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 November 30, ~~2020~~2021


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

~~For~~For the transition period from to

Commission File number 001-32959

AIRCASTLE LIMITED

(Exact name of registrant as specified in its charter)


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

c/o Aircastle Advisor LLC
201 Tresser Boulevard, Suite 400
Stamford
Connecticut
06901
(Address of Principal Executive Offices)

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

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

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Shares, par value $0.01 per share

N/A

NONE

Preference Shares, par value $0.01 per share

N/A

NONE

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

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

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


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

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

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

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

As of January ~~8, 2021,~~7, 2022, there were 14,048 outstanding shares of the registrant’s common shares, par value $0.01 per share.

~~Aircastle~~Aircastle Limited and Subsidiaries

Form 10-Q

Table of Contents


		Page No.
	PART I. – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets as of November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020~~28, 2021	3
	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the ~~two months ended August 31, 2020 and 2019, and the~~ three and nine months ended November 30, ~~2020~~2021 and ~~2019~~2020	34
	Consolidated Statements of Cash Flows for the nine months ended November 30, ~~2020~~2021 and ~~2019~~2020	45
	Consolidated Statements of Changes in Shareholders’ Equity for the ~~two months ended August 31, 2020 and 2019~~, ~~and~~ ~~the~~ three and nine months ended November 30 ~~2020~~, 2021 and ~~2019~~2020	67
	Notes to Unaudited Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	4339
Item 4.	Controls and Procedures	4440
	PART II. – OTHER INFORMATION
Item 1.	Legal Proceedings	4541
Item 1A.	Risk Factors	4541
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4541
Item 3.	Defaults Upon Senior Securities	4541
Item 4.	Mine Safety Disclosures	4541
Item 5.	Other Information	4541
Item 6.	Exhibits	4643
SIGNATURE		4845

PART I. — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Aircastle Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

(Unaudited)


		November 30, 2020		August 31, 2020		February 29, 2020			November 30, 2021		February 28, 2021

ASSETS	ASSETS							ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	416,621	$	514,917	$	166,083	Cash and cash equivalents	$	276,289	$	578,004
Restricted cash and cash equivalents	Restricted cash and cash equivalents	5,341		5,353		5,354		Restricted cash and cash equivalents	2,740		2,594
Accounts receivable	Accounts receivable	85,141		68,584		27,269		Accounts receivable	73,073		82,572

Flight equipment held for lease, net of accumulated depreciation of $1,939,501, $1,870,242 and $1,542,938, respectively		6,666,574		6,804,232		7,142,987
Net investment in leases, net of allowance for credit losses of $3,714, $2,972 and $6,558, respectively		312,038		317,064		426,252
Flight equipment held for lease, net of accumulated depreciation of $2,365,312 and $2,076,972, respectively								Flight equipment held for lease, net of accumulated depreciation of $2,365,312 and $2,076,972, respectively	6,542,555		6,492,471
Net investment in leases, net of allowance for credit losses of $1,828 and $864, respectively								Net investment in leases, net of allowance for credit losses of $1,828 and $864, respectively	191,013		195,376
Unconsolidated equity method investments	Unconsolidated equity method investments	35,448		34,876		33,470		Unconsolidated equity method investments	36,587		35,377
Other assets	Other assets	271,237		247,472		206,617		Other assets	335,420		311,944
Total assets	Total assets	$	7,792,400	$	7,992,498	$	8,008,032	Total assets	$	7,457,677	$	7,698,338

LIABILITIES AND SHAREHOLDERS’ EQUITY	LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES	LIABILITIES							LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts	Borrowings from secured financings, net of debt issuance costs and discounts	$	937,603	$	962,659	$	1,012,518	Borrowings from secured financings, net of debt issuance costs and discounts	$	703,592	$	768,850
Borrowings from unsecured financings, net of debt issuance costs and discounts	Borrowings from unsecured financings, net of debt issuance costs and discounts	4,130,141		4,277,766		3,884,235		Borrowings from unsecured financings, net of debt issuance costs and discounts	3,872,584		4,366,261
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	191,437		182,609		207,114		Accounts payable, accrued expenses and other liabilities	200,959		174,267
Lease rentals received in advance	Lease rentals received in advance	55,480		68,341		107,944		Lease rentals received in advance	52,887		58,013

Security deposits	Security deposits	82,706		90,102		109,663		Security deposits	72,608		80,699
Maintenance payments	Maintenance payments	568,135		586,835		650,369		Maintenance payments	498,995		519,178
Total liabilities	Total liabilities	5,965,502		6,168,312		5,971,843		Total liabilities	5,401,625		5,967,268

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

SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY							SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding		—		—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at November 30 and August 31, 2020; and 75,076,794 shares issued and outstanding at February 29, 2020		0		0		751
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, 2021 and no shares issued and outstanding at February 28, 2021								Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at November 30, 2021 and no shares issued and outstanding at February 28, 2021	—		—
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at November 30, 2021 and February 28, 2021								Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at November 30, 2021 and February 28, 2021	—		—
Additional paid-in capital	Additional paid-in capital	1,485,777		1,485,777		1,456,977		Additional paid-in capital	1,878,774		1,485,777
Retained earnings	Retained earnings	341,121		338,409		578,461		Retained earnings	177,278		245,293

Total shareholders’ equity	Total shareholders’ equity	1,826,898		1,824,186		2,036,189		Total shareholders’ equity	2,056,052		1,731,070

Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,792,400	$	7,992,498	$	8,008,032	Total liabilities and shareholders’ equity	$	7,457,677	$	7,698,338

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

Aircastle Limited and Subsidiaries

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

(Dollars in thousands)

(Unaudited)


		Two Months Ended August 31,				Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended November 30,				Nine Months Ended November 30,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020
Revenues:	Revenues:													Revenues:
Lease rental revenue	Lease rental revenue	$	93,891	$	136,156	$	139,493	$	199,847	$	473,566	$	588,141	Lease rental revenue	$	156,088	$	139,493	$	425,802	$	473,566
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue	3,208		5,543		4,839		7,760		14,903		24,407		Direct financing and sales-type lease revenue	2,724		4,839		8,377		14,903
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	(3,544)		(3,835)		(5,384)		(5,819)		(17,360)		(17,077)		Amortization of lease premiums, discounts and incentives	(8,867)		(5,384)		(20,026)		(17,360)
Maintenance revenue	Maintenance revenue	19,158		(644)		24,843		15,360		121,508		55,807		Maintenance revenue	33,510		24,843		81,204		121,508
Total lease revenue	Total lease revenue	112,713		137,220		163,791		217,148		592,617		651,278		Total lease revenue	183,455		163,791		495,357		592,617
Gain (loss) on sale of flight equipment		(185)		4,448		12,951		26,512		24,181		39,134
Gain on sale of flight equipment														Gain on sale of flight equipment	7,420		12,951		17,944		24,181
Other revenue	Other revenue	1,019		2,276		4,169		5,215		17,962		9,370		Other revenue	605		4,169		1,641		17,962
Total revenues	Total revenues	113,547		143,944		180,911		248,875		634,760		699,782		Total revenues	191,480		180,911		514,942		634,760

