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 31,~~November 30, 2023


☐			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, a 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 ☑

As of ~~July 7, 2023,~~January 5, 2024, there were ~~14,048~~15,564 outstanding shares of the registrant’s common shares, par value $0.01 per share.

Aircastle Limited and Subsidiaries

Form 10-Q

Table of Contents


		Page No.
	PART I. – FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of ~~May 31,~~November 30, 2023 and February 28, 2023	3
	Consolidated Statements of Income and Comprehensive Income for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022	4
	Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022	5
	Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended ~~May 31~~November 3 0 , ~~202~~3 2023 and ~~202~~22022	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1922
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3238
Item 4.	Controls and Procedures	3238
	PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	3339
Item 1A.	Risk Factors	3339
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3339
Item 3.	Defaults Upon Senior Securities	3339
Item 4.	Mine Safety Disclosures	3339
Item 5.	Other Information	3339
Item 6.	Exhibits	3440
SIGNATURE		3641

PART I. — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)


		May 31, 2023		February 28, 2023			November 30, 2023		February 28, 2023
		(Unaudited)					(Unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	136,156	$	231,861	Cash and cash equivalents	$	105,832	$	231,861

Accounts receivable	Accounts receivable	11,635		12,855		Accounts receivable	13,012		12,855

Flight equipment held for lease, net	Flight equipment held for lease, net	6,595,518		6,567,606		Flight equipment held for lease, net	6,588,340		6,567,606
Net investment in leases, net	Net investment in leases, net	266,630		67,694		Net investment in leases, net	248,842		67,694
Unconsolidated equity method investment	Unconsolidated equity method investment	40,911		40,505		Unconsolidated equity method investment	42,292		40,505
Other assets	Other assets	305,979		346,330		Other assets	300,204		346,330

Total assets	Total assets	$	7,356,829	$	7,266,851	Total assets	$	7,298,522	$	7,266,851

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY					LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Borrowings from secured financings, net	Borrowings from secured financings, net	$	933,005	$	752,298	Borrowings from secured financings, net	$	894,913	$	752,298
Borrowings from unsecured financings, net	Borrowings from unsecured financings, net	3,720,956		3,842,454		Borrowings from unsecured financings, net	3,455,505		3,842,454
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	198,941		206,473		Accounts payable, accrued expenses and other liabilities	219,547		206,473
Lease rentals received in advance	Lease rentals received in advance	48,952		66,816		Lease rentals received in advance	56,710		66,816

Security deposits	Security deposits	63,735		61,734		Security deposits	64,606		61,734
Maintenance payments	Maintenance payments	497,012		465,618		Maintenance payments	492,350		465,618

Total liabilities	Total liabilities	5,462,601		5,395,393		Total liabilities	5,183,631		5,395,393

Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies

SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at May 31, 2023 and February 28, 2023		—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at May 31, 2023 and February 28, 2023		—		—
Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at November 30, 2023 and February 28, 2023						Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at November 30, 2023 and February 28, 2023	—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 15,564 and 14,048 shares issued and outstanding at November 30, 2023 and February 28, 2023, respectively						Common shares, $0.01 par value, 250,000,000 shares authorized, 15,564 and 14,048 shares issued and outstanding at November 30, 2023 and February 28, 2023, respectively	—		—
Additional paid-in capital	Additional paid-in capital	1,878,774		1,878,774		Additional paid-in capital	2,078,774		1,878,774
Retained earnings (accumulated deficit)	Retained earnings (accumulated deficit)	15,454		(7,316)		Retained earnings (accumulated deficit)	36,117		(7,316)

Total shareholders’ equity	Total shareholders’ equity	1,894,228		1,871,458		Total shareholders’ equity	2,114,891		1,871,458

Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,356,829	$	7,266,851	Total liabilities and shareholders’ equity	$	7,298,522	$	7,266,851

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

Aircastle Limited and Subsidiaries

Consolidated Statements of Income and Comprehensive Income

(Dollars in thousands)

(Unaudited)


		Three Months Ended May 31,				Three Months Ended November 30,				Nine Months Ended November 30,
		2023		2022				2023		2022		2023		2022
Revenues:	Revenues:						Revenues:
Lease rental revenue	Lease rental revenue	$	146,735	$	144,144		Lease rental revenue	$	156,820	$	142,336	$	453,906	$	432,988
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue	1,073		2,598			Direct financing and sales-type lease revenue	4,835		2,087		10,993		6,950
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	(7,207)		(5,388)			Amortization of lease premiums, discounts and incentives	(2,641)		(3,763)		(16,972)		(14,669)
Maintenance revenue	Maintenance revenue	34,520		27,099			Maintenance revenue	58,657		56,574		108,223		103,787
Total lease revenue	Total lease revenue	175,121		168,453			Total lease revenue	217,671		197,234		556,150		529,056
Gain on sale of flight equipment		42,594		3,687
Gain on sale or disposition of flight equipment							Gain on sale or disposition of flight equipment	20,193		53,473		67,240		67,209
Other revenue	Other revenue	776		3,424			Other revenue	882		6,809		1,803		10,394
Total revenues	Total revenues	218,491		175,564			Total revenues	238,746		257,516		625,193		606,659

Operating expenses:	Operating expenses:						Operating expenses:
Depreciation	Depreciation	88,789		81,318			Depreciation	86,647		82,872		261,764		246,296
Interest, net	Interest, net	56,891		50,294			Interest, net	57,037		50,757		170,963		151,638
Selling, general and administrative	Selling, general and administrative	20,835		19,916			Selling, general and administrative	18,500		17,999		58,217		55,358
Provision for credit losses	Provision for credit losses	6,959		580			Provision for credit losses	5,280		854		11,405		1,543
Impairment of flight equipment	Impairment of flight equipment	1,097		4,428			Impairment of flight equipment	34,959		29,880		37,156		67,979
Maintenance and other costs	Maintenance and other costs	8,533		8,065			Maintenance and other costs	7,107		3,783		24,494		17,010
Total operating expenses	Total operating expenses	183,104		164,601			Total operating expenses	209,530		186,145		563,999		539,824

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

Other	Other	1,337		—			Other	1,529		1,201		6,238		3,273
Total other income (expense)		1,337		(463)
Total other income							Total other income	1,529		1,201		6,238		2,810

Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	36,724		10,500			Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	30,745		72,572		67,432		69,645
Income tax provision	Income tax provision	14,360		3,329			Income tax provision	6,025		23,071		15,286		22,332
Earnings of unconsolidated equity method investment, net of tax	Earnings of unconsolidated equity method investment, net of tax	406		511			Earnings of unconsolidated equity method investment, net of tax	925		603		1,787		1,780

Net income	Net income	$	22,770	$	7,682		Net income	$	25,645	$	50,104	$	53,933	$	49,093

Preference share dividends							Preference share dividends	—		—		(10,500)		(10,500)

Net income available to common shareholders	Net income available to common shareholders	$	22,770	$	7,682		Net income available to common shareholders	$	25,645	$	50,104	$	43,433	$	38,593

Total comprehensive income available to common shareholders	Total comprehensive income available to common shareholders	$	22,770	$	7,682		Total comprehensive income available to common shareholders	$	25,645	$	50,104	$	43,433	$	38,593

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,					Nine Months Ended November 30,
		2023		2022			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	22,770	$	7,682	Net income	$	53,933	$	49,093
Adjustments to reconcile net income to net cash and restricted cash provided by operating activities:
Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:						Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:
Depreciation	Depreciation	88,789		81,318		Depreciation	261,764		246,296
Amortization of deferred financing costs	Amortization of deferred financing costs	4,031		3,597		Amortization of deferred financing costs	12,611		10,612
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	7,207		5,388		Amortization of lease premiums, discounts and incentives	16,972		14,669
Deferred income taxes	Deferred income taxes	3,812		2,865		Deferred income taxes	11,082		13,227

Collections on net investment in leases	Collections on net investment in leases	927		2,282		Collections on net investment in leases	1,565		5,444
Security deposits and maintenance payments included in earnings	Security deposits and maintenance payments included in earnings	(3,203)		9,076		Security deposits and maintenance payments included in earnings	(37,654)		(35,437)
Gain on sale of flight equipment		(42,594)		(3,687)
Gain on sale or disposition of flight equipment						Gain on sale or disposition of flight equipment	(67,240)		(67,209)
Loss on extinguishment of debt	Loss on extinguishment of debt	—		463		Loss on extinguishment of debt	—		463
Impairment of flight equipment	Impairment of flight equipment	1,097		4,428		Impairment of flight equipment	37,156		67,979
Provision for credit losses	Provision for credit losses	6,959		580		Provision for credit losses	11,405		1,543
Other	Other	(397)		(508)		Other	(1,769)		(1,778)
Changes in certain assets and liabilities:	Changes in certain assets and liabilities:					Changes in certain assets and liabilities:
Accounts receivable	Accounts receivable	3,209		4,274		Accounts receivable	504		11,368
Other assets	Other assets	(3,607)		(5,008)		Other assets	(16,164)		2,223
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	2,272		(4,305)		Accounts payable, accrued expenses and other liabilities	8,351		8,947
Lease rentals received in advance	Lease rentals received in advance	9,178		1,848		Lease rentals received in advance	16,551		16,091

Net cash and restricted cash provided by operating activities		100,450		110,293
Net cash and cash equivalents provided by operating activities						Net cash and cash equivalents provided by operating activities	309,067		343,531
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	(322,151)		(63,724)		Acquisition and improvement of flight equipment	(669,597)		(688,722)
Proceeds from sale of flight equipment	Proceeds from sale of flight equipment	53,782		58,233		Proceeds from sale of flight equipment	198,816		334,164

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	4,947		(8,716)		Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits	3,126		7,765

Other	Other	(2,900)		—		Other	(5,548)		1,500

Net cash and restricted cash used in investing activities		(266,322)		(14,207)
Net cash and cash equivalents used in investing activities						Net cash and cash equivalents used in investing activities	(473,203)		(345,293)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:

Proceeds from issuance of common shares						Proceeds from issuance of common shares	200,000		—

Proceeds from secured and unsecured debt financings	Proceeds from secured and unsecured debt financings	624,911		—		Proceeds from secured and unsecured debt financings	1,383,709		139,800
Repayments of secured and unsecured debt financings	Repayments of secured and unsecured debt financings	(569,206)		(39,923)		Repayments of secured and unsecured debt financings	(1,632,983)		(163,543)
Debt extinguishment costs	Debt extinguishment costs	—		(291)		Debt extinguishment costs	—		(291)
Deferred financing costs	Deferred financing costs	(527)		(1,860)		Deferred financing costs	(7,673)		(8,674)

