financings” below.

2527

RESULTS OF OPERATIONS

Comparison of the three months ended ~~May~~August 31, 2021 to the three months ended ~~May~~August 31, 2020:


		Three Months Ended May 31,					Three Months Ended August 31,
		2021		2020			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Revenues:	Revenues:					Revenues:
Lease rental revenue	Lease rental revenue	$	132,125	$	183,178	Lease rental revenue	$	137,589	$	150,895
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue	2,877		5,317		Direct financing and sales-type lease revenue	2,776		4,747
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	(5,325)		(7,347)		Amortization of lease premiums, discounts and incentives	(5,835)		(4,629)
Maintenance revenue	Maintenance revenue	26,477		76,630		Maintenance revenue	21,218		20,034
Total lease revenue	Total lease revenue	156,154		257,778		Total lease revenue	155,748		171,047
Gain on sale of flight equipment		9,021		12,078
Gain (loss) on sale of flight equipment						Gain (loss) on sale of flight equipment	1,502		(848)
Other revenue	Other revenue	635		12,670		Other revenue	402		1,123
Total revenues	Total revenues	165,810		282,526		Total revenues	157,652		171,322
Operating expenses:	Operating expenses:					Operating expenses:
Depreciation	Depreciation	82,391		89,212		Depreciation	83,391		86,749
Interest, net	Interest, net	58,037		58,726		Interest, net	55,413		55,324
Selling, general and administrative	Selling, general and administrative	15,589		47,451		Selling, general and administrative	15,996		13,555
Impairment of flight equipment	Impairment of flight equipment	20,583		77,298		Impairment of flight equipment	21,232		212,387
Maintenance and other costs	Maintenance and other costs	7,528		5,566		Maintenance and other costs	8,087		4,271
Total operating expenses	Total operating expenses	184,128		278,253		Total operating expenses	184,119		372,286

Other income (expense):	Other income (expense):					Other income (expense):
Loss on extinguishment of debt	Loss on extinguishment of debt	(24)		(8)		Loss on extinguishment of debt	(14,132)		(57)
Merger expenses	Merger expenses	—		(32,069)		Merger expenses	—		27
Other	Other	10		(17)		Other	57,609		(173)
Total other expense		(14)		(32,094)
Total other income (expense)						Total other income (expense)	43,477		(203)

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments		(18,332)		(27,821)
Income tax benefit		(8,292)		(551)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments						Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	17,010		(201,167)
Income tax provision						Income tax provision	7,665		13,020
Earnings of unconsolidated equity method investments, net of tax	Earnings of unconsolidated equity method investments, net of tax	287		731		Earnings of unconsolidated equity method investments, net of tax	458		674

Net loss		$	(9,753)	$	(26,539)
Net income (loss)						Net income (loss)	$	9,803	$	(213,513)

Revenues

Total revenues decreased ~~$116.7~~by $13.7 million for the three months ended ~~May~~August 31, 2021 as compared to the three months ended ~~May~~August 31, 2020.

Lease rental revenue decreased ~~$51.1~~by $13.3 million as a result of:

•a ~~$39.9~~$7.3 million decrease due to the sale of twelve aircraft since June 1, 2020;

•an $8.5 million decrease due to lease extensions, amendments transitions and other changes; and

•a $2.5 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy.

This decrease was partially offset by a $5.0 million increase in revenue, reflecting the impact of ten aircraft purchased since June 1, 2020.

Direct financing and sales-type lease revenue decreased $2.0 million for the three months ended August 31, 2021, as compared to the three months ended August 31, 2020, primarily attributable to the early lease terminations of one aircraft and the transfer of six aircraft to operating leases.

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


	Three Months Ended August 31,
	2021		2020
	(Dollars in thousands)
Amortization of lease premiums	$	(3,597)	$	(3,374)
Amortization of lease discounts	227		264
Amortization of lease incentives	(2,465)		(1,519)

Amortization of lease premiums, discounts and incentives	$	(5,835)	$	(4,629)

Maintenance revenue. For the three months ended August 31, 2021, we recorded $21.2 million of maintenance revenue, comprised primarily of $17.0 million related to the early lease terminations of three narrow-body aircraft. For the three months ended August 31, 2020, we recorded $20.0 million of maintenance revenue primarily related to the early lease terminations of three narrow-body aircraft.

Gain (loss) on sale of flight equipment increased $2.4 million to a gain of $1.5 million for the three months ended August 31, 2021 as compared to a loss of $0.8 million for the three months ended August 31, 2020. We sold one aircraft in each of the three month periods ended August 31, 2021 and 2020.

Operating expenses

Total operating expenses decreased by $188.2 million for the three months ended August 31, 2021, as compared to the three months ended August 31, 2020.