Operating expenses:	Operating expenses:													Operating expenses:
Depreciation	Depreciation	57,993		60,703		86,845		90,737		262,806		269,689		Depreciation	84,526		86,845		250,308		262,806
Interest, net	Interest, net	37,355		44,071		59,945		63,204		173,996		194,952		Interest, net	50,515		59,945		163,965		173,996
Selling, general and administrative (including non-cash share-based payment expense of $0 and $2,283 for the two months ended August 31, 2020 and 2019, $0 and $3,209 for the three months ended November 30, 2020 and 2019, and $28,049 and $9,793 for the nine months ended November 30, 2020 and 2019, respectively)		8,249		11,999		15,145		18,389		76,152		55,060
Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the nine months ended November 30, 2021 and 2020, respectively)														Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the nine months ended November 30, 2021 and 2020, respectively)	17,141		14,403		48,714		70,897
Provision for credit losses														Provision for credit losses	958		742		970		5,255
Impairment of flight equipment	Impairment of flight equipment	9,596		0		9,867		0		299,551		7,404		Impairment of flight equipment	69,111		9,867		110,926		299,551
Maintenance and other costs	Maintenance and other costs	2,544		2,911		4,207		6,696		14,044		18,744		Maintenance and other costs	8,660		4,207		24,275		14,044
Total operating expenses	Total operating expenses	115,737		119,684		176,009		179,026		826,549		545,849		Total operating expenses	230,911		176,009		599,158		826,549

Other expense:
Other income (expense):														Other income (expense):
Loss on extinguishment of debt	Loss on extinguishment of debt	0		(7,577)		(43)		0		(108)		(7,577)		Loss on extinguishment of debt	—		(43)		(14,156)		(108)
Merger expenses	Merger expenses	67		0		(450)		(3,044)		(32,492)		(3,044)		Merger expenses	—		(450)		—		(32,492)
Other	Other	(173)		(193)		0		(198)		(191)		(3,987)		Other	63		—		57,682		(191)
Total other expense		(106)		(7,770)		(493)		(3,242)		(32,791)		(14,608)
Total other income (expense)														Total other income (expense)	63		(493)		43,526		(32,791)

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	(2,296)		16,490		4,409		66,607		(224,580)		139,325		Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	(39,368)		4,409		(40,690)		(224,580)
Income tax provision	Income tax provision	9,325		1,283		2,269		7,659		14,738		17,280		Income tax provision	23,504		2,269		22,877		14,738
Earnings of unconsolidated equity method investments, net of tax	Earnings of unconsolidated equity method investments, net of tax	426		1,160		572		601		1,978		2,281		Earnings of unconsolidated equity method investments, net of tax	465		572		1,210		1,978
Net income (loss)	Net income (loss)	$	(11,195)	$	16,367	$	2,712	$	59,549	$	(237,340)	$	124,326	Net income (loss)	$	(62,407)	$	2,712	$	(62,357)	$	(237,340)
Preference share dividends														Preference share dividends	—		—		(5,658)		—
Net income (loss) available to common shareholders														Net income (loss) available to common shareholders	$	(62,407)	$	2,712	$	(68,015)	$	(237,340)

Total comprehensive income (loss)		$	(11,195)	$	16,367	$	2,712	$	59,549	$	(237,340)	$	124,326

Total comprehensive income (loss) available to common shareholders														Total comprehensive income (loss) available to common shareholders	$	(62,407)	$	2,712	$	(68,015)	$	(237,340)

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)

Nine Months Ended November 30,
2020 2019
Cash flows from operating activities:
Net income (loss) $ (237,340) $ 124,326
Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities:
Depreciation 262,806 269,689
Amortization of deferred financing costs 10,642 11,105
Amortization of lease premiums, discounts and incentives 17,360 17,077
Deferred income taxes 12,109 10,512
Non-cash share-based payment expense 28,049 9,793
Collections on net investment in leases 12,953 19,081
Security deposits and maintenance payments included in earnings (107,732) (40,496)
Gain on sale of flight equipment (24,181) (39,134)
Loss on extinguishment of debt 108 7,577
Impairment of flight equipment 299,551 7,404
Provision for credit losses 5,255 0
Other (1,991) 219
Changes in certain assets and liabilities:
Accounts receivable (55,946) (6,516)
Other assets (40,780) 6,689
Accounts payable, accrued expenses and other liabilities (1,875) (2,951)
Lease rentals received in advance (54,608) 16,604
Net cash and restricted cash provided by operating activities 124,380 410,979
Cash flows from investing activities:
Acquisition and improvement of flight equipment (134,263) (953,170)
Proceeds from sale of flight equipment 113,588 345,318
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits (4,083) (13,093)
Unconsolidated equity method investments and associated costs 0 (11,681)
Other (594) 3,572
Net cash and restricted cash used in investing activities (25,352) (629,054)
Cash flows from financing activities:
Repurchase of shares (25,536) (9,873)
Parent contribution at Merger 25,536 0
Proceeds from secured and unsecured debt financings 1,193,871 2,141,848
Repayments of secured and unsecured debt financings (1,027,164) (1,814,686)
Debt extinguishment costs (108) (7,183)
Deferred financing costs (6,358) (13,343)
Security deposits and maintenance payments received 63,443 149,195
Security deposits and maintenance payments returned (48,162) (81,351)
Dividends paid (24,025) (67,453)
Net cash and restricted cash provided by financing activities 151,497 297,154
Net increase in cash and restricted cash: 250,525 79,079
Cash and restricted cash at beginning of period 171,437 133,299
Cash and restricted cash at end of period $ 421,962 $ 212,378

~~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)~~

Nine Months Ended November 30,
2020 2019
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents $ 416,621 $ 197,817
Restricted cash and cash equivalents 5,341 14,561
Unrestricted and restricted cash and cash equivalents $ 421,962 $ 212,378
Supplemental disclosures of cash flow information:
Cash paid for interest $ 176,284 $ 204,951
Cash paid for income taxes $ 1,244 $ 995
Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions $ 29,869 $ 28,862
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment $ 45,443 $ 62,751
Transfers from flight equipment held for lease to Net investment in leases and Other assets $ 6,584 $ 62,129


	Nine Months Ended November 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(62,357)	$	(237,340)
Adjustments to reconcile net loss to net cash and restricted cash provided by operating activities:
Depreciation	250,308		262,806
Amortization of deferred financing costs	12,483		10,642
Amortization of lease premiums, discounts and incentives	20,026		17,360
Deferred income taxes	8,998		12,109
Non-cash share-based payment expense	—		28,049

Collections on net investment in leases	11,727		12,953
Security deposits and maintenance payments included in earnings	(58,480)		(107,732)
Gain on sale of flight equipment	(17,944)		(24,181)
Loss on extinguishment of debt	14,156		108
Impairment of flight equipment	110,926		299,551
Provision for credit losses	970		5,255
Other	(1,210)		(1,991)
Changes in certain assets and liabilities:
Accounts receivable	4,059		(55,946)
Other assets	(23,305)		(40,780)
Accounts payable, accrued expenses and other liabilities	7,205		(1,875)
Lease rentals received in advance	(6,127)		(54,608)
Net cash and restricted cash provided by operating activities	271,435		124,380
Cash flows from investing activities:
Acquisition and improvement of flight equipment	(533,741)		(134,263)
Proceeds from sale of flight equipment	127,584		113,588


Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits	(11,361)		(4,083)


Other	(64)		(594)
Net cash and restricted cash used in investing activities	(417,582)		(25,352)
Cash flows from financing activities:
Repurchase of shares	—		(25,536)
Parent contribution at Merger	—		25,536
Net proceeds from preference share issuance	393,347		—
Proceeds from secured and unsecured debt financings	—		1,193,871
Repayments of secured and unsecured debt financings	(566,885)		(1,027,164)
Debt extinguishment costs	(13,372)		(108)
Deferred financing costs	(5,170)		(6,358)



Security deposits and maintenance payments received	63,012		63,443
Security deposits and maintenance payments returned	(20,696)		(48,162)

Dividends paid	(5,658)		(24,025)

Net cash and restricted cash (used in) provided by financing activities	(155,422)		151,497
Net (decrease) increase in cash and restricted cash:	(301,569)		250,525
Cash and restricted cash at beginning of period	580,598		171,437

Cash and restricted cash at end of period	$	279,029	$	421,962

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)


	Nine Months Ended November 30,
	2021		2020
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents	$	276,289	$	416,621
Restricted cash and cash equivalents	2,740		5,341

Unrestricted and restricted cash and cash equivalents	$	279,029	$	421,962

Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	151,743	$	176,284
Cash paid for income taxes	$	308	$	1,244
Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions	$	11,570	$	29,869

Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment	$	14,765	$	45,443
Transfers from flight equipment held for lease to Net investment in leases and Other assets	$	22,134	$	6,584

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 (Deficit)				Total Shareholders’ Equity
															Shares			Amount				Shares		Amount
Balance, February 28, 2021													Balance, February 28, 2021		14,048			$	—			—		$	—			$	1,485,777			$	245,293			$	1,731,070
Net loss													Net loss		—			—				—		—				—				(9,753)				(9,753)
Balance, May 31, 2021													Balance, May 31, 2021		14,048			$	—			—		$	—			$	1,485,777			$	235,540			$	1,721,317
Net income													Net income		—			—				—		—				—				9,803				9,803
Issuance of preference shares													Issuance of preference shares		—			—				400		—				393,362				—				393,362
Preference share dividends													Preference share dividends		—			—				—		—				—				(5,658)				(5,658)
Balance, August 31, 2021													Balance, August 31, 2021		14,048			$	—			400		$	—			$	1,879,139			$	239,685			$	2,118,824
Net loss													Net loss		—			—				—		—				—				(62,407)				(62,407)
Issuance of preference shares													Issuance of preference shares		—			—				—		—				(365)				—				(365)

Balance, November 30, 2021													Balance, November 30, 2021		14,048			$	—			400		$	—			$	1,878,774			$	177,278			$	2,056,052

					Additional Paid-In Capital		Retained Earnings				Total Shareholders’ Equity
		Common Shares							Total Shareholders’ Equity	Common Shares							Preference Shares						Additional Paid-In Capital			Retained Earnings (Deficit)				Total Shareholders’ Equity
		Shares	Amount							Shares					Amount			Shares				Amount
Balance, February 29, 2020	Balance, February 29, 2020	75,076,794	$	751	$	1,456,977	$	578,461					$	2,036,189		Balance, February 29, 2020	75,076,794			$	751		—			$	—			$	1,456,977			$	578,461			$	2,036,189

Amortization of share-based payments	Amortization of share-based payments	—	—		28,049		—				28,049		Amortization of share-based payments		—			—				—		—				28,049				—				28,049

Net loss	Net loss	—	—		—		(228,857)				(228,857)		Net loss		—			—				—		—				—				(26,539)				(26,539)

Payment of unvested shares at Merger	Payment of unvested shares at Merger	(101,809)	(1)		(25,535)		—				(25,536)		Payment of unvested shares at Merger		(101,809)			(1)				—		—				(25,535)				—				(25,536)
Parent contribution at Merger	Parent contribution at Merger	—	—		25,536		—				25,536		Parent contribution at Merger		—			—				—		—				25,536				—				25,536
Share cancellation and re-issuance at Merger	Share cancellation and re-issuance at Merger	(74,960,937)	(750)		750		—				0		Share cancellation and re-issuance at Merger		(74,960,937)			(750)				—		—				750				—				—

Balance, June 30, 2020		14,048	0		1,485,777		349,604				1,835,381
Balance, May 31, 2020													Balance, May 31, 2020		14,048			$	—			—		$	—			$	1,485,777			$	551,922			$	2,037,699
Net loss	Net loss	—	—		—		(11,195)				(11,195)		Net loss		—			—				—		—				—				(213,513)				(213,513)
Balance, August 31, 2020	Balance, August 31, 2020	14,048	0		1,485,777		338,409				1,824,186		Balance, August 31, 2020		14,048			$	—			—		$	—			$	1,485,777			$	338,409			$	1,824,186
Net income	Net income	—	—		—		2,712				2,712		Net income		—			—				—		—				—				2,712				2,712

Balance, November 30, 2020	Balance, November 30, 2020	14,048	$	0	$	1,485,777	$	341,121			$	1,826,898	Balance, November 30, 2020		14,048			$	—			—		$	—			$	1,485,777			$	341,121			$	1,826,898

					Additional Paid-In Capital		Retained Earnings (Deficit)				Total Shareholders’ Equity
		Common Shares							Total Shareholders’ Equity
		Shares	Amount
Balance, February 28, 2019		75,066,346	$	751	$	1,458,783	$	534,333					$	1,993,867
Issuance of common shares to directors and employees		56,043	0		0		—						0
Repurchase of common shares from stockholders, directors and employees		(139,275)	(1)		(2,863)		—				(2,864)
Amortization of share-based payments		—	—		3,818		—				3,818
Reclassification of prior year director stock award liability		—	—		796		—				796

Dividends declared		—	—		—		(22,543)				(22,543)
Net income		—	—		—		48,410				48,410

Balance, June 30, 2019		74,983,114	750		1,460,534		560,200				2,021,484

Repurchase of common shares from stockholders, directors and employees		(347,784)	(4)		(7,005)		—				(7,009)
Amortization of share-based payments		—	—		2,100		—				2,100

Dividends declared		—	—		—		(22,485)				(22,485)
Net income		—	—		—		16,367				16,367

Balance, August 31, 2019		74,635,330	746		1,455,629		554,082				2,010,457
Amortization of share-based payments		—	—		2,821		—				2,821
Dividends declared		—	—		—		(23,789)				(23,789)
Net income		—	—		—		59,549				59,549

Balance, November 30, 2019		74,635,330	$	746	$	1,458,450	$	589,842			$	2,049,038

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)

November 30, ~~2020~~2021

Note 1. Summary of Significant Accounting Policies

Organization and Basis of Presentation

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

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

As previously disclosed, on September 30, 2020, the Company’s Board of Directors unanimously agreed to change the Company’s fiscal year end to the twelve-month period ending on the last day in February. This change better aligns the Company’s financial reporting period with the financial reporting cycle of its shareholders, Marubeni Corporation and Mizuho Leasing.