Security deposits and maintenance payments received	Security deposits and maintenance payments received	31,620		27,911		Security deposits and maintenance payments received	130,068		110,675
Security deposits and maintenance payments returned	Security deposits and maintenance payments returned	(6,131)		(425)		Security deposits and maintenance payments returned	(14,014)		(17,679)

Dividends paid	Dividends paid	(10,500)		(10,500)		Dividends paid	(21,000)		(21,000)

Net cash and restricted cash provided by (used in) financing activities		70,167		(25,088)
Net (decrease) increase in cash and restricted cash:		(95,705)		70,998
Cash and restricted cash at beginning of period		231,861		170,682
Net cash and cash equivalents provided by financing activities						Net cash and cash equivalents provided by financing activities	38,107		39,288
Net (decrease) increase in cash and cash equivalents:						Net (decrease) increase in cash and cash equivalents:	(126,029)		37,526
Cash and cash equivalents at beginning of period						Cash and cash equivalents at beginning of period	231,861		170,682

Cash and restricted cash at end of period		$	136,156	$	241,680
Cash and cash equivalents at end of period						Cash and cash equivalents at end of period	$	105,832	$	208,208

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,					Nine Months Ended November 30,
		2023		2022			2023		2022
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents		$	136,156	$	241,030
Restricted cash and cash equivalents		—		650

Unrestricted and restricted cash and cash equivalents		$	136,156	$	241,680

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	Cash paid for interest, net of amounts capitalized	$	54,053	$	44,275	Cash paid for interest, net of amounts capitalized	$	158,730	$	138,999
Cash paid for income taxes	Cash paid for income taxes	$	(31)	$	(576)	Cash paid for income taxes	$	4,142	$	4,602
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	$	12,927	$	339	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	$	13,414	$	4,005

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	$	8,177	$	3,800	Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	$	54,335	$	18,672
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	$	182,818	$	17,734	Transfers from flight equipment held for lease to Net investment in leases and Other assets	$	184,236	$	1,695

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

Aircastle Limited and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Dollars in thousands, except share amounts)

(Unaudited)


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

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

Balance, August 31, 2023														Balance, August 31, 2023	15,564	$	—	400	$	—	$	2,078,774	$	10,472	$	2,089,246
Net income														Net income	—	—		—	—		—		25,645		25,645

Balance, November 30, 2023														Balance, November 30, 2023	15,564	$	—	400	$	—	$	2,078,774	$	36,117	$	2,114,891

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

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

Balance, August 31, 2022														Balance, August 31, 2022	14,048	$	—	400	$	—	$	1,878,774	$	(60,586)	$	1,818,188
Net income														Net income	—	—		—	—		—		50,104		50,104
Balance, November 30, 2022														Balance, November 30, 2022	14,048	$	—	400	$	—	$	1,878,774	$	(10,482)	$	1,868,292

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 31,~~November 30, 2023

Note 1. Summary of Significant Accounting Policies

Organization

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 consists of acquiring, leasing, managing and selling commercial jet aircraft.

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

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

Basis of Presentation and Principles of Consolidation

The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

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, 2023.

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.

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

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of ~~May 31,~~November 30, 2023, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

Risk and Uncertainties

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

Use of Estimates

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

Recent Accounting Pronouncements

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

Effective March 1, 2023, we adopted ASC 848, which has not and is not expected to have a material impact on our consolidated financial statements. We have one aircraft lease and certain debt financings for which the associated lease rental revenue and interest expense are based on LIBOR. The ICE Benchmark Administration Limited, LIBOR’s administrator, has ceased publishing ~~certain~~all LIBOR settings, ~~and is expected to stop publishing~~including the Overnight, 1-month, 3-month, 6-month, and 12-month USD LIBOR U.S. dollar ~~settings in 2023. In anticipation of that cessation,~~settings. Effective March 1, 2023, we adopted ASC 848 and commenced the transition of our LIBOR-based contracts to the Secured Overnight Financing Rate (“SOFR” or “Term SOFR”). ~~The optional expedients under ASC 848 have allowed and will allow us to account~~As of November 30, 2023, we had no aircraft leases or debt financings for ~~contract modifications as continuations of~~which the ~~existing contracts without further reassessments or remeasurements that would otherwise be required under the applicable U.S. GAAP.~~

~~For the three months ended May 31, 2023, less than 1% of each our~~associated lease rental revenue ~~and~~or interest expense ~~was derived from a floating-rate lease or debt financings that~~ used LIBOR as the applicable reference rate. The adoption of ASC 848 did not have a material impact on our consolidated financial statements.

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

Note 2. Fair Value Measurements

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets as of ~~May 31,~~November 30, 2023, and February 28, 2023, that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

Fair Value Measurements at May 31, 2023
Using Fair Value Hierarchy

Fair Value as of
May 31, 2023
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1) Significant
Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3) Valuation
Technique
Assets:
Cash and cash equivalents $ 136,156 $ 136,156 $ — $ — Market
Investment in debt securities 5,029 — — 5,029 Income
Investment in equity securities 5,513 2,069 — 3,444 Market/Income
Total $ 146,698 $ 138,225 $ — $ 8,473

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023


				Fair Value Measurements at February 28, 2023 Using Fair Value Hierarchy										Fair Value Measurements at November 30, 2023 Using Fair Value Hierarchy
		Fair Value as of February 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique		Fair Value as of November 30, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Assets:											Assets:
Cash and cash equivalents	Cash and cash equivalents	$	231,861	$	231,861	$	—	$	—	Market	Cash and cash equivalents	$	105,832	$	105,832	$	—	$	—	Market

Investments, at fair value:											Investments, at fair value:
Investment in debt securities	Investment in debt securities	5,029		—		—		5,029		Income	Investment in debt securities	$	5,029	$	—	$	—	$	5,029	Income
Investment in equity securities	Investment in equity securities	5,790		2,346		—		3,444		Market/Income	Investment in equity securities	5,492		2,048		—		3,444		Market/Income

Total		$	242,680	$	234,207	$	—	$	8,473
Total investments, at fair value											Total investments, at fair value	$	10,521	$	2,048	$	—	$	8,473


			Fair Value Measurements at February 28, 2023 Using Fair Value Hierarchy
	Fair Value as of February 28, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	231,861	$	231,861	$	—	$	—	Market



Investments, at fair value:
Investment in debt securities	$	5,029	$	—	$	—	$	5,029	Income
Investment in equity securities	5,790		2,346		—		3,444		Market/Income

Total investments, at fair value	$	10,819	$	2,346	$	—	$	8,473

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

For the three and nine months ended ~~May 31,~~November 30, 2023, we had no transfers into or out of Level 3.

Assets Measured at Fair Value on a Non-recurring Basis

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

We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on the average of the market approach (Level 2), which includes third party appraisal data, and an income approach (Level 3), which includes the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2023

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

Financial Instruments

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

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

The carrying amounts and fair values of our financial instruments at November 30, 2023, and February 28, 2023 were as follows:


	November 30, 2023				February 28, 2023

Assets	Carrying Amount of Asset		Fair Value of Asset		Carrying Amount of Asset		Fair Value of Asset
Investments, at fair value(1)	$	10,521	$	10,521	$	10,819	$	10,819
Other investments, net(2)	5,079		5,079		—		—

Liabilities	Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Credit Facilities	$	130,000	$	130,000	$	20,000	$	20,000
Unsecured Term Loan	155,000		155,000		155,000		151,449

Term Financings	903,212		903,182		761,283		739,804
Senior Notes	3,200,000		3,056,270		3,700,000		3,524,563

_______________

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

(2)As of November 30, 2023, we had a $3.2 million allowance for credit losses on certain investments in debt securities that are carried at amortized cost – see Note 15.

Aircraft Valuation

Impairment of Flight Equipment

During the three and nine months ended November 30, 2023, the Company recorded impairment charges totaling $35.0 million and $37.2 million, respectively.

Of the total impairment charges, $25.5 million were transactional impairments related to scheduled aircraft lease expirations and engine redeliveries during the three months ended November 30, 2023. The Company recognized $37.7 million of maintenance revenue for these aircraft and engines. We also recorded impairments of $9.5 million resulting from the completion of our annual fleet review during the three months ended November 30, 2023.

1011

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

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

May 31, 2023 February 28, 2023
Carrying Amount
of Asset Fair Value
of Asset Carrying Amount
of Asset Fair Value
of Asset
Investment in debt securities $ 5,029 $ 5,029 $ 5,029 $ 5,029
Investment in equity securities 5,513 5,513 5,790 5,790
Carrying Amount
of Liability Fair Value
of Liability Carrying
Amount
of Liability Fair Value
of Liability
Credit Facilities $ 395,000 $ 397,725 $ 20,000 $ 20,000
Unsecured Term Loan 155,000 155,309 155,000 151,449
Term Financings 941,989 930,841 761,283 739,804
Senior Notes 3,200,000 3,022,820 3,700,000 3,524,563

~~Aircraft Valuation~~

Annual Recoverability Assessment

We ~~plan to perform~~performed our annual recoverability assessment of all our aircraft during the ~~third quarter~~three months ended November 30, 2023. As a result of ~~2023.~~our annual fleet review, we recorded impairments of $9.5 million related to 3 narrow-body aircraft, as well as 1 spare engine.

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

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

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

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2023~~

Note 3. Flight Equipment Held for Lease, Net

The following table summarizes the activities for the Company’s flight equipment held for lease for the ~~three~~nine months ended ~~May 31,~~November 30, 2023:


	Amount
Balance at February 28, 2023	$	6,567,606
Additions	~~321,805~~668,028
Depreciation	~~(88,553)~~(261,073)
Disposals and transfers to net investment in leases and held for sale	~~(204,243)~~(350,165)
Impairments	~~(1,097)~~(36,056)

Balance at ~~May 31,~~November 30, 2023	$	~~6,595,518~~6,588,340

Accumulated depreciation as of ~~May 31,~~November 30, 2023	$	~~2,264,771~~2,302,697

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2023

Note 4. Lease Rental Revenues

Minimum future lease rentals contracted to be received under our existing operating leases of flight equipment at ~~May 31,~~November 30, 2023 were as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount(1)		Year Ending February 28/29,	Amount(1)
2024 (Remainder of fiscal year)	2024 (Remainder of fiscal year)	$	451,869	2024 (Remainder of fiscal year)	$	151,479
2025	2025	528,826		2025	555,800
2026	2026	414,434		2026	457,573
2027	2027	348,453		2027	396,182
2028	2028	278,390		2028	321,596
Thereafter	Thereafter	833,985		Thereafter	965,887
Total	Total	$	2,855,957	Total	$	2,848,517

_______________

(1)Reflects impact of lessee lease rental deferrals.