Depreciation expense decreased by $3.4 million for the three months ended August 31, 2021 as compared to the three months ended August 31, 2020, primarily attributable to a decrease of $5.6 million resulting from twelve aircraft sold since June 1, 2020 and lower depreciation on aircraft subject to impairment charges recorded during 2021. This was partially offset by higher depreciation of $2.4 million due to ten aircraft acquired since June 1, 2020.

Interest, net consisted of the following:


	Three Months Ended August 31,
	2021		2020
	(Dollars in thousands)
Interest on borrowings and other liabilities	$	51,807	$	52,638


Amortization of deferred financing fees and debt discount	4,193		3,402
Interest expense	56,000		56,040
Less: Interest income	(382)		(716)
Less: Capitalized interest	(205)		—

Interest, net	$	55,413	$	55,324

Selling, general and administrative expenses for the three months ended August 31, 2021 increased $2.4 million as compared to the three months ended August 31, 2020, due to higher personnel costs, partially offset by a decrease in the provision for credit losses related to the change in our allowance for credit losses.

Impairment of aircraft. During the three months ended August 31, 2021, we recorded impairment charges of $21.2 million, of which $18.0 million were transactional impairments, primarily related to two narrow-body aircraft resulting from early lease terminations. The Company recognized $16.1 million of maintenance revenue for these two aircraft. During the three months ended August 31, 2020, we recorded transactional impairment charges totaling $212.4 million, of which $169.3 million were transactional impairments related to four wide-body and two narrow-body aircraft. The Company recognized $9.3 million of maintenance revenue related to these six aircraft during the three months ended August 31, 2020. The impairment charges were attributable to early lease terminations, judicial insolvency proceedings, or as a result of our annual recoverability assessment.

Maintenance and other costs were $8.1 million for the three months ended August 31, 2021, an increase of $3.8 million as compared to the three months ended August 31, 2020, primarily attributable to higher costs for aircraft that returned due to lease terminations and are being transitioned to new lessees.

Other income (expense)

Total other income (expense) increased by $43.7 million for the three months ended August 31, 2021, as compared to the three months ended August 31, 2020. During the three months ended August 31, 2021, the Company recognized $55.2 million of proceeds from the sales of unsecured claims related to the LATAM Bankruptcy into Other income (expense) – see Note 1. This was partially offset by a $14.1 million loss on extinguishment of debt related to the early redemption in full of $500.0 million outstanding aggregate principal amount of our 5.5% Senior Notes due 2022.

Income tax provision

Our income tax provision for the three months ended August 31, 2021 and 2020 was $7.7 million and $13.0 million, respectively. The decrease in our income tax provision of $5.4 million was primarily attributable to changes in the mix of pre-tax book income/(loss) in Bermuda, Ireland and the United States. The three months ended August 31, 2021 included income from the sales of unsecured claims related to the LATAM Bankruptcy, which was recorded in a low tax jurisdiction. Further, the three months ended August 31, 2020 included discrete items related to stock compensation and the impact of the CARES Act.

RESULTS OF OPERATIONS

Comparison of the six months ended August 31, 2021 to the six months ended August 31, 2020:


	Six Months Ended August 31,
	2021		2020
	(Dollars in thousands)
Revenues:
Lease rental revenue	$	269,714	$	334,073
Direct financing and sales-type lease revenue	5,653		10,064
Amortization of lease premiums, discounts and incentives	(11,159)		(11,975)
Maintenance revenue	47,694		96,665
Total lease revenue	311,902		428,827
Gain on sale of flight equipment	10,524		11,230
Other revenue	1,036		13,793
Total revenues	323,462		453,850
Operating expenses:
Depreciation	165,782		175,961
Interest, net	113,450		114,050
Selling, general and administrative	31,585		61,006
Impairment of flight equipment	41,815		289,685
Maintenance and other costs	15,615		9,837
Total operating expenses	368,247		650,539

Other income (expense):
Loss on extinguishment of debt	(14,156)		(65)
Merger expenses	—		(32,042)
Other	57,619		(192)
Total other income (expense)	43,463		(32,299)

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments	(1,322)		(228,988)
Income tax (benefit) provision	(627)		12,469
Earnings of unconsolidated equity method investments, net of tax	745		1,405

Net income (loss)	$	50	$	(240,052)

Revenues

Total revenues decreased $130.4 million for the six months ended August 31, 2021 as compared to the six months ended August 31, 2020.

Lease rental revenue decreased by $64.4 million as a result of:

•a $46.2 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy;

•a ~~$7.0~~$14.3 million decrease due to the sale of ~~twelve~~thirteen aircraft since March 1, 2020; and

•a ~~$6.7 million~~$11.3 decrease due to lease extensions, amendments, transitions and other changes.

This decrease was partially offset by a ~~$2.5~~$7.5 million increase in revenue, reflecting the impact of ~~seven~~thirteen aircraft purchased since March 1, 2020.