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle directly or indirectly owns all outstanding common shares of its subsidiaries. The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company manages, analyzes and reports on its business and results of operations based on 1 operating segment: leasing, financing, selling and managing commercial flight equipment. Our Chief Executive Officer is the chief operating decision maker.

The accompanying consolidated financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, in our opinion, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. However, we believe that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended ~~December 31, 2019, as amended, and the Company’s Transition Report on Form 10-Q for the two months ended~~ February ~~29, 2020.~~

~~Effective January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326,~~ ~~Financial Instruments - Credit Losses~~ (“ASC 326”). The standard applies to entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. The standard affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and other financial assets not excluded from the scope that have the contractual right to receive cash. Net investment in leases comprised the Company’s financial asset principally affected by the standard. Operating lease receivables are not within the scope of ASC 326.

Upon the Company’s adoption of ASC 326, our net investment in leases was recorded in the consolidated financial statements net of an allowance for credit losses. This allowance for credit losses reflects the Company’s estimate of lessee default probabilities and loss given default percentages. The estimate of expected credit losses considers relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of reported amounts. Our allowance also considers the potential loss due to non-credit risk related to unguaranteed residual values. We adopted the standard using the “modified retrospective” approach with a January 1, 2020 adjustment to retained earnings. The adoption of the standard did not have a material impact on our consolidated financial statements or related disclosures.

~~Effective January 1, 2020, the Company adopted, the FASB Accounting Standard Update (“ASU”) No. 2018-13,~~ ~~Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement~~. The standard modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The adoption of the standard did not have a material impact on our consolidated financial statements

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

~~or related disclosures.~~

~~Effective January 1, 2020, the Company adopted the FASB ASU No. 2018-15,~~ ~~Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.~~ The standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use-software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The adoption of the standard did not have a material impact on our consolidated financial statements or related disclosures.

~~Effective January 1, 2020, the Company adopted the FASB ASU No. 2018-17,~~ ~~Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities~~. The standard changes how all entities evaluate decision-making fees under the variable interest entity guidance. The standard is applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The adoption of the standard did not have a material impact on our consolidated financial statements or related disclosures.28, 2021.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of November 30, ~~2020,~~2021, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Aircastle and all its ~~subsidiaries. Aircastle consolidates 2~~subsidiaries, including any Variable Interest ~~Entities~~Entity (“~~VIEs”~~VIE”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

~~We consolidate VIEs~~Risk and Uncertainties

In the normal course of business, Aircastle encounters several significant types of economic risk including credit, market, aviation industry and capital market risks. Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations to Aircastle. Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings. Aviation industry risk is the risk of a downturn in the commercial aviation industry which ~~we have determined that we are~~could adversely impact a lessee’s ability to make payments, increase the ~~primary beneficiary. We use judgment when deciding: (a) whether an entity is subject to consolidation as a VIE; (b) who~~risk of early lease terminations and depress lease rates and the ~~variable interest holders are; (c) the potential expected losses and residual returns~~value of the ~~variable interest holders; and (d) which variable interest holder~~Company’s aircraft. Capital market risk is the ~~primary beneficiary. When determining which enterprise~~risk that the Company is unable to obtain capital at reasonable rates to fund the ~~primary beneficiary, we consider: (1) the entity’s purpose and design; (2) which variable interest holder has the power~~growth of its business or to direct the activities that most significantly impact the entity’s economic performance; and (3) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When certain events occur, we reconsider whether we are the primary beneficiary of VIEs. We do not reconsider whether we are a primary beneficiary solely because of operating losses incurred by an entity.refinance existing debt facilities.

Use of Estimates

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2021

COVID-19 Pandemic

COVID-19 has had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic. While there have been some improvements in certain markets recently, according to IATA, as of November 30, 2021, air travel was still down to approximately 53% compared to normal levels and a full recovery to pre-pandemic levels is not expected for several years. Substantially all the world’s airlines have experienced financial difficulties and liquidity challenges, including many of our customers. While we believe long-term demand for air travel will return to historical trends over time, the near-term impacts of COVID-19’s economic shock are material; the extent and duration of those impacts cannot currently be determined.

Even as the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection. As of January 7, 2022, our total deferrals, net of repayments, were $87,219. These deferrals have been granted to 19 customers for an average of six to twelve months of lease rentals and represent 15% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended November 30, 2021. Of the total deferrals, $81,797 is included in Accounts receivable or Other assets as of November 30, 2021, with the balance representing future lease payments. Approximately 87% of our total deferrals as of January 7, 2022, have been agreed to as part of broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions. Many have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.

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

As of January 7, 2022, 6 of our customers are subject to judicial insolvency proceedings or similar protection. These customers lease 21 aircraft, which represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and 12% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended November 30, 2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, lease rental revenue for certain customers may be recognized on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.

LATAM, our second largest customer, is included in the above group and represents 7% of our net book value of flight equipment and 7% of our Lease rental revenue as of and for the twelve months ended November 30, 2021. We have signed restructured leases for all 13 of our LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process. During the second quarter of 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered) (the “LATAM Bankruptcy”). The allowed amount of our unsecured claims was approved by the Bankruptcy Court and proceeds from the sales of these claims in the amount of $55,213 were received during the second quarter of 2021 and recognized in Other income (expense).

Lease Revenue Recognition

We lease flight equipment under net operating leases with lease terms typically ranging from three to seven years. We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals. Operating lease rentals that adjust based on a London Interbank Offered Rate (“LIBOR”) index are recognized on a straight-line basis over the lease term using the prevailing rate at lease commencement. Changes

Aircastle Limited and Subsidiaries

Notes to ~~rate-based lease rentals are recognized~~Unaudited Consolidated Financial Statements

(Dollars in ~~the statements of income (loss) in the period of change.~~thousands, except per share amounts)

November 30, 2021

In certain instances, we may provide lease concessions to customers, generally in the form of lease rental deferrals. While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease term is generally the same as that which was required under the original lease agreement. We

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other ~~assets in our Consolidated Balance Sheets.~~assets.

IfShould we determine that the collectability of rental payments is no longer probable (including any deferral thereof), we will recognize lease rental revenue using a cash basis of accounting rather than an accrual method. In the period we conclude that collection of lease payments is no longer probable, we recognize any difference between revenue amounts recognized to date under the accrual method and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to lease rental revenue.

The COVID-19 virus has had an unprecedented negative impact on the global economy, and in particular on the aviation sector. As a result of COVID-19, there has been a dramatic slowdown in air traffic, with many markets in near complete shutdown. According to the International Air Transport Association (“IATA”), as of November 2020, air travel was down to approximately 34% of normal levels and a full recovery to pre-pandemic levels is not expected for several years. Substantially all the world’s airlines are experiencing financial difficulties and liquidity challenges. While we believe the long-term demand for air travel will return to historical trends over time, the near-term impacts of the COVID-19 virus’ economic shock are material; the extent and duration of which cannot currently be determined.