At ~~May 31,~~November 30, 2023 and February 28, 2023, the amounts of lease incentive liabilities recorded in maintenance payments on our consolidated balance sheets were ~~$26.0~~$27.5 million and $22.4 million, respectively.

Note 5. Net Investment in Leases, Net

At ~~May 31,~~November 30, 2023 and February 28, 2023, our net investment in leases consisted of 1413 and 4 aircraft, respectively. The components of our net investment in leases at ~~May 31,~~November 30, 2023 and February 28, 2023, were as follows:


		May 31, 2023		February 28, 2023			November 30, 2023		February 28, 2023
Lease receivable	Lease receivable	$	143,191	$	31,674	Lease receivable	$	131,070	$	31,674
Unguaranteed residual value of flight equipment	Unguaranteed residual value of flight equipment	131,665		37,287		Unguaranteed residual value of flight equipment	124,811		37,287
Net investment leases	Net investment leases	274,856		68,961		Net investment leases	255,881		68,961
Allowance for credit losses	Allowance for credit losses	(8,226)		(1,267)		Allowance for credit losses	(7,039)		(1,267)
Net investment in leases, net	Net investment in leases, net	$	266,630	$	67,694	Net investment in leases, net	$	248,842	$	67,694

During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, 10 aircraft were reclassified from operating leases to sales-type leases. Collectability of the lease payments for these 10 aircraft, which was not deemed probable at the effective date of

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~May 31, 2023~~

the related lease ~~modification,~~modifications, became probable during the ~~three~~nine months ended ~~May 31,~~November 30, 2023. Accordingly, we derecognized the carrying amounts of the underlying aircraft and lease payments recorded by us as deposit liabilities and recognized net investments in leases. A selling profit totaling $32.7 million for these 10 aircraft was recognized as a component of ~~Gain~~gain on sale or disposition of flight equipment for the ~~three~~nine months ended ~~May 31,~~November 30, 2023. We also recognized a provision for credit losses totaling ~~$7.0~~$6.2 million for these 10 aircraft during the ~~three~~nine months ended ~~May 31, 2023.~~November 30, 2023 – see Note 15.

~~The activity~~

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in ~~the allowance for credit losses related to our net investment in leases for the three months ended May 31,~~thousands, except per share amounts)

November 30, 2023 ~~was as follows:~~


	~~Amount~~
~~Balance at February 28, 2023~~	$	~~1,267~~
~~Provision for credit losses~~	~~6,959~~


~~Balance at May 31, 2023~~	$	~~8,226~~

At ~~May 31,~~November 30, 2023, future lease payments to be received under our net investment in leases were as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount		Year Ending February 28/29,	Amount
2024 (Remainder of fiscal year)	2024 (Remainder of fiscal year)	$	17,735	2024 (Remainder of fiscal year)	$	6,972
2025	2025	25,284		2025	23,711
2026	2026	24,984		2026	22,884
2027	2027	25,121		2027	23,111
2028	2028	24,911		2028	23,111
Thereafter	Thereafter	74,317		Thereafter	73,548
Total lease payments to be received	Total lease payments to be received	192,352		Total lease payments to be received	173,337
Present value of lease payments - lease receivable	Present value of lease payments - lease receivable	(143,191)		Present value of lease payments - lease receivable	(131,070)
Difference between undiscounted lease payments and lease receivable	Difference between undiscounted lease payments and lease receivable	$	49,161	Difference between undiscounted lease payments and lease receivable	$	42,267

Note 6. Concentration of Risk

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

The geographic concentration of the net book value of our fleet (flight equipment held for lease and net investment in leases, or “Net Book Value”) as of ~~May 31,~~November 30, 2023, and February 28, 2023, was as follows:


		May 31, 2023				February 28, 2023					November 30, 2023				February 28, 2023
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	62		27	%	62		28	%	Asia and Pacific	60		27	%	62	28	%
Europe	Europe	90		29	%	88		30	%	Europe	88		30	%	88	30	%
Middle East and Africa	Middle East and Africa	7		2	%	8		3	%	Middle East and Africa	6		2	%	8	3	%
North America	North America	43		23	%	38		20	%	North America	44		24	%	38	20	%
South America	South America	31		15	%	29		14	%	South America	32		15	%	29	14	%
Off-lease	Off-lease	11	(1)	4	%	14	(2)	5	%	Off-lease	6	(1)	2	%	14	5	%
Total	Total	244		100	%	239		100	%	Total	236		100	%	239	100	%

_______________

(1)Of the 116 off-lease aircraft at ~~May 31,~~November 30, 2023, we currently have 21 narrow-body aircraft ~~and 1 wide-body aircraft~~that is undergoing freighter conversion which we are ~~currently~~ marketing for ~~lease or sale.~~lease.

~~(2)Of the 14 off-lease aircraft~~The following table sets forth individual countries representing at least 10% of our Net Book Value as of November 30, 2023, and February 28, 2023:


	November 30, 2023				February 28, 2023
Country	Net Book Value		Net Book Value %	Number of Lessees	Net Book Value		Net Book Value %	Number of Lessees
United States(1)	$	745,266	11%	5	$	—	—%	—

_______________

(1) As of February 28, 2023, ~~we have 2 narrow-body aircraft and 1 wide-body aircraft which we are currently marketing for lease or sale.~~the United States represented less than 10% of our Net Book Value.

1314

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

~~The following table sets forth individual countries representing at least 10% of our Net Book Value as of May 31, 2023 and February 28, 2023:~~

May 31, 2023 February 28, 2023
Country Net Book
Value Net Book
Value % Number
of
Lessees Net Book
Value Net Book
Value % Number
of
Lessees
United States(1)
$ 679,035 10% 5 $ — —% —

~~_______________~~

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

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


		Three Months Ended May 31,			Three Months Ended November 30,						Nine Months Ended November 30,
Region	Region		2023			2022		Region	2023		2022		2023		2022
Asia and Pacific	Asia and Pacific		30	%		33	%	Asia and Pacific	28	%	31	%	29	%	33	%
Europe	Europe		30	%		29	%	Europe	28	%	30	%	30	%	29	%
Middle East and Africa	Middle East and Africa		4	%		5	%	Middle East and Africa	4	%	5	%	4	%	5	%
North America	North America		23	%		17	%	North America	23	%	21	%	23	%	19	%
South America	South America		13	%		16	%	South America	17	%	13	%	14	%	14	%

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

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

Three Months Ended May 31,
2023 2022
Number of Lessees Combined % of Lease
Rental Revenue Number of Lessees Combined % of Lease
Rental Revenue
Largest lessees by lease rental revenue 3 21% 4 30%


	Three Months Ended November 30,				Nine Months Ended November 30,
	2023		2022		2023		2022
	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue
Largest lessees by lease rental revenue	4	27%	4	25%	3	21%	4	27%

For the three months ended ~~May 31,~~November 30, 2023, South Korea and the United States each comprised 11% of total revenue. Total revenue attributable to South Korea included $21.3 million of maintenance revenue and total revenue attributable to ~~Greece was~~the United States included $9.3 million from gains on sale or disposition of flight equipment. For the nine months ended November 30, 2023, no single country comprised 10% ~~and included $19.2 million~~or more of ~~maintenance revenue as a result of scheduled lease expirations for a Greek lessee.~~ total revenue.

For the three months ended ~~May 31,~~November 30, 2022, total revenue attributable to ~~Greece~~the United States was ~~less than 10%.~~29% and included $13.7 million of maintenance revenue and $47.0 million of gains on sale or disposition of aircraft. For the nine months ended November 30, 2022, total revenue attributable to the United States was 18% and included $54.8 million of gains on sales of aircraft and $13.9 million of maintenance revenue.

Note 7. Unconsolidated Equity Method Investment

We have a joint venture with Mizuho Leasing which has 9 aircraft with a net book value of ~~$281.9~~$275.1 million at ~~May 31,~~November 30, 2023.


	Amount
Balance at February 28, 2023	$	40,505

Earnings of unconsolidated equity method investment, net of tax	~~406~~1,787
Balance at ~~May 31,~~November 30, 2023	$	~~40,911~~42,292

1415

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

Note 8. Borrowings from Secured and Unsecured Debt Financings

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


		At May 31, 2023					At February 28, 2023			At November 30, 2023					At February 28, 2023
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:

Term Financings(1)	Term Financings(1)	$	941,989	38	2.36% to 7.52%	09/13/24 to 06/27/32	$	761,283	Term Financings(1)	$	903,212	38	2.36% to 7.73%	09/13/24 to 06/27/32	$	761,283
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(8,984)		—			(8,985)		Less: Debt issuance costs and discounts	(8,299)					(8,985)

Total secured debt financings, net of debt issuance costs and discounts	Total secured debt financings, net of debt issuance costs and discounts	933,005		38			752,298		Total secured debt financings, net of debt issuance costs and discounts	894,913					752,298

Unsecured Debt Financings:	Unsecured Debt Financings:								Unsecured Debt Financings:
Senior 5.000% Notes due 2023		—			5.00%	04/01/23	500,000
Senior 4.400% Notes due 2023		650,000			4.40%	09/25/23	650,000
5.000% Senior Notes due 2023									5.000% Senior Notes due 2023	—			5.00%	04/01/23	500,000
4.400% Senior Notes due 2023									4.400% Senior Notes due 2023	—			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		750,000			2.85%	01/26/28	750,000
2.850% Senior Notes due 2028									2.850% Senior Notes due 2028	750,000			2.85%	01/26/28	750,000
6.500% Senior Notes due 2028									6.500% Senior Notes due 2028	650,000			6.50%	07/18/28	—
Unsecured Term Loans	Unsecured Term Loans	155,000			6.68%	02/27/24	155,000		Unsecured Term Loans	155,000			7.06%	02/27/24	155,000
Revolving Credit Facilities	Revolving Credit Facilities	395,000			6.72% to 6.91%	02/28/24 to 05/24/25	20,000		Revolving Credit Facilities	130,000			6.80% to 7.38%	02/28/24 to 05/24/25	20,000
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(29,044)					(32,546)		Less: Debt issuance costs and discounts	(29,495)					(32,546)

Total unsecured debt financings, net of debt issuance costs and discounts	Total unsecured debt financings, net of debt issuance costs and discounts	3,720,956					3,842,454		Total unsecured debt financings, net of debt issuance costs and discounts	3,455,505					3,842,454

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	$	4,653,961				$	4,594,752	Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	4,350,418				$	4,594,752

(1)The borrowings under these financings at ~~May 31,~~November 30, 2023, have a weighted-average fixed rate of interest of ~~5.35%~~5.46%.