Direct financing and sales-type lease revenue decreased ~~$2.4~~$4.4 million for the six months ended August 31, 2021, as compared to the six months ended August 31, 2020, primarily attributable to the early lease terminations of eight aircraft and the transition of ~~six~~seven aircraft to operating leases.

Amortization of lease premiums, discounts and lease incentives:


		Three Months Ended May 31,					Six Months Ended August 31,
		2021		2020			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Amortization of lease premiums	Amortization of lease premiums	$	(2,904)	$	(5,093)	Amortization of lease premiums	$	(6,500)	$	(8,466)
Amortization of lease discounts	Amortization of lease discounts	231		285		Amortization of lease discounts	457		548
Amortization of lease incentives	Amortization of lease incentives	(2,652)		(2,539)		Amortization of lease incentives	(5,116)		(4,057)

Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	$	(5,325)	$	(7,347)	Amortization of lease premiums, discounts and incentives	$	(11,159)	$	(11,975)

The decrease in amortization of lease premiums of ~~$2.2~~$2.0 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to the ~~three~~six months ended ~~May~~August 31, 2020 was primarily due to early lease terminations.

Maintenance revenue. For the ~~three~~six months ended ~~May~~August 31, 2021, we recorded ~~$26.5~~$47.7 million of maintenance revenue, comprised primarily of ~~$21.7~~$41.9 million related to the scheduled lease expirations of ~~two~~four narrow-body aircraft and the early lease ~~termination~~terminations of three narrow-body and one ~~narrow-body~~wide-body aircraft. In addition, we recorded ~~$4.8~~$5.4 million of maintenance revenue related to one narrow-body and one wide-body aircraft for which the customers are subject to judicial insolvency proceedings or similar protection. For the ~~three~~six months ended ~~May~~August 31, 2020, we recorded ~~$76.6~~$96.7 million of maintenance revenue, comprised primarily of ~~$38.8~~$59.4 million related to the early lease terminations of ~~ten~~thirteen narrow-body aircraft and ~~$36.8~~$36.3 million related to the scheduled lease expirations of three narrow-body and one wide-body aircraft.

Gain on sale of flight equipment decreased ~~$3.1~~$0.7 million to ~~$9.0~~$10.5 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to ~~gains of $12.1~~$11.2 million for the ~~three~~six months ended ~~May~~August 31, 2020. During the ~~three~~six months ended ~~May~~August 31, 2021, we sold ~~three~~four aircraft, as compared to the sale of ~~two~~three aircraft during the ~~three~~six months ended ~~May~~August 31, 2020. Gain on sale for the ~~three~~six months ended ~~May~~August 31, 2020 was primarily attributable to the receipt of insurance proceeds for one aircraft which was disposed.

Other revenue decreased ~~$12.0~~$12.8 million to ~~$0.6~~$1.0 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to ~~$12.7~~$13.8 million for the ~~three~~six months ended ~~May~~August 31, 2020. The ~~three~~six months ended ~~May~~August 31, 2020 included $12.8 million of security deposits recognized into revenue related to the early lease ~~termination~~terminations of seven narrow-body aircraft.

Operating expenses

Total operating expenses decreased ~~$94.1~~$282.3 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to the ~~three~~six months ended ~~May~~August 31, 2020.

Depreciation expense decreased ~~$6.8~~$10.2 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to the ~~three~~six months ended ~~May~~August 31, 2020. The decrease is primarily comprised of ~~$8.5~~$13.8 million resulting from ~~thirteen~~fourteen aircraft sold since March 1, 2020 and lower depreciation related to aircraft subject to aircraft impairments. This was partially offset by a ~~$1.4~~$4.2 million increase in depreciation due to ~~seven~~thirteen aircraft acquired since March 1, 2020.

Interest, net consisted of the following:


		Three Months Ended May 31,					Six Months Ended August 31,
		2021		2020			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Interest on borrowings and other liabilities	Interest on borrowings and other liabilities	$	54,033	$	55,739	Interest on borrowings and other liabilities	$	106,135	$	108,483

Amortization of deferred financing fees and debt discount	Amortization of deferred financing fees and debt discount	4,191		3,311		Amortization of deferred financing fees and debt discount	8,384		6,713
Interest expense	Interest expense	58,224		59,050		Interest expense	114,519		115,196
Less: Interest income	Less: Interest income	(35)		(324)		Less: Interest income	(712)		(1,146)
Less: Capitalized interest	Less: Capitalized interest	(152)		—		Less: Capitalized interest	(357)		—

Interest, net	Interest, net	$	58,037	$	58,726	Interest, net	$	113,450	$	114,050

Interest, net decreased ~~$0.7~~$0.6 million due to a lower weighted average ~~interest rates and~~ debt outstanding ~~partially offset by higher amortization~~and cost of ~~deferred financings fees.~~borrowing.