Airlines have been seeking to preserve liquidity through a combination of requesting government support, raising debt and equity, delaying or canceling new aircraft orders, furloughing employees, as well as requesting deferrals from lessors. We have agreed to defer near-term lease payments with certain of our airline customers, which they are obliged to repay over time. As of January 8, 2021, we have agreed to defer approximately $101,000 in near-term lease payments, including $76,460 that appear in our Consolidated Balance Sheets as components of Accounts receivable, Net investment in leases, or Other assets as of November 30, 2020. This represents approximately 15% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended November 30, 2020. Deferrals have been agreed to with 37 airlines, representing 46% of our customer base, and for an average deferral of five months of lease rentals. In certain situations, we have agreed to broader restructurings of contractual terms, for example obtaining better security packages, term extensions, or other valuable considerations in exchange for short-term economic concessions.

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

As of January 8, 2021, 7 of our customers are subject to judicial insolvency proceedings or similar protection. We lease 22 aircraft to these customers, which comprise 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases) and 11% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended November 30, 2020. NaN of these customers is LATAM, our second largest customer, which represents 7% of our net book value of flight equipment and 6% of our Lease rental revenue as of and for the twelve months ended November 30, 2020. Based on historic experience, the judicial process can take anywhere from twelve months to eighteen months to be resolved. We are actively engaged in the various judicial proceedings to protect our economic interests. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done on a cash basis of accounting rather than the accrual method depending on the customers lease security arrangements.

Impairment of Flight Equipment

We perform aan annual recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft ~~basis annually during the second quarter. In addition, a~~basis. A recoverability assessment is also performed whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in an aircraft ~~model’s~~type’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued. When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an ~~aircraft, economic conditions and other factors.~~aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2 – Fair Value Measurements.

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

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

~~Net Investment in Leases~~

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

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

Recent Accounting Pronouncements

In March 2020, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU No.~~Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform ~~(Topic 848)~~Topic 848 (“ASC 848”), ~~Facilitation of~~in response to the ~~Effects of Reference Rate Reform on Financial Reporting. The standard applies~~market transition from the LIBOR and other interbank offered rates (“IBORs”) to alternative reference rates. U.S. GAAP requires entities ~~that have contracts,~~to evaluate whether a contract modification, such as ~~debt agreements, lease agreements~~the replacement or ~~derivative instruments, which reference LIBOR or another~~change of a reference rate, ~~expected~~results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to ~~be discontinued due to reference rate reform. Entities can~~ elect not to apply certain modification accounting requirements ~~for contract modifications that replace a reference rate~~to contracts affected by reference rate reform. ~~If elected, such contracts are accounted for as a continuation of the existing contract and no reassessments or re-measurements are required.~~ The standard ~~is effective for all entities from March 12, 2020~~provides this temporary election through December 31, 2022, and ~~does not apply~~cannot be applied to contract modifications ~~made~~that occur after December 31, 2022. Reference rate reform will primarily impact our lease and debt arrangements for which floating-rate lease rentals and interest expense are based on LIBOR. As of November 30, 2021, less than 1% of our fleet have floating-rate lease rentals and, for the three and nine months ended November 30, 2021, 4% of our interest expense was derived from floating-rate debt which is referenced to LIBOR. We have not adopted ASC 848 ~~for this interim period~~ and are currently evaluating the election available to us under the ~~standard and the impact it may have on our financial statements.~~

In April 2020, the FASB Staff issued a question-and-answer document (the “Q&A”) regarding accounting for lease concessions related to the effects of the COVID-19 pandemic. The Q&A provides that entities may elect to apply or not apply the lease modification guidance in ASC 842, “Leases”, for lease concessions provided by lessors as a result of thestandard.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2020~~2021

~~COVID-19 pandemic.~~Effective, March 1, 2021, the Company adopted FASB ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The ~~Company has elected~~guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the current guidance and by clarifying and amending the current guidance. The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. This adoption did not ~~to apply the lease modification guidance in ASC 842 for such lease concessions – see “Lease Revenue Recognition” above.~~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 use of unobservable inputs. ~~These inputs are prioritized as follows:~~

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

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

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

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

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

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

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

The following tables set forth our financial assets as of November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020~~28, 2021 that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.


				Fair Value Measurements at November 30, 2020 Using Fair Value Hierarchy										Fair Value Measurements at November 30, 2021 Using Fair Value Hierarchy
		Fair Value as of November 30, 2020		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, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:	Assets:										Assets:
Cash and cash equivalents	Cash and cash equivalents	$	416,621	$	416,621	$	0	$	0	Market	Cash and cash equivalents	$	276,289	$	276,289	$	—	$	—	Market
Restricted cash and cash equivalents	Restricted cash and cash equivalents	5,341		5,341		0		0		Market	Restricted cash and cash equivalents	2,740		2,740		—		—		Market

Total	Total	$	421,962	$	421,962	$	0	$	0		Total	$	279,029	$	279,029	$	—	$	—

Fair Value Measurements at August 31, 2020
Using Fair Value Hierarchy
Fair Value as of August 31, 2020 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 $ 514,917 $ 514,917 $ 0 $ 0 Market
Restricted cash and cash equivalents 5,353 5,353 0 0 Market
Total $ 520,270 $ 520,270 $ 0 $ 0

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~


				Fair Value Measurements at February 29, 2020 Using Fair Value Hierarchy										Fair Value Measurements at February 28, 2021 Using Fair Value Hierarchy
		Fair Value as of February 29, 2020		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique		Fair Value as of February 28, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Valuation Technique
Assets:	Assets:										Assets:
Cash and cash equivalents	Cash and cash equivalents	$	166,083	$	166,083	$	0	$	0	Market	Cash and cash equivalents	$	578,004	$	578,004	$	—	$	—	Market
Restricted cash and cash equivalents	Restricted cash and cash equivalents	5,354		5,354		0		0		Market	Restricted cash and cash equivalents	2,594		2,594		—		—		Market
Derivative assets		19		0		19		0		Market

Total	Total	$	171,456	$	171,437	$	19	$	0		Total	$	580,598	$	580,598	$	—	$	—

Our cash and cash equivalents, ~~along with our~~and restricted cash and cash equivalents balances, consist largely of money market securities that are highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within ~~our~~the fair value hierarchy. Our interest rate derivative included in Level 2 consists of a United States dollar-denominated interest rate cap, and its fair value is based on the market comparisons for similar instruments. We also considered the credit rating and risk of the counterparty providing the interest rate cap based on quantitative and qualitative factors.

For ~~the two months ended August 31, 2020 and 2019, and~~ the three and nine months ended November 30, ~~2020,~~2021, we had 0no transfers into or out of Level 3.

We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on the average of the market approach that uses Level 2 inputs, which include third party appraisal data and an income approach that uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2021

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

Aircraft Valuation

Impairment of Flight Equipment

~~For~~During the ~~two~~three months ended ~~August 31, 2020,~~November 30, 2021, the Company recorded transactional impairment charges totaling $69,111 related to 2 narrow-body and 1 wide-body aircraft on lease to Garuda Indonesia, resulting from the lessee’s default on its lease obligations. The Company recognized $24,268 of ~~$9,596,~~maintenance revenue for these 3 aircraft.

During the nine months ended November 30, 2021, the Company recorded impairment charges totaling $110,926, of which $107,705 were transactional impairments, primarily related to 6 narrow-body and 1 ~~narrow-body aircraft for which the customer rejected the~~wide-body aircraft. The impairment charges resulted from early lease ~~due to judicial insolvency proceedings. We also~~terminations, scheduled lease expiration and a lessee default. The Company recognized ~~$9,367~~$61,414 of maintenance ~~reserves and security deposits into~~ revenue for ~~this 1~~these 7 aircraft.