Secured Debt ~~Financings:~~Financings

Term Financings

During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we borrowed the remaining $168.7 million available under our full recourse secured financing facility entered into on November 21, 2022 (the “2022 Secured Facility”). ~~As of May 31, 2023, $437.6 million was outstanding~~The total amount borrowed under the 2022 Secured Facility was $447.7 million in relation to 17 owned aircraft. The 2022 Secured Facility bears interest at a floating rate under the Term SOFR (as defined in the credit agreement governing the 2022 Secured Facility) plus 2.35% per annum and matures on November 21, 2029.

Unsecured Debt ~~Financings:~~Financings

5.000% Senior Notes due 2023

We repaid the $500.0 million aggregate principal amount of our 5.000% Senior Notes due 2023 at their final stated maturity date in April 2023.

~~Revolving Credit Facilities~~6.500%Senior Notes due 2028

On ~~June 5,~~July 18, 2023, ~~one~~the Company issued $650.0 million aggregate principal amount of ~~our unsecured revolving credit facilities was expanded from $245.0 million to $285.0~~6.500% Senior Notes due

1516

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

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

4.400% Senior Notes due 2023

We repaid the $650.0 million aggregate principal amount of our 4.400% Senior Notes due 2023 at their final stated maturity date in September 2023.

Revolving Credit Facilities

One of our unsecured revolving credit ~~facility~~facilities was ~~further~~ expanded from $245.0 million to ~~$325.0~~$375.0 million ~~on July 12, 2023 and~~during the nine months ended November 30, 2023. The revolving credit facility matures on May 24, 2025. On January 9, 2024, we entered into an amendment that further expanded the size of the facility to $600.0 million and extended the maturity date to January 9, 2028. The facility bears interest at Term SOFR (as defined in the amendment to the credit agreement) plus 1.950%.

As of ~~May 31,~~November 30, 2023, we had ~~$395.0~~$130.0 million outstanding under our revolving credit facilities and had ~~$1.4~~$1.7 billion available for borrowing.

As of ~~May 31,~~November 30, 2023, we were in compliance with all applicable covenants in our financings.

Note 9. Shareholders' Equity

Issuance of Common Shares

On July 5, 2023, the Company entered into a Subscription Agreement with its Shareholders, pursuant to which the Company has agreed to make a pro rata issuance of the Company’s common shares, $0.01 par value per share (the “Shares”), for an aggregate purchase price of up to $500.0 million. The Shares will be issued in two tranches, with 1,516 Shares issued under the first tranche on July 18, 2023, for an aggregate purchase price of $200.0 million. The issuance of the second tranche, which is subject to both the approval of the Company’s Board of Directors and shareholders, is expected to occur during the Company’s first fiscal quarter of 2024 for an aggregate purchase price of up to $300.0 million. The number of Shares and the subscription price per share are to be determined and agreed to by the parties at the time of issuance. The Shares will rank pari passu in all respects with other common shares of the Company. The Company has used and intends to continue to use the net proceeds from the issuance of Shares for general corporate purposes.

Preference Share Dividends

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

On September 15, 2023, the Company paid a semi-annual dividend in the amount of $10.5 million for its Preference Shares, which was approved by the Company’s Board of Directors on ~~January 10,~~July 11, 2023, and accrued as of ~~February 28,~~August 31, 2023.

On January 9, 2024, the Company’s Board of Directors approved a semi-annual dividend in the amount of $10.5 million for its preference shares, to be paid on March 15, 2024.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2023

Note 10. Related Party Transactions

We incurred fees from our Shareholders as part of intra-company service agreements totaling ~~$2.0~~$2.2 million and ~~$1.4~~$1.3 million during the three months ended ~~May 31,~~November 30, 2023 and 2022, respectively, and $6.3 million and $3.9 million during the nine months ended November 30, 2023 and 2022, respectively, whereby our Shareholders provide certain management and administrative services to the Company. In addition, the Company purchased parts under a parts management services and supply agreement with an affiliate of Marubeni totaling ~~$0.4~~$0.2 million and ~~$1.7~~$0.4 million during the three months ended ~~May 31,~~November 30, 2023 and 2022, respectively, and $1.3 million and $3.7 million during the nine months ended November 30, 2023 and 2022, respectively.

Note 11. 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 income from continuing operations before income taxes and earnings of our unconsolidated equity method investment for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022 were as follows:


		Three Months Ended May 31,			Three Months Ended November 30,						Nine Months Ended November 30,
			2023			2022			2023		2022		2023		2022
U.S. operations	U.S. operations		$	4,282		$	5,336	U.S. operations	$	7,518	$	5,868	$	18,388	$	15,994
Non-U.S. operations	Non-U.S. operations		32,442			5,164		Non-U.S. operations	23,227		66,704		49,044		53,651
Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	Income from continuing operations before income taxes and earnings of unconsolidated equity method investment		$	36,724		$	10,500	Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	$	30,745	$	72,572	$	67,432	$	69,645

Our aircraft-owning subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in the United States and Ireland 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 Company’s~~We recognized an income tax provision of $15.3 million and $22.3 million for the nine months ended November 30, 2023 and 2022, respectively. Our effective tax rate ~~(“ETR”)~~ for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022 was ~~39.1%~~22.7% and ~~31.7%~~32.1%, respectively. The ~~movement in the ETR is~~decreases are primarily ~~caused by changes in~~attributable to the mix of ~~the Company’s pre-tax income~~profits in ~~its~~ taxable and ~~non-tax~~non-taxable jurisdictions. The nine months ended November 30, 2023, included lower U.S. tax in our Irish aircraft-owning entities resulting from aircraft sales in the prior year. The nine months ended November 30, 2022, included higher income taxes related to certain intra-entity transfers of aircraft assets to Irish aircraft-owning entities.

Ireland and Bermuda Tax Law Changes

On December 18, 2023, Ireland enacted Finance (No. 2) Bill 2023 (the “Finance Bill”) which includes legislative changes for new tax measures and amendments to the Irish tax code, such as provisions to implement the Pillar Two GloBE rules, new outbound payment rules, and a dividend withholding tax, among other changes. The Finance Bill requires a 20% withholding tax be applied to certain payments, such as interest payments, from Irish companies to recipients in no-tax and zero-tax jurisdictions, effective April 1, 2024. The Finance Bill also requires a 25% withholding tax be applied to dividends and distributions, subject to certain exemptions, as well as introduces new interest deduction rules for a qualifying finance company. The Company is currently evaluating the impact the Finance Bill will have on its

1618

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

operations, in particular, with respect to existing intra-entity loans, as well as on our provision for income taxes and the consolidated financial statements.

On December 18, 2023, Bermuda enacted a 15% corporate income tax regime (the “Bermuda CIT”) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the Company’s exemption from Bermuda corporate income, withholding and capital gains taxes will cease on February 28, 2025. The Company is currently evaluating the impact the Bermuda CIT will have on its operations, as well as on our provision for income taxes and the consolidated financial statements.

Note 12. Interest, Net

The following table shows the components of interest, net:


		Three Months Ended May 31,			Three Months Ended November 30,						Nine Months Ended November 30,
			2023			2022			2023		2022		2023		2022
Interest on borrowings and other liabilities	Interest on borrowings and other liabilities		$	55,872		$	47,241	Interest on borrowings and other liabilities	$	56,746	$	49,436	$	170,751	$	145,069

Amortization of deferred financing fees and debt discount	Amortization of deferred financing fees and debt discount		4,031			3,597		Amortization of deferred financing fees and debt discount	4,290		3,517		12,611		10,612
Interest expense	Interest expense		59,903			50,838		Interest expense	61,036		52,953		183,362		155,681
Less: Interest income	Less: Interest income		(2,292)			(259)		Less: Interest income	(3,323)		(1,394)		(10,351)		(2,401)
Less: Capitalized interest	Less: Capitalized interest		(720)			(285)		Less: Capitalized interest	(676)		(802)		(2,048)		(1,642)

Interest, net	Interest, net		$	56,891		$	50,294	Interest, net	$	57,037	$	50,757	$	170,963	$	151,638

Note 13. Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was $0.6 million and $0.5 million, and $1.8 million and $1.4 million for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022, respectively.

As of ~~May 31,~~November 30, 2023, 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
2024 (Remainder of fiscal year)	2024 (Remainder of fiscal year)	$	2,522	2024 (Remainder of fiscal year)	$	735
2025	2025	2,933		2025	2,957
2026	2026	2,709		2026	2,801
2027	2027	2,717		2027	2,738
2028	2028	2,748		2028	2,769
Thereafter	Thereafter	16,716		Thereafter	17,817
Total	Total	$	30,345	Total	$	29,817

At ~~May 31,~~November 30, 2023, we had commitments to acquire 12 aircraft for ~~$406.6~~$402.7 million.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2023

At ~~May 31,~~November 30, 2023, commitments, including ~~$39.4~~$34.4 million of remaining progress payments, contractual price escalations and other adjustments for these aircraft, net of amounts already paid, were as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount		Year Ending February 28/29,	Amount
2024 (Remainder of fiscal year)	2024 (Remainder of fiscal year)	$	138,239	2024 (Remainder of fiscal year)	$	26,500
2025	2025	171,533		2025	73,934
2026	2026	96,848		2026	204,343
2027	2027	—		2027	97,876
2028	2028	—		2028	—
Thereafter	Thereafter	—		Thereafter	—

Total	Total	$	406,620	Total	$	402,653

Note 14. Other Assets

Other assets consisted of the following as of November 30, 2023, and February 28, 2023:


	November 30, 2023		February 28, 2023
Deferred income tax asset	$	250	$	304
Lease incentives and premiums, net of accumulated amortization of $87,544 and $77,722, respectively	32,814		54,208
Flight equipment held for sale	25,148		59,370
Aircraft purchase deposits and Embraer E-2 progress payments	45,308		43,494


Right-of-use asset(1)	16,390		16,930
Deferred rent receivable, net(2)	17,535		35,631
Investments, at fair value(3)	10,521		10,819
Other investments, net(2)(3)	5,079		—
Other assets	147,159		125,574

Total other assets	$	300,204	$	346,330

______________

(1)Net of lease incentives and tenant allowances.

(2)Net of an allowance for credit losses as of November 30, 2023 – see Note 15.

(3)See Note 2.

Note 15. Allowance for Credit Losses

The activity in the allowance for credit losses related to our net investment in leases, investments, and deferred rent receivables for the nine months ended November 30, 2023, was as follows:


	Net Investment in Leases, net		Other Investments, net		Deferred Rent Receivables, net		Total
Balance at February 28, 2023	$	1,267	$	—	$	—	$	1,267
Provision for credit losses	6,050		3,209		2,146		11,405
Write-offs	(278)		—		—		(278)

Balance at November 30, 2023	$	7,039	$	3,209	$	2,146	$	12,394

During the nine months ended November 30, 2023, we increased our credit provision for net investment in leases as a result of 10 aircraft that were reclassified from operating leases to sales-type leases – see Note 5. We also recognized a credit provision for debt securities received by us as part of an airline restructuring, as well as certain restructured receivables, during the nine months ended November 30, 2023.