Selling, general and administrative expenses decreased ~~$31.9~~$29.4 million, primarily attributable to a decrease in share-based compensation expense of $28.0 million as a result of the completion of the Merger. The ~~three~~six months ended ~~May~~August 31, 2020 also included a provision for credit losses of ~~$3.3~~$4.5 million related to the change in our allowance for credit losses.

Impairment of aircraft. During the ~~three~~six months ended ~~May~~August 31, 2021, wethe Company recorded ~~transactional~~ impairment charges totaling $41.8 million, of ~~$20.6~~which $38.6 million were transactional impairments, primarily related to ~~two~~four narrow-body ~~aircraft.~~aircraft and resulted from three early lease terminations and one scheduled lease expiration. The Company recognized ~~$21.1~~$37.1 million of maintenance revenue for these ~~two~~four aircraft.

During the ~~three~~six months ended ~~May~~August 31, 2020, the Company recorded ~~transactional~~ impairment charges totaling $289.7 million, of ~~$77.3~~which $246.6 million were transactional impairments, primarily related to ~~ten~~twelve narrow-body ~~aircraft~~ and ~~one~~five wide-body aircraft.The Company recognized ~~$83.3~~$92.2 million of maintenance and security deposits into revenue for these ~~eleven~~seventeen aircraft. ~~See “Summary of Recoverability Assessment and Other Impairments” below for a detailed discussion of~~The impairment charges ~~related~~were attributable to ~~certain aircraft.~~early lease terminations, scheduled lease expirations, lessee defaults, judicial insolvency proceedings, or as a result of our annual recoverability assessment.

Maintenance and other costs were ~~$7.5~~$15.6 million for the ~~three~~six months ended ~~May~~August 31, 2021, an increase of ~~$2.0~~$5.8 million as compared to the ~~three~~six months ended ~~May~~August 31, 2020, primarily attributable to higher costs for ~~scheduled~~aircraft that returned due to lease terminations and ~~unscheduled transitions.~~are being transitioned to new lessees.

Other ~~expense~~income (expense)

Total other ~~expense~~income (expense) ~~decreased $32.1~~increased $75.8 million for the six months ended August 31, 2021, as compared to the six months ended August 31, 2020. During the three months ended ~~May~~August 31, 2021, the Company recognized $55.2 million of proceeds from the sales of unsecured claims related to the LATAM Bankruptcy into Other income (expense). This was partially offset by a $14.1 million loss on extinguishment of debt related to the early redemption in full of $500.0 million outstanding aggregate principal amount of our 5.5% Senior Notes due 2022. The six months ended August 31, 2020 included $32.1 million of legal and banking ~~expenses~~costs related to the Merger.

Income tax ~~benefit~~(benefit) provision

Our income tax ~~benefit~~(benefit) provision for the ~~three~~six months ended ~~May~~August 31, 2021 ~~and 2020~~ was ~~$8.3 million and~~a $0.6 million ~~respectively. Income taxes have been provided based on~~benefit as compared to a $12.5 million provision for the ~~applicable tax laws and rates of those countries in which operations are conducted and income is earned, primarily the United States and Ireland.~~six months ended August 31, 2020. The ~~increase~~decrease in our income tax ~~benefit~~provision of ~~$7.7~~$13.1 million was primarily attributable to changes in the mix of pre-tax book income/(loss) in Bermuda, Ireland and the United States. The six months ended August 31, 2021 included income from the sale of unsecured claims related to the LATAM Bankruptcy, which was recorded in a low tax jurisdiction. Further, the ~~three-month period~~six months ended ~~May~~August 31, 2020 included discrete items related to stock compensation and the impact of the CARES Act.

~~Summary of~~

Annual Recoverability Assessment ~~and Other Impairments~~

~~Impairment of Flight Equipment~~

During the three months ended May 31, 2021, the Company recorded transactional impairment charges totaling $20.6 million which related to two narrow-body aircraft and were the result of an early lease termination and a scheduled lease expiration. The Company recognized $21.1 million of maintenance revenue for these two aircraft.

During the three months ended May 31, 2020, the Company recorded transactional impairment charges totaling $77.3 million, which related to ten narrow-body and one wide-body aircraft. The Company recognized $83.3 million of maintenance and security deposits into revenue for these eleven aircraft. The impairment charges and revenue were recognized as a result of the early lease terminations of nine aircraft and scheduled lease expirations of two aircraft.

2934

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.

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 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, 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 of common and ~~preferred~~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 ~~three~~six months ended ~~May~~August 31, 2021, we met our liquidity and capital resource needs with ~~$70.0~~$179.7 million of cash flow from operations, ~~and $63.4~~$77.9 million of cash from the sale of aircraft and other flight ~~equipment.~~equipment, and $393.4 million in net proceeds from our preference share issuance.

As of ~~May~~August 31, 2021, the weighted-average maturity of our secured and unsecured debt financings was 3.5 years and we were in compliance with all applicable covenants.