~~For~~During the three months ended November 30, 2020, the Company recorded transactional impairment charges totaling $9,867, ~~which~~ primarily related to the scheduled lease expirations of 2 narrow-body aircraft. The Company ~~also~~ recognized $15,200 of maintenance revenue ~~related to~~for these 2 aircraft.

During the nine months ended November 30, 2020, the Company recorded impairment charges totaling $299,551, of which $256,510 were transactional impairments, ~~which~~ primarily related to 13 narrow-body and 5 wide-body aircraft. The Company ~~also~~ recognized $107,448 of maintenance ~~reserves~~ and security deposits into revenue for these 18 aircraft. The impairment charges were attributable to early lease terminations, scheduled lease expirations, lessee defaults, ~~and/or~~ judicial insolvency proceedings, or as a result of our annual recoverability ~~assessment – refer to the section below for additional details.~~

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

assessment.

Annual Recoverability Assessment

We ~~completed~~performed our annual recoverability assessment of all our aircraft induring the ~~second~~third quarter of ~~2020. Of the $299,551 impairment charges~~2021. No impairments were recorded ~~for the nine months ended November 30, 2020, we recorded $43,040 related to 1 narrow-body and 1 wide-body aircraft~~ as a result of our annual recoverability ~~assessment.~~ assessment – see the discussion above for further detail regarding transactional impairment charges recorded during the three and nine months ended November 30, 2021.

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

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

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

November 30, 2021

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and amounts borrowed under ~~financings and interest rate derivatives.~~financings. The fair value of cash and cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair value of our senior notes is estimated using quoted market prices. The fair values of all our other financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.

The carrying amounts and fair values of our financial instruments at November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020~~28, 2021 were as follows:


		November 30, 2020				August 31, 2020				February 29, 2020					November 30, 2021				February 28, 2021
		Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability			Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Credit Facilities	Credit Facilities	$	0	$	0	$	150,000	$	148,737	$	100,000	$	100,000	Credit Facilities	$	—	$	—	$	—	$	—
Unsecured Term Loan	Unsecured Term Loan	215,000		209,784		215,000		209,326		215,000		215,000		Unsecured Term Loan	215,000		211,728		215,000		210,290
ECA Financings		40,055		41,814		43,649		45,680		50,745		52,593
Export Credit Agency (“ECA”) Financings														Export Credit Agency (“ECA”) Financings	23,455		24,173		36,423		37,942
Bank Financings	Bank Financings	905,219		903,111		927,385		925,683		971,693		1,002,620		Bank Financings	684,436		706,651		738,353		740,086
Senior Notes	Senior Notes	3,950,000		4,088,771		3,950,000		3,901,958		3,600,000		3,807,956		Senior Notes	3,700,000		3,906,613		4,200,000		4,402,722

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

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

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

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at November 30, ~~2020~~2021 were as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount(1)		Year Ending February 28/29,	Amount(1)
Remainder of 2020		$	175,301
2021		660,667
Remainder of 2021				Remainder of 2021	$	160,213
2022	2022	572,525		2022	608,279
2023	2023	500,271		2023	555,461
2024	2024	373,021		2024	423,515
2025				2025	277,974
Thereafter	Thereafter	508,869		Thereafter	722,000
Total	Total	$	2,790,654	Total	$	2,747,442

_______________

(1)Reflects impact of lessee lease rental deferrals.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2021

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


		Two Months Ended August 31,				Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended November 30,				Nine Months Ended November 30,
Region	Region	2020		2019		2020		2019		2020		2019		Region	2021		2020		2021		2020
Asia and Pacific	Asia and Pacific	40	%	44	%	37	%	44	%	40	%	44	%	Asia and Pacific	27	%	37	%	31	%	40	%
Europe	Europe	34	%	26	%	34	%	25	%	31	%	27	%	Europe	31	%	34	%	34	%	31	%
Middle East and Africa	Middle East and Africa	5	%	9	%	6	%	8	%	7	%	9	%	Middle East and Africa	5	%	6	%	5	%	7	%
North America	North America	12	%	9	%	12	%	10	%	11	%	9	%	North America	15	%	12	%	15	%	11	%
South America	South America	9	%	12	%	11	%	13	%	11	%	11	%	South America	22	%	11	%	15	%	11	%

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

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

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

Two Months Ended August 31, Three Months Ended November 30, Nine Months Ended November 30,
2020 2019 2020 2019 2020 2019
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 Number of Lessees Combined % of Lease
Rental Revenue Number of Lessees Combined % of Lease
Rental Revenue
Largest lessees by lease rental revenue 5 40 % 3 22 % 4 31% 3 21% 4 29% 3 21%

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~


	Three Months Ended November 30,				Nine Months Ended November 30,
	2021		2020		2021		2020
	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue	Number of Lessees	Combined % of Lease Rental Revenue
Largest lessees by lease rental revenue	4	34%	4	31%	5	34%	4	29%

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


		Two Months Ended August 31,								Three Months Ended November 30,								Nine Months Ended November 30,												Three Months Ended November 30,												Nine Months Ended November 30,
		2020				2019				2020				2019				2020				2019								2021						2020						2021						2020
Country	Country	Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue		% of Total Revenue		Revenue				% of Total Revenue		Country		Revenue			% of Total Revenue			Revenue			% of Total Revenue			Revenue			% of Total Revenue			Revenue		% of Total Revenue
Canada(1)	Canada(1)	$	0	0	%	$	0	0	%	$	24,338	13	%	$	0	0	%	$	0	0	%	$	0			0	%	Canada(1)		$	—		—	%		$	24,338		13	%		$	—		—	%		$	—	—	%
India(2)	India(2)	22,606		20	%	19,592		14	%	22,455		12	%	27,673		11	%	75,951		12	%	96,117				14	%	India(2)		23,051			12	%		22,455			12	%		63,569			12	%		75,951		12	%
Mexico(3)		0		0	%	0		0	%	0		0	%	0		0	%	85,711		14	%	0				0	%
Indonesia(3)																								Indonesia(3)	26,581				14		%	—			—		%	—			—		%	—			—		%
Mexico(4)																								Mexico(4)	—				—		%	—			—		%	—			—		%	85,711			14		%

_______________

(1)For the three months ended November 30, 2020, total revenue attributable to Canada included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $19,260. ~~For~~Total revenue attributable to Canada was less than 10% for the ~~two~~three and nine months ended ~~August 31, 2020 and 2019,~~November 30, 2021 and for the nine months ended November 30, 2020 ~~and~~

(2)For the three and nine months ended November 30, ~~2019, total revenue attributable to Canada was less than 10%.~~

~~(2)~~For the two months ended August 31, 2020, total revenue attributable to India included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $10,171. For the two months ended August 31, 2019,2021, total revenue attributable to India included maintenance revenue ~~of $(716).~~totaling $3,609 and $5,608, respectively. For the three and nine months ended November 30, 2020, total revenue attributable to India included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $6,080 and $16,251, respectively.