1720

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

~~May 31,~~November 30, 2023

~~Note 14. Other Assets~~

~~Other assets consisted of the following as of May 31, 2023 and February 28, 2023:~~

May 31,
2023 February 28,
2023
Deferred income tax asset $ 310 $ 304
Lease incentives and premiums, net of accumulated amortization of $80,679 and $77,722, respectively 37,985 54,208
Flight equipment held for sale 28,705 59,370
Aircraft purchase deposits and Embraer E-2 progress payments 40,447 43,494
Right-of-use asset(1)
17,052 16,930
Deferred rent receivable 32,420 35,631
Investments, at fair value 10,543 10,819
Other assets 138,517 125,574
Total other assets $ 305,979 $ 346,330

~~______________~~

~~(1)Net of lease incentives and tenant allowances.~~

Note ~~15.~~16. Accounts Payable, Accrued Expenses and Other Liabilities

Accounts payable, accrued expenses and other liabilities consisted of the following as of ~~May 31,~~November 30, 2023, and February 28, 2023:


		May 31, 2023		February 28, 2023			November 30, 2023		February 28, 2023
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	48,022	$	60,225	Accounts payable, accrued expenses and other liabilities	$	53,603	$	60,225
Deferred income tax liability	Deferred income tax liability	83,808		79,990		Deferred income tax liability	91,018		79,990
Accrued interest payable	Accrued interest payable	43,752		42,752		Accrued interest payable	52,521		42,752
Lease liability	Lease liability	20,048		19,951		Lease liability	19,541		19,951
Lease discounts, net of amortization of $45,830 and $45,586, respectively		3,311		3,555
Lease discounts, net of amortization of $43,940 and $45,586, respectively						Lease discounts, net of amortization of $43,940 and $45,586, respectively	2,864		3,555

Total accounts payable, accrued expenses and other liabilities	Total accounts payable, accrued expenses and other liabilities	$	198,941	$	206,473	Total accounts payable, accrued expenses and other liabilities	$	219,547	$	206,473

Note ~~16.~~17. Subsequent Events

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

On ~~July 5,~~December 26, 2023, the Company ~~entered into a Subscription Agreement with its Shareholders, pursuant to which the Company has agreed to make a pro rata issuance~~received cash settlement proceeds of approximately $43.2 million in settlement of the Company’s ~~common shares, $0.01 par value per share (the “Shares”~~claims under the insurance policies of Joint Stock Company Aurora Airlines and Joint Stock Company Rossiya Airlines (collectively, the “Airlines”), in respect of 4 aircraft (collectively, the “Aircraft”) formerly on lease to the Airlines. The settlement resolves claims against the Airlines, their respective insurers, and transfers the Aircraft title to a Russian insurer. The Company is in ongoing settlement discussions for ~~an aggregate purchase price~~the 5 other aircraft that were not included in the insurance settlement. However, it is uncertain whether any of ~~up to $500.0 million. The Shares~~these discussions will result in any settlement and, if so, in what amount. Settlement proceeds, net of any related costs, will be ~~issued in two tranches, with~~recorded as a component of Gain on sale or disposition of flight equipment for the ~~first tranche expected to be issued in July 2023 for an aggregate purchase price of $200.0 million.~~ three months ending February 29, 2024.

The ~~issuance~~receipt of the ~~second tranche, which is subject~~insurance settlement proceeds serve to ~~both the approval of~~mitigate, in part, the Company’s Board of Directors and shareholders, is expected to occur during the Company’s first fiscal quarter of 2024 for an aggregate purchase price of up to $300.0 million. The number of Shares and the subscription price per share are to be determined and agreed to by the parties at the time of issuance. The Shares will rank pari passu in all respects with other common shares of the Company.losses under its aviation insurance policies. The Company ~~intends~~reserves all rights under its C&P Policies. The collection, timing and amount of any future recoveries, including those related to ~~use~~insurance litigation, remain uncertain. Accordingly, at this time, the ~~net proceeds from the issuance of Shares for general corporate purposes.~~

Company can give no assurance as to when or what amounts it may ultimately collect with respect to these matters.

1821

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, 2023. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and, unless otherwise indicated, the other financial information contained in this report has also been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all references to “dollars” and “$” in this report are to, and all monetary amounts in this report are presented in, U.S. dollars.

All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “report”), other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA 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 for the year ended February 28, 2023. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

WEBSITE AND ACCESS TO THE COMPANY’S REPORTS

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.

1922

OVERVIEW

Aircastle acquires, leases, and sells commercial jet aircraft to airlines throughout the world. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are subject to net leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs. However, in many cases we are obligated to pay a specified portion of maintenance or modification costs. During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we purchased 714 aircraft and sold 418 aircraft and other flight equipment. As of ~~May 31,~~November 30, 2023, we owned and managed on behalf of our joint venture ~~253~~245 aircraft leased to 73 airline customers located in 4342 countries. As of ~~May 31,~~November 30, 2023, the Net Book Value of our fleet was ~~$6.9~~$6.8 billion. The weighted average age of our fleet was ~~9.6~~9.4 years, and the weighted average remaining lease term was ~~5.4~~5.3 years. As of ~~May 31,~~November 30, 2023, we had commitments to acquire 12 aircraft for ~~$406.6~~$402.7 million, which included estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments.

Our total revenues, net income and Adjusted EBITDA were ~~$218.5~~$625.2 million, ~~$22.8~~$53.9 million and ~~$191.1~~$556.1 million, respectively, for the ~~three~~nine months ended ~~May 31,~~November 30, 2023. Cash flow provided by operating activities was ~~$100.5~~$309.1 million for the ~~three~~nine months ended ~~May 31,~~November 30, 2023. Our leadership team and other senior professionals have extensive industry and financial experience, including managing through downturns in the aviation industry. We believe our platform and personnel have enabled us to effectively manage through recent crises, such as the COVID-19 pandemic and the Russian invasion of Ukraine, and will position us to take advantage of new investment opportunities when they arise.

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 one to two times that of global GDP growth. This expansion of air travel has driven growth in the world aircraft fleet; and there are approximately 26,000 commercial mainline passenger and freighter aircraft in the world fleet today. Aircraft leasing companies own approximately 49% of the world’s commercial jet aircraft. Under normal circumstances, we would expect the global fleet to continue expanding at a 2 to 3% average annual rate.

As a leading secondary market investor, we believe that our long-standing business strategy of maintaining conservative leverage and limiting long-term financial commitments has enabled us to manage through recent crises. Our portfolio, primarily comprised of a balanced mix of new technology and mid-life, narrow-body aircraft, should remain attractive assets for our airline customers to respond to the growing demand of global air travel.

Fiscal Year 2023 Lease Expirations and Lease Placements

As of ~~July 7, 2023,~~January 5, 2024, we had 31 off-lease aircraft and 133 aircraft with leases expiring in fiscal year 2023, which combined account for less than 5%2% of our Net Book Value at ~~May 31,~~November 30, 2023, still to be placed or sold.

Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the fiscal years 2024 to 2027, representing the percentage of our Net Book Value as of ~~May 31,~~November 30, 2023, specified below:

•2024: 3829 aircraft, representing ~~12%~~9%;

•2025: 3125 aircraft, representing ~~12%~~9%;

•2026: 2125 aircraft, representing 7%8%; and

•2027: 2926 aircraft, representing 12%.

2023

Acquisitions and Sales

During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we acquired 714 aircraft for ~~$306.3~~$610.6 million. As of ~~May 31,~~November 30, 2023, we had commitments to acquire 12 aircraft for ~~$406.6~~$402.7 million, with delivery through the second quarter of ~~2025,~~2026, which includes estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments. As of ~~July 7, 2023,~~January 5, 2024, we have acquired 1 additional aircraft and have commitments to acquire 1121 aircraft for ~~$377.7~~$723.2 million.

During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we sold 418 aircraft and other flight equipment for net proceeds of ~~$53.8~~$198.8 million and recognized a net gain on sale of ~~$9.9~~$34.5 million for these aircraft. As of ~~July 7, 2023,~~January 5, 2024, we have sold 34 additional aircraft.

Finance

We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital from debt and equity investors. Since our inception in late 2004, we have raised ~~$2.1~~$2.3 billion in equity capital from private and public ~~investors.~~investors, including $200.0 million received during the current year in respect of the Subscription Agreement entered into with our Shareholders – see Note 9 in the Notes to the unaudited Consolidated Financial Statements. We also raised ~~$20.0~~$20.8 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, equity offerings, unsecured bond offerings, borrowings secured by our aircraft, draws under 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” below.

2124

AIRCASTLE AIRCRAFT INFORMATION

The following table sets forth certain information with respect to the aircraft owned by us as of ~~May 31,~~November 30, 2023 and 2022:


Owned Aircraft	Owned Aircraft	As of May 31, 2023			As of May 31, 2022			Owned Aircraft	As of November 30, 2023			As of November 30, 2022
		(Dollars in millions)							(Dollars in millions)
Net Book Value of Flight Equipment	Net Book Value of Flight Equipment	$	6,862		$	6,388		Net Book Value of Flight Equipment	$	6,837		$	6,571

Net Book Value of Unencumbered Flight Equipment	Net Book Value of Unencumbered Flight Equipment	$	5,348		$	5,322		Net Book Value of Unencumbered Flight Equipment	$	5,438		$	5,480
Number of Aircraft	Number of Aircraft	244			241			Number of Aircraft	236			241
Number of Unencumbered Aircraft	Number of Unencumbered Aircraft	206			210			Number of Unencumbered Aircraft	198			209
Number of Lessees	Number of Lessees	73			74			Number of Lessees	72			76
Number of Countries	Number of Countries	43			44			Number of Countries	42			46
Weighted Average Age (Years)(1)	Weighted Average Age (Years)(1)	9.6			10.4			Weighted Average Age (Years)(1)	9.4			10.0
Weighted Average Remaining Lease Term (Years)(1)	Weighted Average Remaining Lease Term (Years)(1)	5.4			5.1			Weighted Average Remaining Lease Term (Years)(1)	5.3			5.1
Weighted Average Fleet Utilization during the three months ended May 31, 2023 and 2022(2)		95.6		%	94.8		%

Portfolio Yield for the three months ended May 31, 2023 and 2022(3)		8.7		%	9.2		%

Weighted Average Fleet Utilization during the three months ended November 30, 2023 and 2022(2)								Weighted Average Fleet Utilization during the three months ended November 30, 2023 and 2022(2)	99.1		%	94.4		%
Weighted Average Fleet Utilization during the nine months ended November 30, 2023 and 2022(2)								Weighted Average Fleet Utilization during the nine months ended November 30, 2023 and 2022(2)	97.9		%	94.6		%
Portfolio Yield for the three months ended November 30, 2023 and 2022(3)								Portfolio Yield for the three months ended November 30, 2023 and 2022(3)	9.5		%	9.0		%
Portfolio Yield for the nine months ended November 30, 2023 and 2022(3)								Portfolio Yield for the nine months ended November 30, 2023 and 2022(3)	9.1		%	9.1		%

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	$	282		$	295		Net Book Value of Flight Equipment	$	275		$	289
Number of Aircraft	Number of Aircraft	9			9			Number of Aircraft	9			9

(1)Weighted by Net Book Value.