We have agreed to defer lease payments with certain of our airline customers. As of ~~July 9,~~October 8, 2021, we have agreed to defer approximately ~~$111.7~~$101.8 million of lease payments with 22twenty airlines, which they are obligated to repay over time. If air traffic remains depressed over an extended period and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to ~~extend~~provide further deferrals to ~~some of our other~~certain customers or to extend the deferrals we have previously granted. We may ultimately be unable to collect all the amounts we have deferred. As of ~~May~~August 31, 2021, we hold ~~$78.3~~$77.1 million in security deposits, ~~$524.0~~$518.3 million in maintenance payments and ~~$147.9~~$143.3 million in letters of credit from our lessees.

We believe we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of ~~July~~October 1, 2021, total liquidity of ~~$2.88~~$2.4 billion includes ~~$1.38~~$1.4 billion of undrawn credit facilities, ~~$1.02~~$0.3 billion of unrestricted cash, ~~$103 million~~$0.3 billion of contracted asset sales and ~~$375 million~~$0.4 billion of projected operating cash flows through ~~June~~September 30, 2022. 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.

3035

Cash Flows

Three Months Ended May 31,
2021 2020
(Dollars in thousands)
Net cash flow provided by (used in) operating activities $ 69,990 $ (44,475)
Net cash flow provided by investing activities 4,549 17,848
Net cash flow (used in) provided by financing activities (9,534) 186,235


	Six Months Ended August 31,
	2021		2020
	(Dollars in thousands)
Net cash flow provided by operating activities	$	179,714	$	25,592
Net cash flow (used in) provided by investing activities	(282,348)		15,529
Net cash flow (used in) provided by financing activities	(137,769)		307,712

Operating Activities:

The COVID-19 pandemic has severely impacted the demand for air travel, ~~over the past fifteen months,~~ which has negatively impacted our customers’ financial performance. ~~The impact of COVID-19, together with~~Over the past eighteen months, lease concessions have been given to many of our ~~airline~~ customers in the form of lease rental deferrals ~~has resulted in slower~~or broader lease restructurings. Our cash ~~collections~~flow from operating activities for the six months ended August 31, 2021 includes the repayment of certain lease deferrals granted during the ~~three months ended May 31, 2021 and 2020.~~first half of 2020 at the inception of the pandemic. We expect that our collections will remain under pressure due to the impact of COVID-19.

Cash flow provided by ~~operations~~operating activities was ~~$70.0~~$179.7 million and $25.6 million for the ~~three~~six months ended ~~May~~August 31, 2021 ~~as compared to cash flow used in operations~~and 2020, respectively. The increase of ~~$44.5 million for the three months ended May 31, 2020. The net increase in cash flow provided by operations of $114.5~~$154.1 million was primarily ~~a result of:~~attributable to:

•~~a $98.7~~an $82.3 million decrease in accounts receivable and other assets, primarily due to ~~deferred~~an increase in customer collections, including the repayment of existing lease ~~rentals;~~deferrals as noted above, as well as a reduction in requests for new deferrals as compared to the six months ended August 31, 2020;

•a ~~$32.1~~$55.2 million increase in cash ~~as the three months ended May 31, 2020, included higher banking and legal costs~~ resulting from the ~~Merger; and~~sale of unsecured claims related to the LATAM Bankruptcy – see Note 1;

•a ~~$7.2~~$41.6 million increase as the ~~three~~six months ended ~~May~~August 31, 2020, included advance lease rentals recognized into revenue primarily due to lease ~~terminations.~~terminations; and

•a $32.1 million increase in cash as the six months ended August 31, 2020, included banking and legal costs resulting from the Merger.

These inflows were offset by a ~~$39.9~~$46.2 million decrease in cash due to lower lease rental revenue resulting from early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method.

Investing Activities:

Cash flow ~~provided by~~used in investing activities was ~~$4.5 million and $17.8~~$282.3 million for the ~~three~~six months ended ~~May~~August 31, 2021 ~~and 2020, respectively. The decrease in~~as compared to cash flow provided by investing activities of ~~$13.3~~$15.5 million ~~was primarily~~for the six months ended August 31, 2020. The net decrease of $297.9 million resulted from a ~~result of a $42.4~~$336.5 million increase in the acquisition and improvement of flight equipment.

These outflows were partially offset by a ~~$17.2~~$24.7 million increase in ~~aircraft purchase deposits and progress payments, net of returned deposits and an $11.5 million increase in aircraft~~ proceeds from the sale of flight equipment.

Financing Activities:

Cash flow used in financing activities was ~~$9.5~~$137.8 million for the ~~three~~six months ended ~~May~~August 31, 2021 as compared to cash flow provided by financing activities of ~~$186.2~~$307.7 million for the ~~three~~six months ended ~~May~~August 31, 2020. The net decrease of ~~$195.8~~$445.5 million was primarily ~~a result of a $253.3~~attributable to an $889.4 million decrease in proceeds from secured and unsecured debt financings, net of repayments.