(3)For the three months ended November 30, 2021, total revenue attributable to Indonesia included maintenance revenue totaling $24,268. Total revenue attributable to Indonesia was less than 10% for the nine months ended November 30, 2021 and for the three and nine months ended November 30, ~~2019, total revenue attributable to India included $(803) and $16,035 of maintenance revenue, respectively.~~2020.

~~(3)~~(4)For the nine months ended November 30, 2020, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $79,912. ~~For~~Total revenue attributable to Mexico was less than 10% for the ~~two~~three and nine months ended ~~August 31, 2020 and 2019,~~November 30, 2021 and for the three months ended November 30, ~~2020,~~2020.

Aircastle Limited and ~~the three and nine months ended~~ Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2019, total revenue attributable to Mexico was less than 10%.~~2021

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


		November 30, 2020				August 31, 2020				February 29, 2020					November 30, 2021				February 28, 2021
Region	Region	Number of Aircraft		Net Book Value %		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	80		37	%	89		39	%	90		38	%	Asia and Pacific	74		32	%	79		37	%
Europe	Europe	99		28	%	99		27	%	99		27	%	Europe	99		31	%	92		27	%
Middle East and Africa	Middle East and Africa	11		4	%	11		4	%	15		6	%	Middle East and Africa	10		4	%	11		4	%
North America	North America	28		11	%	28		10	%	40		13	%	North America	35		16	%	28		12	%
South America	South America	26		13	%	26		13	%	26		15	%	South America	24		12	%	26		13	%
Off-lease	Off-lease	16	(1)	7	%	20	(2)	7	%	2	(3)	1	%	Off-lease	13	(1)	5	%	16	(2)	7	%
Total	Total	260		100	%	273		100	%	272		100	%	Total	255		100	%	252		100	%

_______________

(1)~~Consisted of 1 Airbus A320-200~~Of the 13 off-lease aircraft ~~which delivered during the fourth quarter of 2020 to a lessee in North America, 1 Airbus A320-200~~at November 30, 2021, we have 2 narrow-body aircraft and 2 Boeing 737-800 aircraft, which are subject to executed leases with airlines in Europe, 1 Airbus A330-200 aircraft, which is subject to a confirmed letter of intent to lease with an airline in Europe, and 1 Airbus A319-100, 3 ~~Airbus A320-200 aircraft, 3 Airbus A330-200 aircraft, and 4 Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

(2)~~Consisted of 1 Airbus A320-200~~Of the 16 off-lease aircraft which delivered during the fourth quarter of 2020 to a lessee in North America, 1 Airbus A330-200 aircraft, which is subject to a confirmed letter of intent to lease with an airline in Europe, 11 Airbus A320-200, 4 Airbus A330-200 andat February 28, 2021, we have 3 ~~Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

~~(3)Consisted of 1 Airbus A330-200 aircraft, which delivered during the second quarter of 2020 to a lessee in Europe, and 1 Boeing 737-800 aircraft, which we are marketing for lease or sale.~~

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

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


		November 30, 2020				August 31, 2020				February 29, 2020					November 30, 2021				February 28, 2021
Country	Country	Net Book Value		Net Book Value %	Number of Lessees	Net Book Value		Net Book Value %	Number of Lessees	Net Book Value		Net Book Value %	Number of Lessees	Country	Net Book Value		Net Book Value %	Number of Lessees	Net Book Value		Net Book Value %	Number of Lessees
India	India	$	779,560	11%	4	$	897,384	13%	4	$	917,793	12%	4	India	$	696,703	10%	3	$	756,514	11%	3

At November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020,~~28, 2021, the amounts of lease incentive liabilities recorded in maintenance payments on our Consolidated Balance Sheets were ~~$13,731, $12,173~~$19,832 and ~~$10,076,~~$14,673, respectively.

Note 4. Net Investment in Leases

At November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020,~~28, 2021, our net investment in leases consisted of ~~24, 24~~15 and 3015 aircraft, respectively. The components of our net investment in leases at November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020,~~28, 2021, were as follows:


		November 30, 2020		August 31, 2020		February 29, 2020			November 30, 2021		February 28, 2021
Lease receivable	Lease receivable	$	111,392	$	117,847	$	166,060	Lease receivable	$	55,645	$	67,075
Unguaranteed residual value of flight equipment	Unguaranteed residual value of flight equipment	204,360		202,189		266,750		Unguaranteed residual value of flight equipment	137,196		129,165
Net investment leases	Net investment leases	315,752		320,036		432,810		Net investment leases	192,841		196,240
Allowance for credit losses	Allowance for credit losses	(3,714)		(2,972)		(6,558)		Allowance for credit losses	(1,828)		(864)
Net investment in leases, net of allowance	Net investment in leases, net of allowance	$	312,038	$	317,064	$	426,252	Net investment in leases, net of allowance	$	191,013	$	195,376

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2021

The activity in the allowance for credit losses related to our net investment in leases for the nine months ended November 30, ~~2020~~2021 is as follows:


	Amount
Balance at February ~~29, 2020~~28, 2021	$	~~6,558~~

~~Provision for credit losses~~	~~4,513~~
~~Write-offs~~	~~(8,099)~~
~~Balance at August 31, 2020~~	~~2,972~~864
Provision for credit losses	~~742~~970
Write-offs	(6)

Balance at November 30, ~~2020~~2021	$	~~3,714~~1,828

During the nine months ended November 30, 2020, we wrote-off $8,099 of lease rentals against the allowance for credit losses due to the early lease termination of seven Airbus A320-200 aircraft which had been classified as Net investment in leases. At November 30, ~~2020,~~2021, future lease payments on net investment in leases are as follows:

Year Ending February 28/29, Amount
Remainder of 2020 $ 13,449
2021 32,504
2022 23,811
2023 22,628
2024 6,836
Thereafter 31,130
Total lease payments to be received 130,358
Present value of lease payments - lease receivable (111,392)
Difference between undiscounted lease payments and lease receivable $ 18,966


Year Ending February 28/29,	Amount
Remainder of 2021	$	4,073
2022	14,380
2023	9,539
2024	8,609
2025	7,680
Thereafter	21,682
Total lease payments to be received	65,963
Present value of lease payments - lease receivable	(55,645)
Difference between undiscounted lease payments and lease receivable	$	10,318

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

Note 5. Unconsolidated Equity Method Investments

We have a joint venture with Mizuho Leasing which has 9 aircraft with a net book value of ~~$315,418~~$301,862 at November 30, ~~2020.~~2021.


	Amount
Investment in joint ~~ventures~~venture at February ~~29, 2020~~28, 2021	$	~~33,470~~35,377

Earnings from joint venture, net of tax	~~1,406~~


~~Investment in joint ventures at August 31, 2020~~	~~34,876~~
~~Earnings from joint venture, net of tax~~	~~572~~1,210
Investment in joint venture at November 30, ~~2020~~2021	$	~~35,448~~36,587

~~In April 2020,~~On December 9, 2021, we ~~sold 2 engines~~entered into a loan agreement to ~~Magellan, an affiliate~~provide the joint venture with a $1,500 unsecured loan facility, which bears interest at a rate of ~~Marubeni, for $5,355.~~LIBOR plus 2% and is payable on December 9, 2022. This transaction was approved by our ~~Audit Committee~~management as an arm’s length transaction under our related party policy.