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

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

2225

PORTFOLIO DIVERSIFICATION


		Owned Aircraft as of May 31, 2023				Owned Aircraft as of May 31, 2022					Owned Aircraft as of November 30, 2023				Owned Aircraft as of November 30, 2022
		Number of Aircraft		% of Net Book Value		Number of Aircraft		% of Net Book Value			Number of Aircraft		% of Net Book Value		Number of Aircraft	% of Net Book Value
Aircraft Type	Aircraft Type									Aircraft Type
Passenger:	Passenger:									Passenger:
Narrow-body - new technology(1)	Narrow-body - new technology(1)	49		31	%	28		19	%	Narrow-body - new technology(1)	54		35	%	37	25	%

Narrow-body - current technology	Narrow-body - current technology	173		54	%	187		63	%	Narrow-body - current technology	160		51	%	181	59	%
Wide-body - current technology	Wide-body - current technology	18		13	%	22		16	%	Wide-body - current technology	17		12	%	20	14	%

Total Passenger	Total Passenger	240		98	%	237		98	%	Total Passenger	231		98	%	238	98	%
Freighter - current technology	Freighter - current technology	4		2	%	4		2	%	Freighter - current technology	5		2	%	3	2	%
Total	Total	244		100	%	241		100	%	Total	236		100	%	241	100	%

Manufacturer	Manufacturer									Manufacturer
Airbus	Airbus	158		65	%	156		65	%	Airbus	154		66	%	158	66	%
Boeing	Boeing	68		27	%	74		30	%	Boeing	63		26	%	69	28	%
Embraer	Embraer	18		8	%	11		5	%	Embraer	19		8	%	14	6	%
Total	Total	244		100	%	241		100	%	Total	236		100	%	241	100	%

Regional Diversification	Regional Diversification									Regional Diversification
Asia and Pacific	Asia and Pacific	62		27	%	70		32	%	Asia and Pacific	60		27	%	64	28	%
Europe	Europe	90		29	%	87		28	%	Europe	88		30	%	90	30	%
Middle East and Africa	Middle East and Africa	7		2	%	10		4	%	Middle East and Africa	6		2	%	9	3	%
North America	North America	43		23	%	34		17	%	North America	44		24	%	37	20	%
South America	South America	31		15	%	25		13	%	South America	32		15	%	28	14	%
Off-lease	Off-lease	11	(2)	4	%	15	(3)	6	%	Off-lease	6	(2)	2	%	13	5	%

Total	Total	244		100	%	241		100	%	Total	236		100	%	241	100	%

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

(2) Of the 116 off-lease aircraft at ~~May 31,~~November 30, 2023, we currently have 21 narrow-body aircraft ~~and 1 wide-body aircraft~~that is undergoing freighter conversion which we are ~~currently~~ marketing for ~~lease or sale.~~lease.

~~(3) All 15 off-lease aircraft at May 31, 2022 have been placed on lease, sold or disposed.~~

2326

The top ten customers for our owned aircraft at ~~May 31,~~November 30, 2023 were as follows:


Customer	Customer	Country	Percent of Net Book Value	Number of Aircraft	Customer	Country	Percent of Net Book Value	Number of Aircraft
IndiGo	IndiGo	India	8.5%	13	IndiGo	India	8.5%	13
LATAM	LATAM	Chile	6.8%	13	LATAM	Chile	6.7%	13
KLM	KLM	Netherlands	4.8%	10	KLM	Netherlands	5.3%	11
Lion Air(1)					Lion Air(1)	Indonesia	4.3%	10
Viva Aerobus	Viva Aerobus	Mexico	4.0%	7	Viva Aerobus	Mexico	4.0%	7
Lion Air(1)		Indonesia	3.8%	9
American Airlines	American Airlines	United States	3.6%	9	American Airlines	United States	3.9%	10
Aerolineas Argentinas	Aerolineas Argentinas	Argentina	3.2%	6	Aerolineas Argentinas	Argentina	3.8%	7
Frontier Airlines					Frontier Airlines	United States	3.6%	5
Volaris	Volaris	Mexico	3.2%	6	Volaris	Mexico	3.2%	6
Air Canada	Air Canada	Canada	3.2%	5	Air Canada	Canada	3.1%	5
Iberia		Spain	3.0%	14

Total top ten customers	Total top ten customers		44.1%	92	Total top ten customers		46.4%	87
All other customers	All other customers		55.9%	152	All other customers		53.6%	149

Total all customers	Total all customers		100.0%	244	Total all customers		100.0%	236

(1) Includes 46 aircraft on lease with 3 affiliated airlines.

2427

COMPARATIVE RESULTS OF OPERATIONS

~~Results~~Comparison of ~~Operations for~~ the three months ended ~~May 31,~~November 30, 2023, ~~as compared~~ to the three months ended ~~May 31,~~November 30, 2022:


		Three Months Ended May 31,					Three Months Ended November 30,
		2023		2022			2023		2022
		(Dollars in thousands)					(Dollars in thousands)
Revenues:	Revenues:					Revenues:
Lease rental revenue	Lease rental revenue	$	146,735	$	144,144	Lease rental revenue	$	156,820	$	142,336
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue	1,073		2,598		Direct financing and sales-type lease revenue	4,835		2,087
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	(7,207)		(5,388)		Amortization of lease premiums, discounts and incentives	(2,641)		(3,763)
Maintenance revenue	Maintenance revenue	34,520		27,099		Maintenance revenue	58,657		56,574
Total lease revenue	Total lease revenue	175,121		168,453		Total lease revenue	217,671		197,234
Gain on sale of flight equipment		42,594		3,687
Gain on sale or disposition of flight equipment						Gain on sale or disposition of flight equipment	20,193		53,473
Other revenue	Other revenue	776		3,424		Other revenue	882		6,809
Total revenues	Total revenues	218,491		175,564		Total revenues	238,746		257,516
Operating expenses:	Operating expenses:					Operating expenses:
Depreciation	Depreciation	88,789		81,318		Depreciation	86,647		82,872
Interest, net	Interest, net	56,891		50,294		Interest, net	57,037		50,757
Selling, general and administrative	Selling, general and administrative	20,835		19,916		Selling, general and administrative	18,500		17,999
Provision for credit losses	Provision for credit losses	6,959		580		Provision for credit losses	5,280		854
Impairment of flight equipment	Impairment of flight equipment	1,097		4,428		Impairment of flight equipment	34,959		29,880
Maintenance and other costs	Maintenance and other costs	8,533		8,065		Maintenance and other costs	7,107		3,783
Total operating expenses	Total operating expenses	183,104		164,601		Total operating expenses	209,530		186,145

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

Other	Other	1,337		—		Other	1,529		1,201
Total other income (expense)		1,337		(463)
Total other income						Total other income	1,529		1,201

Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	36,724		10,500		Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	30,745		72,572
Income tax provision	Income tax provision	14,360		3,329		Income tax provision	6,025		23,071
Earnings of unconsolidated equity method investment, net of tax	Earnings of unconsolidated equity method investment, net of tax	406		511		Earnings of unconsolidated equity method investment, net of tax	925		603

Net income	Net income	$	22,770	$	7,682	Net income	$	25,645	$	50,104

Revenues

Total revenues ~~increased $42.9~~decreased $18.8 million, attributable to:

Lease rental revenue increased ~~$2.6~~$14.5 million, primarily attributable to an increase of ~~$22.8~~$21.3 million related to 28 aircraft purchased since September 1, 2022.

This was partially offset by:

•a $6.0 million decrease related to the sale of 17 aircraft since September 1, 2022; and

•a $0.8 million decrease due to lease extensions, amendments, transitions and other changes.

Direct financing and sales-type lease revenue increased $2.7 million, primarily related to the reclassification of 10 aircraft to sales-type leases, partially offset by the sale of 5 aircraft since September 1, 2022.

Amortization of lease premiums, discounts and lease incentives:


	Three Months Ended November 30,
	2023		2022
	(Dollars in thousands)
Amortization of lease premiums	$	(2,671)	$	(2,949)
Amortization of lease discounts	223		161
Amortization of lease incentives	(193)		(975)

Amortization of lease premiums, discounts and incentives	$	(2,641)	$	(3,763)

Maintenance revenue. For the three months ended November 30, 2023, we recorded $58.7 million of maintenance revenue primarily related to maintenance payments received by us and recognized into income as a result of scheduled aircraft lease expirations and engine redeliveries.

For the three months ended November 30, 2022, we recorded $56.6 million of maintenance revenue, comprised primarily of $17.0 million related to scheduled lease expirations and $21.8 million related to early lease terminations. We also received $17.8 million of maintenance security letters of credit for our former Russian lessees during the three months ended November 30, 2022, which we have recognized in maintenance revenue.

Gain on sale or disposition of flight equipment. During the three months ended November 30, 2023, we sold 8 aircraft and other flight equipment for gains totaling $20.2 million. We sold 8 aircraft during the three months ended November 30, 2022, for gains totaling $53.5 million, which largely related to 2 freighter aircraft and 1 wide-body aircraft that were previously leased to Russian or Russian-affiliated airlines.

Operating expenses

Total operating expenses increased $23.4 million, attributable to:

Depreciation expense increased $3.8 million primarily attributable to an increase of $8.9 million related to 28 aircraft acquired since September 1, 2022, partially offset by a decrease of $6.1 million related to 23 aircraft sold since September 1, 2022.

Interest, net increased $6.3 million due to a higher average cost of borrowing, partially offset by a lower weighted average debt outstanding of $30.9 million.

Provision for credit losses increased to $5.3 million, primarily related to a credit provision for debt securities received by us as part of an airline restructuring, as well as certain restructured receivables, during the three months ended November 30, 2023.