These outflows were partially offset by a ~~$38.1~~$393.4 million increase in net proceeds from the issuance of preference shares, a $39.0 million decrease in maintenance and security deposits returned, net of deposits received, and a $24.0 million decrease in dividends ~~paid.~~paid on common shares as a result of the Merger.

Debt Obligations

For complete information on our debt obligations, please refer to Note 6 – “Secured and Unsecured Debt Financings” in the Notes to Unaudited Consolidated Financial Statements above.

Contractual Obligations

Our contractual obligations consist of principal and interest payments on debt financings, aircraft acquisitions and rent payments related to our office leases. Total contractual obligations decreased to ~~$6.71~~$6.13 billion at ~~May~~August 31, 2021 from

~~$6.82~~ $6.82 billion at February 28, ~~2021. The decrease in~~2021, primarily due to the redemption of all of the $500.0 million outstanding aggregate principal ~~and interest payments was roughly offset by an increase in purchase obligations from February 28, 2021 to May 31, 2021.~~

~~The following table presents~~amount of our ~~actual contractual obligations and their payment due dates as of May 31, 2021:~~

Payments Due by Period as of May 31, 2021
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 2022 - 2028 $ 4,200,000 $ 500,000 $ 1,650,000 $ 650,000 $ 1,400,000
DBJ Term Loan 215,000 60,000 155,000 — —
Revolving Credit Facilities — — — — —
ECA Financings 27,164 7,478 15,632 4,054 —
Bank Financings 720,388 72,478 288,189 359,721 —
Total principal payments 5,162,552 639,956 2,108,821 1,013,775 1,400,000
Interest payments on debt obligations(1)
752,956 215,849 322,658 157,887 56,562
Office leases(2)
12,878 1,938 3,451 3,551 3,938
Purchase obligations(3)
779,372 175,031 453,016 151,325 —
Total $ 6,707,758 $ 1,032,774 $ 2,887,946 $ 1,326,538 $ 1,460,500

~~(1)Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at May 31, 2021.~~

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

(3) At May 31, 2021, we had commitments to acquire 23 aircraft for $779.4 million. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments.Senior Notes Due 2022.

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 ~~three~~six months ended ~~May~~August 31, 2021 and 2020, we incurred a total of ~~$6.5~~$17.6 million and ~~$7.1~~$11.7 million, respectively, of capital expenditures (including lease incentives) related to the improvement of aircraft.

As of ~~May~~August 31, 2021, the weighted average age by net book value of our aircraft was approximately ~~10.8~~10.6 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 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. These maintenance reserves are 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.

Actual maintenance payments to us by lessees in the future may be less than projected as a result of several factors, ~~including defaults by~~such as in the ~~lessees.~~event of a 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 Annual Report on Form 10-K for the year ended February 28, 2021.

Off-Balance Sheet Arrangements

We entered into a joint venture arrangement in order to help expand our base of new business opportunities. This joint venture does not qualify for consolidated accounting treatment. The assets and liabilities of this entity are not included in our Consolidated Balance Sheets and we record our net investment under the equity method of accounting. See Note 5 – “Unconsolidated Equity Method Investments” in the Notes to Unaudited Consolidated Financial Statements above.

We hold a 25% equity interest in our joint venture with Mizuho Leasing and as of ~~May~~August 31, 2021, the net book value of its nine aircraft was ~~$308.6~~$305.3 million.

Foreign Currency Risk and Foreign Operations

At ~~May~~August 31, 2021, all our leases are 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 ~~three~~six months ended ~~May~~August 31, 2021, expenses, such as payroll and office costs, denominated in currencies other than the U.S. dollar aggregated approximately ~~$4.5~~$8.6 million in U.S. dollar equivalents and represented ~~28.9%~~27.2% 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 ~~three~~six months ended ~~May~~August 31, 2021 and 2020, we incurred insignificant net gains and losses on foreign currency transactions.

Management’s Use of EBITDA and Adjusted EBITDA

We define EBITDA as income (loss) from continuing operations before 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 (loss) to EBITDA and Adjusted EBITDA for the three and six months ended ~~May~~August 31, 2021 and 2020:


		Three Months Ended May 31,	Three Months Ended August 31,						Six Months Ended August 31,
				2021		2020			2021		2020		2021		2020
				(Dollars in thousands)
Net loss				$	(9,753)	$	(26,539)
Net income (loss)								Net income (loss)	$	9,803	$	(213,513)	$	50	$	(240,052)
Depreciation	Depreciation			82,391		89,212		Depreciation	83,391		86,749		165,782		175,961
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives			5,325		7,347		Amortization of lease premiums, discounts and incentives	5,835		4,629		11,159		11,975
Interest, net	Interest, net			58,037		58,726		Interest, net	55,413		55,324		113,450		114,050
Income tax benefit				(8,292)		(551)
Income tax provision (benefit)								Income tax provision (benefit)	7,665		13,020		(627)		12,469
EBITDA	EBITDA			127,708		128,195		EBITDA	162,107		(53,791)		289,814		74,403
Adjustments:	Adjustments:							Adjustments:
Impairment of flight equipment	Impairment of flight equipment			20,583		77,298		Impairment of flight equipment	21,232		212,387		41,815		289,685

Loss on extinguishment of debt	Loss on extinguishment of debt			24		8		Loss on extinguishment of debt	14,132		57		14,156		65
Non-cash share-based payment expense	Non-cash share-based payment expense			—		28,049		Non-cash share-based payment expense	—		—		—		28,049
Merger related expenses(1)	Merger related expenses(1)			—		34,637		Merger related expenses(1)	—		(27)		—		34,601
Loss on mark-to-market of interest rate derivative contracts	Loss on mark-to-market of interest rate derivative contracts			—		17		Loss on mark-to-market of interest rate derivative contracts	—		2		—		19

Contract termination expense								Contract termination expense	—		172		—		172

Adjusted EBITDA	Adjusted EBITDA			$	148,315	$	268,204	Adjusted EBITDA	$	197,471	$	158,800	$	345,785	$	426,994

______________

(1) Included $32.1 million in Other expense and $2.6 million in Selling, general and administrative expenses.

Limitations of EBITDA and Adjusted EBITDA

An investor or potential investor may find EBITDA and Adjusted EBITDA 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 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 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 (benefit) provision generally represents charges (gains), which may significantly affect our financial results;

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

•adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes which may not be comparable to similarly titled measures used by other companies.

EBITDA and Adjusted EBITDA 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 to not rely on any single financial measure to evaluate our business. In addition, because EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, EBITDA and Adjusted EBITDA 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 and~~ 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. 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. If LIBOR is no longer available or in certain other circumstances as described in the borrowing agreements, the applicable borrowing agreements provide a mechanism for determining an alternative rate of interest. There is no assurance that any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, LIBOR.

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 interest rates on our leases subject to variable rental rates would increase/decrease the minimum contracted rentals in our portfolio as of May 31, 2021 by $0.5 million and $0.1 million, respectively, over the next twelve months. As of ~~May~~August 31, 2021, a hypothetical 100-basis point increase/decrease in interest rates on our variable rate borrowings would result in an interest expense increase/decrease of ~~$3.9~~$3.6 million and ~~$0.9~~$0.5 million, respectively, net of amounts received from our interest rate derivatives, over the next twelve months. ~~We have an~~Our interest rate cap ~~to hedge~~that hedged a portion of our floating rate interest exposure ~~which is set at 2% and has a current notional balance of $220.0 million and reduces over time to $215.0 million. The cap matures~~matured in September 2021.

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 ~~May~~August 31, 2021. 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 ~~May~~August 31, 2021.

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 ~~May~~August 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to COVID-19. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls to minimize this impact on their design and operating effectiveness.

PART II. — OTHER INFORMATION

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 for the year ended February 28, 2021, as filed with the SEC.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~Environmental, Social and Governance

We believe that our commitment to identifying and implementing positive environmental and social related business practices strengthens our Company, and better serves our customers, our communities and the broader environment within which we conduct our business.

3740

Our Commitment to Environmental Sustainability

Many nations have set ambitious targets towards the ultimate the goal of curbing the adverse effects of climate change. These targets are most often created by way of political or economic unions and can be accompanied by legally binding international treaties. Global aviation has been identified as an essential player in the advancement of these environmental goals, and our Company’s long-term strategic plan takes these rapidly developing initiatives into consideration when we evaluate the technology behind the aircraft we target for investment.

The Company believes the operations of our customers could be affected by the potential impacts of both climate change and sustainability targets and initiatives aimed at curbing its effect. For example, the European Union (the “E.U.”) adopted a proposal that sets an intermediate target to reduce its greenhouse gas emissions by 55% by the year 2030. In July of 2021, the E.U. also drafted a proposal that would impose a minimum tax on energy products supplied as aircraft fuel for flights within the E.U. In another example, Sweden proposed takeoff and landing fees on certain aircraft types to encourage more energy-efficiency. For these ambitious measures to reach implementation, a wide political and administrative consensus would likely need to be achieved. The Company is committed to monitoring such developments over the long term.

Due to the inherent complexities of jet aircraft, decarbonizing aviation requires more radical new technology as compared to other modes of transportation. Sustainable aviation fuels (“SAFs”) provide the most readily available means for airline operators to reduce their carbon emissions while using existing technology. Several of the Company’s customers are current users or developers of SAFs, and the Company encourages such efforts.

Our People

As of August 31, 2021, we had 109 employees. None of our employees are covered by a collective bargaining agreement, and we believe that we maintain excellent employee relations.

In addition, we believe that our commitment to our employees is critical to our continued success, leading to high employee satisfaction and low employee turnover. To facilitate talent attraction and retention, we strive to have a diverse, inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by strong compensation, benefits and health and wellness programs, and by programs that build connections between our employees and their communities. Each year, we review employee career development and succession planning internally and with our Compensation Committee.

As the COVID-19 pandemic continues to be a focus of concern, the physical and mental health and safety of our employees, customers and business partners remain the highest priority for us, and we continue to maintain comprehensive protective measures. Since March of 2020, we have successfully operated with most of our workforce working remotely. We expect to start returning to our offices in the near term, although we will continue to monitor trends and local government regulations and guidelines, and may adjust our return to office plans accordingly to ensure the health and safety of our employees.

Our Culture & Governance

Our Company was formed in 2004 on the values of integrity, common decency and respect for others. These values continue to this day and shared by our employees. In addition, these values are embodied in our Code of Business Conduct and Ethics, which has been adopted by the Board of Directors of the Company to serve as a statement of principles to guide our decision-making and reinforce our commitment to these values in all aspects of our business.

The Company also maintains independent third-party whistle-blower platforms for anonymous reporting of fraud or ethics violations. Our best-in-class cyber security initiatives protect us through malware detection, cloud penetration testing, threat hunting and incident responsiveness.

We believe that our commitment to our Company, our employees and the communities in which we operate has led to high employee satisfaction and low employee turnover, as discussed above, and our commitment to our customers and business partners has resulted in high customer satisfaction, as evidenced by long-time relationships with our customers and new/repeat transactions with our business partners.

ITEM 6. EXHIBITS


Exhibit No.						Description of Exhibit

2.1						Agreement and Plan of Merger, dated as of November 5, 2019, by and among Aircastle Limited, MM Air Limited and MM Air Merger Sub Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 7, 2019). **

3.1						Amended and Restated Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 27, 2020).

3.2						Amended and Restated Bye-laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 27, 2020).

3.3						Certificate of Designations, dated June 8, 2021 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 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 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 December 6, 2013).

4.3						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).

~~4.4~~						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).

~~4.5~~4.4						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).

~~4.6~~4.5						Sixth Supplemental Indenture, dated as of September 25, 2018, 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 September 25, 2018).

~~4.7~~4.6						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).

~~4.8~~4.7						Indenture, dated as of 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).

~~4.9~~4.8						Indenture, dated as of January 26, 2021, by and between Aircastle 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).

~~4.10~~4.9						Deposit Agreement, dated June 8, 2021, among Aircastle Limited, Computershare 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).

10.1						Amendment No. 9 to Purchase Agreement COM0270-15, dated as of August 28, 2020, by and between Aircastle Holding Corporation and Embraer S.A. * ØØ

10.2						Amendment No. 10 to Purchase Agreement COM0270-15, dated as of September 18, 2020, by and between Aircastle Holding Corporation and Embraer S.A. * ØØ

10.3						Notice and Consent COM0439-19, dated as of September 18, 2020, between Aircastle Holding Corporation, Embraer S.A. and Yaborã Indústria Aeronáutics S.A. * ** ØØ

10.4						Amendment No. 11 to Purchase Agreement COM0270-15, dated as of December 4, 2020, by and between Aircastle Holding Corporation and Yaborã Indústria Aeronáutics S.A. * ØØ

10.5						Amendment No. 6 to Letter Agreement COM0270-15, dated as of December 4, 2020, by and between Aircastle Holding Corporation and Yaborã Indústria Aeronáutics S.A. * ØØ

10.6						Amendment No. 12 to Purchase Agreement COM0270-15, dated as of June 2, 2021, between Aircastle Holding Corporation, Embraer S.A. and Yaborã Indústria Aeronáutics S.A. * ØØ

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


Exhibit No.						Description of Exhibit

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

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. *

101						The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~May~~August 31, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of ~~May~~August 31, 2021 and February 28, 2021; (ii) Consolidated Statements of Loss and Comprehensive Loss for the three and six months ended ~~May~~August 31, 2021 and 2020; (iii) Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~May~~August 31, 2021 and 2020; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three and six months ended ~~May~~August 31, 2021 and 2020; and (v) Notes to Unaudited Consolidated Financial Statements.*


~~Exhibit No.~~						~~Description of Exhibit~~

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

* Filed herewith.

** Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request.

ØØ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.

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: ~~July 14,~~October 13, 2021


			AIRCASTLE LIMITED
			(Registrant)
			By:			/s/ ~~James C. Connelly~~Dane Silverman
						~~James C. Connelly~~Dane Silverman
						Chief Accounting Officer and Authorized Officer

4044