Impairment of aircraft. During the three months ended November 30, 2023, the Company recorded impairment charges totaling $35.0 million, of which $25.5 million were transactional impairments related to scheduled aircraft lease expirations and engine redeliveries. The Company recognized $37.7 million of maintenance revenue for these aircraft and engines.

We also recorded impairments of $9.5 million resulting from the completion of our annual fleet review during the three months ended November 30, 2023.

During the three months ended November 30, 2022, the Company recorded impairment charges totaling $29.9 million related to 2 narrow-body aircraft resulting from scheduled lease expirations and an early lease termination, as well as 1 wide-body aircraft resulting from our annual fleet review. The Company recognized $26.3 million of maintenance and lease rentals received in advance into revenue for the 2 narrow-body aircraft.

Maintenance and other costs increased $3.3 million, primarily attributable to higher aircraft insurance premiums and higher costs due to the timing of transition of aircraft to new lessees.Higher transition costs are largely related to aircraft for which the previous lease was terminated early, and the aircraft was repossessed from the prior operator.

Income tax provision

Income tax provision. Our income tax provision was $6.0 million and $23.1 million and our effective tax rate was 19.6% and 31.8% for the three months ended November 30, 2023 and 2022, respectively.The decrease in the tax provision is attributable to changes in the mix of profits in taxable and non-taxable jurisdictions.The three months ended November 30, 2022, included gains on the sale of aircraft which were recorded on a low tax jurisdiction and higher income taxes related to certain intra-entity transfers of aircraft assets to Irish aircraft-owning entities.

Results of Operations for the nine months ended November 30, 2023, as compared to the nine months ended November 30, 2022:


	Nine Months Ended November 30,
	2023		2022
	(Dollars in thousands)
Revenues:
Lease rental revenue	$	453,906	$	432,988
Direct financing and sales-type lease revenue	10,993		6,950
Amortization of lease premiums, discounts and incentives	(16,972)		(14,669)
Maintenance revenue	108,223		103,787
Total lease revenue	556,150		529,056
Gain on sale or disposition of flight equipment	67,240		67,209
Other revenue	1,803		10,394
Total revenues	625,193		606,659
Operating expenses:
Depreciation	261,764		246,296
Interest, net	170,963		151,638
Selling, general and administrative	58,217		55,358
Provision for credit losses	11,405		1,543
Impairment of flight equipment	37,156		67,979
Maintenance and other costs	24,494		17,010
Total operating expenses	563,999		539,824

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

Other	6,238		3,273
Total other income	6,238		2,810

Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	67,432		69,645
Income tax provision	15,286		22,332
Earnings of unconsolidated equity method investment, net of tax	1,787		1,780

Net income	$	53,933	$	49,093

Revenues

Total revenues increased $18.5 million, attributable to:

Lease rental revenue increased $20.9 million, primarily attributable to an increase of $66.0 million related to 36 aircraft purchased since March 1, 2022.

This was partially offset by:

•a ~~$5.9~~$19.4 million decrease related to the sale of 23 aircraft since March 1, 2022;

•a $14.2 million decrease due to lease extensions, amendments, transitions and other changes; and

•~~a $5.8 million decrease due to lease terminations;~~

•~~a $5.8~~an $11.5 million decrease related to ~~the sale of 14 aircraft since March 1, 2022; and~~

•~~a $2.6 million decrease related to the timing of payments for customers for which~~ lease ~~rental revenue was recognized using a cash basis of accounting rather than an accrual method.~~terminations.

Direct financing and sales-type lease revenue ~~decreased $1.5~~increased $4.0 million, primarily related to the ~~sales~~reclassification of 810 aircraft to sales-type leases, partially offset by the sale of 9 aircraft since March 1, 2022.

Amortization of lease premiums, discounts and lease incentives:


		Three Months Ended May 31,					Nine Months Ended November 30,
		2023		2022			2023		2022
		(Dollars in thousands)					(Dollars in thousands)
Amortization of lease premiums	Amortization of lease premiums	$	(2,987)	$	(2,555)	Amortization of lease premiums	$	(8,453)	$	(8,227)
Amortization of lease discounts	Amortization of lease discounts	244		129		Amortization of lease discounts	691		416
Amortization of lease incentives	Amortization of lease incentives	(4,464)		(2,962)		Amortization of lease incentives	(9,210)		(6,858)

Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	$	(7,207)	$	(5,388)	Amortization of lease premiums, discounts and incentives	$	(16,972)	$	(14,669)

The amortization of lease incentives increased ~~$1.5~~$2.4 million, ~~primarily related~~due to the transition of aircraft to new lessees.

Maintenance revenue. For the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we recorded ~~$34.5~~$108.2 million of maintenance revenue primarily related to maintenance payments received by us and recognized into income as a result of scheduled aircraft lease ~~expirations.~~expirations and engine redeliveries.

For the ~~three~~nine months ended ~~May 31,~~November 30, 2022, we recorded ~~$27.1~~$103.8 million of maintenance revenue, comprised primarily of ~~which $23.9~~$33.8 million related to ~~payments~~early lease terminations and $28.2 million related to scheduled lease expirations. We also received on$41.8 million of maintenance security letters of credit for ~~2 freighter aircraft that were previously leased to a~~our former Russian ~~airline. In addition,~~lessees during the nine months ended November 30, 2022, which we ~~recorded~~have recognized in maintenance ~~revenue of $2.1 million related to the scheduled lease expiration of 1 narrow-body aircraft.~~revenue.

Gain on sale or disposition of flight ~~equipment~~equipment.. During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we sold 418 aircraft and other flight equipment for gains totaling ~~$9.9~~$34.5 million. We sold 417 aircraft ~~and other flight equipment~~ during the ~~three~~nine months ended ~~May 31,~~November 30, 2022, for gains totaling ~~$3.7 million.~~$67.2 million, which largely related to 2 freighter aircraft and 1 wide-body aircraft that were previously leased to Russian or Russian-affiliated airlines.

We also recognized selling profit totaling $32.7 million related to the reclassification of 10 aircraft from operating leases to sales-type leases during the ~~three~~nine months ended ~~May 31,~~November 30, 2023 – see Note 5 in the Notes to Unaudited Consolidated Financial Statements.

Other revenue. ~~The three~~During the nine months ended ~~May 31,~~November 30, 2022, ~~included $1.5~~we received $7.1 million of payments ~~received~~ on general security letters of credit for aircraft that were previously leased to Russian airlines and $1.8 million of security deposits retained by us in connection with an aircraft lease amendment. We collected the remaining general security letters of ~~general security~~ credit totaling $0.6 million during the ~~three~~nine months ended ~~May 31,~~November 30, 2023.

Operating expenses

Total operating expenses increased ~~$18.5~~$24.2 million, attributable to:

Depreciation expense increased ~~$7.5~~$15.5 million, primarily attributable to an increase of ~~$10.4~~$28.9 million related to 2936 aircraft acquired since March 1, 2022, partially offset by a decrease of ~~$5.5~~$16.8 million resulting from 1826 aircraft sold since March 1, 2022.

Interest, net increased ~~$6.6~~$19.3 million due to a higher average cost of borrowing and higher weighted average debt outstanding of ~~$154.5~~$115.6 million.

Selling, general and administrative expenses increased ~~$0.9~~$2.9 million, primarily due to an increase in personnel costs and ongoing Russian litigation expenses.

Provision for credit losses increased ~~$6.4~~$9.9 million, ~~primarily~~ related to our credit provision for net investment in leases as a ~~$7.0 million allowance for credit losses recorded during the three months ended May 31, 2023 resulting from the reclassification~~result of 10 aircraft that were reclassified from operating leases to sales-type leases – see Note 5 in the Notes to Unaudited Consolidated Financial Statements. We also recognized a credit provision for debt securities received by us as part of an airline restructuring, as well as certain restructured receivables, during the nine months ended November 30, 2023.

Impairment of aircraft. During the nine months ended November 30, 2023, the Company recorded impairment charges totaling $37.2 million, of which $25.5 million were transactional impairments related to scheduled aircraft lease expirations and engine redeliveries. The Company recognized $37.7 million of maintenance revenue for these aircraft and engines.

We ~~recorded an impairment charge~~also recognized impairments of ~~$1.1~~$9.5 million resulting from the completion of our annual fleet review during the ~~three~~nine months ended ~~May 31,~~November 30, 2023.

During the ~~three~~nine months ended ~~May 31,~~November 30, 2022, the Company wrote off the remaining book ~~value~~values of 8 narrow-body and 1 freighter aircraft in Russia that had not been returned to us, totaling ~~$4.4~~$31.9 million. The Company recognized $20.3 million of maintenance and other revenue for these 9 aircraft related to payments received on maintenance and general security letters of credit.

The Company also recorded impairment charges totaling $36.1 million during the nine months ended November 30, 2022, primarily related to 3 narrow-body aircraft resulting from scheduled lease expirations and an early termination, as well as 1 wide-body aircraft resulting from our annual fleet review, and recognized $33.8 million of maintenance and lease rentals received in advance into revenue for the 3 narrow-body aircraft during the nine months ended November 30, 2022.

Maintenance and other ~~costs:~~costs ~~Maintenance and other costs~~ increased ~~$0.5~~$7.5 million, primarily attributable to higher aircraft insurance premiums ~~partially offset by lower~~and higher costs due to the timing of transition of aircraft to new ~~lessees.~~lessees.Higher transition costs are largely related to aircraft for which the previous lease was terminated early, and the aircraft was repossessed from the prior operator.

Other income (expense)

Total other income increased by $3.4 million, primarily consisting of cash received in connection with claims settlements from various airline customers that had entered into bankruptcy proceedings or similar-type restructurings.

Income tax provision

Income tax provision.Our income tax ~~expense~~provision was ~~$14.4~~$15.3 million and ~~$3.3~~$22.3 million ~~for the three months ended May 31, 2023~~ and ~~2022, respectively. Our~~our effective tax rate was ~~39.1%~~22.7% and ~~31.7%~~32.1% for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022, respectively. The ~~increase is~~decreases are primarily attributable to ~~changes in~~ the mix of ~~pre-tax income~~profits in taxable and non-taxable jurisdictions. The nine months ended November 30, 2023, included lower U.S. tax in our Irish aircraft owning entities resulting from aircraft sales in the prior year. The nine months ended November 30, 2022, included higher income taxes related to certain intra-entity transfers of aircraft assets to Irish aircraft-owning entities.

Aircraft Valuation

For complete information on impairment of flight equipment, refer to Note 2 in the Notes to the Unaudited Consolidated Financial Statements and “Comparative Results of Operations” above.

Annual Recoverability Assessment

aviation industry, as well as information received from third-party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors, such as the location of the aircraft and accessibility to records and technical documentation.

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

2733

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 term facilities, term financings and limited recourse securitization financings for new aircraft acquisitions;

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

•asset sales; and

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

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

During the ~~three~~nine months ended ~~May 31,~~November 30, 2023, we met our liquidity and capital resource needs with ~~$100.5~~$309.1 million of cash flows from operations and ~~$53.8~~$198.8 million of proceeds from the sale of aircraft and other flight equipment.

As of ~~May 31,~~November 30, 2023, the weighted-average maturity of our secured and unsecured debt financings was ~~2.6~~2.9 years, and we were in compliance with all applicable covenants.

We believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of ~~July 7, 2023,~~January 5, 2024, total liquidity of ~~$2.6~~$2.8 billion includes ~~$1.5~~$1.8 billion of undrawn facilities, ~~$0.5 billion of equity commitments, $0.4~~$0.6 billion of projected adjusted operating cash ~~flows, $0.1~~flow and contracted asset sales, $0.3 billion of ~~contracted asset sales~~equity commitments and $0.1 billion of unrestricted cash through ~~July~~January 1, ~~2024.~~2025. In addition, we believe payments received from lessees and other funds generated from operations, unsecured bond offerings, borrowings secured 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.

2834

Cash Flows


		Three Months Ended May 31,					Nine Months Ended November 30,
		2023		2022			2023		2022
		(Dollars in thousands)					(Dollars in thousands)
Net cash flow provided by operating activities	Net cash flow provided by operating activities	$	100,450	$	110,293	Net cash flow provided by operating activities	$	309,067	$	343,531
Net cash flow used in investing activities	Net cash flow used in investing activities	(266,322)		(14,207)		Net cash flow used in investing activities	(473,203)		(345,293)
Net cash flow provided by (used in) financing activities		70,167		(25,088)
Net cash flow provided by financing activities						Net cash flow provided by financing activities	38,107		39,288

Operating Activities:

Cash flow provided by operating activities was ~~$100.5~~$309.1 million and ~~$110.3~~$343.5 million for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022, respectively.

The ~~three~~nine months ended ~~May 31,~~November 30, 2022, included ~~$25.4~~$48.9 million of payments received on maintenance and general security letters of credit for our former Russian ~~lessees.~~lessees, as well as additional customer collections related to the repayment of lease deferrals and other outstanding receivables. Excluding the impact of these letters of credit, cash provided by operating activities increased $14.5 million, primarily due to ~~the continued increase in customer collections, including the repayment~~end-of-lease maintenance payments received by us and recognized into income as a result of scheduled lease ~~deferrals.~~expirations. This was partially offset by higher interest costs on our debt financings.

Investing Activities:

Cash flow used in investing activities was ~~$266.3~~$473.2 million and ~~$14.2~~$345.3 million for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022, respectively. The net increase of ~~$252.1~~$127.9 million was primarily attributable to ~~a $258.4~~lower proceeds from the sale of aircraft and other flight equipment of $135.3 million ~~increase in cash paid for~~during the ~~acquisition and improvement of flight equipment. During the three~~nine months ended ~~May 31, 2023, we acquired 7 aircraft as compared to 1 aircraft during the three months ended May 31, 2022.~~November 30, 2023.

Financing Activities:

Cash flow provided by financing activities was ~~$70.2~~$38.1 million and $39.3 million for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 ~~as compared to cash flow used in financing activities of $25.1 million for the three months ended May 31, 2022.~~and 2022, respectively. The net ~~cash increase~~decrease of ~~$95.3~~$1.2 million was primarily attributable to an increase of $225.5 million in ~~proceeds from~~repayments of secured and unsecured financings, net of ~~repayments.~~borrowings, partially offset by $200.0 million in proceeds from the issuance of our common stock.

Debt Obligations

For complete information on our debt obligations, refer to Note 8 in the Notes to Unaudited Consolidated Financial Statements.

Contractual Obligations

Our contractual obligations primarily consist of principal and interest payments on debt financings, aircraft acquisitions and rent payments pursuant to our office leases. Total contractual obligations decreased to ~~$5.8~~$5.5 billion at ~~May 31,~~November 30, 2023 from $6.0 billion at February 28, 2023, due to lower outstanding debt and aircraft purchase commitments, partially offset by higher ~~outstanding debt and the related~~ interest ~~thereon.~~obligations.

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~~nine months ended ~~May 31,~~November 30, 2023 and 2022, we incurred a total of ~~$24.4~~$66.9 million and ~~$27.2~~$68.4 million, respectively, of capital expenditures, including lease incentives, related to the improvement of aircraft.

As of ~~May 31,~~November 30, 2023, the weighted average age by Net Book Value of our aircraft was approximately ~~9.6~~9.4 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. Maintenance

reserves are generally paid by the lessee to provide for future maintenance events. Provided a lessee performs scheduled maintenance of the aircraft, we are required to reimburse the lessee for scheduled maintenance payments. In certain cases, we are also required to make lessor contributions, in excess of amounts a lessee may have paid, towards the costs of maintenance events performed by or on behalf of the lessee. We may incur additional maintenance and modification costs in the future in the event we are required to remarket an aircraft, such as in the event of a lessee default or a lessee fails to meet its maintenance obligations under the lease agreement.

Actual maintenance payments to us by lessees in the future may be less than projected as a result of several factors, such as in the event of a 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, 2023.

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 7 in the Notes to Unaudited Consolidated Financial Statements.

We hold a 25% equity interest in our joint venture with Mizuho Leasing and as of ~~May 31,~~November 30, 2023, the net book value of its 9 aircraft was ~~$281.9~~$275.1 million.

Foreign Currency Risk and Foreign Operations

At ~~May 31,~~November 30, 2023, ~~more than~~ 99% of our leases were payable to us in U.S. dollars. However, we incur Euro and Singapore dollar-denominated expenses in connection with our subsidiaries in Ireland and Singapore. For the ~~three~~nine months ended ~~May 31,~~November 30, 2023, expenses, such as personnel and office costs, denominated in currencies other than the U.S. dollar totaled ~~$5.7~~$15.6 million in U.S. dollar equivalents and represented 27% of total selling, general and administrative expenses. Our international operations are a significant component of our business strategy and permit us to 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, if our foreign currency exposure increases, we may enter into hedging transactions in the future to mitigate this risk. For the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022, 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 interest expense, income taxes, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-U.S. GAAP measure is helpful in identifying trends in our performance.

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

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

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

The table below shows the reconciliation of net income to EBITDA and Adjusted EBITDA for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022:


		Three Months Ended May 31,			Three Months Ended November 30,						Nine Months Ended November 30,
			2023			2022			2023		2022		2023		2022

Net income	Net income		$	22,770		$	7,682	Net income	$	25,645	$	50,104	$	53,933	$	49,093
Depreciation	Depreciation		88,789			81,318		Depreciation	86,647		82,872		261,764		246,296
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives		7,207			5,388		Amortization of lease premiums, discounts and incentives	2,641		3,763		16,972		14,669
Interest, net	Interest, net		56,891			50,294		Interest, net	57,037		50,757		170,963		151,638
Income tax provision	Income tax provision		14,360			3,329		Income tax provision	6,025		23,071		15,286		22,332
EBITDA	EBITDA		190,017			148,011		EBITDA	177,995		210,567		518,918		484,028
Adjustments:	Adjustments:							Adjustments:
Impairment of flight equipment	Impairment of flight equipment		1,097			4,428		Impairment of flight equipment	34,959		29,880		37,156		67,979

Loss on extinguishment of debt	Loss on extinguishment of debt		—			463		Loss on extinguishment of debt	—		—		—		463

Adjusted EBITDA	Adjusted EBITDA		$	191,114		$	152,902	Adjusted EBITDA	$	212,954	$	240,447	$	556,074	$	552,470

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 ~~provision(benefit)~~provision (benefit) generally represents charges (gains), which may significantly affect our financial results; 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 not 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 floating-rate debt obligations. Rent payments under our aircraft lease agreements typically do not vary during the term of the lease according to changes in interest rates. However, our borrowing agreements generally require payments based on a variable interest rate index, such as ~~LIBOR,~~ SOFR or an alternative reference rate. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities. Our borrowing agreements may provide a mechanism for determining an alternative rate of interest as entities continue to transition away from LIBOR due to reference rate reform. 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.

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. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

As of ~~May 31,~~November 30, 2023, a hypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would result in an interest expense increase/decrease of ~~$8.0~~$4.8 million and ~~$8.0~~$4.8 million, respectively, over the next twelve months.

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 31,~~November 30, 2023. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of ~~May 31,~~November 30, 2023.

Changes in Internal Control over Financial Reporting

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

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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, 2023, 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

Environmental, Social and Governance (“ESG”)

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

3339

ITEM 6. EXHIBITS


Exhibit No.						Description of Exhibit

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~~3.1 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						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).

~~4.4~~						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).

~~4.5~~4.4						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).

~~4.6~~4.5						Seventh Supplemental Indenture, dated as of June 13, 2019, between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 13, 2019).

~~4.7~~4.6						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).

~~4.8~~4.7						Indenture, dated as of January 26, 2021, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 26, 2021).

~~4.9~~4.8						Deposit Agreement, dated June 8, 2021, among Aircastle Limited, Computer share Inc. and Computershare Trust Company, N.A., acting jointly as depositary, and the holders from time to time of depositary receipts issued thereunder (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 8, 2021).

~~10.1~~4.9						~~Amendment No. 19 to Purchase Agreement COM0270-15,~~Indenture, dated as of ~~April~~July 18, 2023, ~~(Amendment No. 19), by and~~ between Aircastle ~~Holding Corporation~~Limited and ~~Embraer S.A. * ** ØØ~~Computershare Trust Company, N.A., as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 18, 2023).

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

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

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 31,~~November 30, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of ~~May 31,~~November 30, 2023 and February 28, 2023; (ii) Consolidated Statements of Income and Comprehensive Income for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022; (iii) Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~May 31,~~November 30, 2023 and 2022; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the three and nine months ended ~~May 31,~~November 30, 2023 and 2022; 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 attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K.

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

3540

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 12, 2023~~January 11, 2024


			AIRCASTLE LIMITED
			(Registrant)
			By:			/s/ Dane Silverman
						Dane Silverman
						Chief Accounting Officer and Authorized Officer

3641


			Fair Value Measurements at May 31, 2023 Using Fair Value Hierarchy
	Fair Value as of May 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:
Cash and cash equivalents	$	136,156	$	136,156	$	—	$	—	Market

Investment in debt securities	5,029		—		—		5,029		Income
Investment in equity securities	5,513		2,069		—		3,444		Market/Income

Total	$	146,698	$	138,225	$	—	$	8,473