~~Note 6. Variable Interest Entities~~

Aircastle consolidates 2 VIEs (the “Air Knight VIEs”) of which it is the primary beneficiary. The operating activities of these Air Knight VIEs are limited to acquiring, owning, leasing, maintaining, operating and, under certain circumstances, selling 2 aircraft as discussed below.

During February 2020, we repaid the export credit agency (the “ECA Financings”) for 4 of the 6 aircraft owned by the Air Knight VIEs, which included principal and accrued interest amounts outstanding of $95,128 and incurred early extinguishment costs of $4,020. In June 2020, the leases of the 4 aircraft subject to the ECA Financings were formally terminated and the aircraft were released as security under such financings. The only assets that the Air Knight VIEs have on their books are net investments in leases that are eliminated in the consolidated financial statements. The related aircraft, with a net book value as of November 30, 2020 of $121,878, were included in our flight equipment held for lease. The consolidated debt outstanding, net of debt issuance costs, of the Air Knight VIEs as of November 30, 2020 is $39,634.

1716

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2020~~2021

Note 7.6. Secured and Unsecured Debt Financings

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


		At November 30, 2020					At August 31, 2020		At February 29, 2020			At November 30, 2021					At February 28, 2021
Debt Obligation	Debt Obligation	Outstanding Borrowings		Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings		Outstanding Borrowings		Debt Obligation	Outstanding Borrowings		Number of Aircraft	Interest Rate	Final Stated Maturity	Outstanding Borrowings
Secured Debt Financings:	Secured Debt Financings:										Secured Debt Financings:
ECA Financings~~(1)~~	ECA Financings~~(1)~~	$	40,055	2	3.49% to 3.96%	12/03/21 to 11/30/24	$	43,649	$	50,745	ECA Financings~~(1)~~	$	23,455	1	3.49%	11/30/24	$	36,423
Bank Financings~~(2)~~(1)	Bank Financings~~(2)~~(1)	905,219		34	2.15% to 4.55%	06/17/23 to 01/19/26	927,385		971,693		Bank Financings~~(2)~~(1)	684,436		31	2.19% to 4.55%	06/17/23 to 03/06/25	738,353
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(7,671)		—			(8,375)		(9,920)		Less: Debt issuance costs and discounts	(4,299)		—			(5,926)
Total secured debt financings, net of debt issuance costs and discounts	Total secured debt financings, net of debt issuance costs and discounts	937,603		36			962,659		1,012,518		Total secured debt financings, net of debt issuance costs and discounts	703,592		32			768,850

Unsecured Debt Financings:	Unsecured Debt Financings:										Unsecured Debt Financings:
Senior Notes due 2020(3)		0			7.625%	04/15/20	0		300,000
Senior Notes due 2021		500,000			5.125%	03/15/21	500,000		500,000
Senior Notes due 2022	Senior Notes due 2022	500,000			5.50%	02/15/22	500,000		500,000		Senior Notes due 2022	—			5.50%	02/15/22	500,000
Senior 5.00% Notes due 2023	Senior 5.00% Notes due 2023	500,000			5.00%	04/01/23	500,000		500,000		Senior 5.00% Notes due 2023	500,000			5.00%	04/01/23	500,000
Senior 4.40% Notes due 2023	Senior 4.40% Notes due 2023	650,000			4.40%	09/25/23	650,000		650,000		Senior 4.40% Notes due 2023	650,000			4.40%	09/25/23	650,000
Senior Notes due 2024	Senior Notes due 2024	500,000			4.125%	05/01/24	500,000		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			5.250%	08/11/25	650,000		0		Senior Notes due 2025	650,000			5.25%	08/11/25	650,000
Senior Notes due 2026	Senior Notes due 2026	650,000			4.250%	06/15/26	650,000		650,000		Senior Notes due 2026	650,000			4.25%	06/15/26	650,000
Senior Notes due 2028											Senior Notes due 2028	750,000			2.85%	01/26/28	750,000
Unsecured Term Loans	Unsecured Term Loans	215,000			1.72%	03/07/22 to 03/07/24	215,000		215,000		Unsecured Term Loans	215,000			1.58%	02/27/22 to 02/27/24	215,000
Revolving Credit Facilities	Revolving Credit Facilities	0			1.25% to 2.00%	07/30/21 to 06/27/22	150,000		100,000		Revolving Credit Facilities	—			N/A	12/27/21 to 04/26/25	—
Less: Debt issuance costs and discounts	Less: Debt issuance costs and discounts	(34,859)					(37,234)		(30,765)		Less: Debt issuance costs and discounts	(42,416)					(48,739)
Total unsecured debt financings, net of debt issuance costs and discounts	Total unsecured debt financings, net of debt issuance costs and discounts	4,130,141					4,277,766		3,884,235		Total unsecured debt financings, net of debt issuance costs and discounts	3,872,584					4,366,261

Total secured and unsecured debt financings, net of debt issuance costs and discounts	Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	5,067,744				$	5,240,425	$	4,896,753	Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	4,576,176				$	5,135,111

(1)The borrowings under these financings at November 30, 2020 have a weighted-average rate of interest of 3.60%. During February 2020, the Company repaid the ECA Financings for 4 aircraft owned by the Air Knight VIEs, which were released as security for such financings during the second quarter of 2020 – see Note 6.

~~(2)The borrowings under these financings at November 30, 2020~~2021 have a weighted-average fixed rate of interest of ~~3.09%~~3.21%.

Unsecured Debt Financings:

Revolving Credit Facilities

During the nine months ended November 30, 2021, we entered into various amendments for 1 of our unsecured revolving credit facilities that, among other things, expanded the size of the facility and split the commitment into 2 tranches. As a result, the existing $300,000 commitment was expanded to $365,000, with $135,000 and $230,000 of the commitment allocated to Tranche A and Tranche B, respectively. Tranche A matured on the facility’s previously stated maturity date of December 27, 2021 and Tranche B will mature on February 28, 2023.

On April ~~15, 2020,~~26, 2021, we entered into an amendment that increased the ~~Company repaid $300,000 aggregate principal amount~~size of ~~7.625% Senior Notes due 2020 due at their final~~1 of our revolving credit facilities from $800,000 to $1,000,000. The stated maturity ~~date.~~date for $900,000 of the total commitment was extended to April 26, 2025, and the remaining $100,000 commitment will mature on the facility’s previously stated maturity date of June 27, 2022.

On ~~July 30, 2020, the Company~~April 26, 2021, we entered into ~~a $150,000 unsecured~~an amendment that reduced the size of our revolving credit facility with Mizuho Bank Ltd., a related party, from $150,000 to $50,000 and extended its maturity date to July 30, 2022. Mizuho Bank, Ltd. is now a lender for our $1,000,000 revolving credit facility with a commitment in the amount of $100,000.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, 2021

On December 6, 2021, the Company entered into a $100,000 senior unsecured revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party. The facility bears interest at a rate of LIBOR plus ~~2%, or a base rate plus 1%~~1.625%, matures on ~~July 31, 2021~~December 6, 2023, and ~~includes~~requires the Company to have a ~~one-year extension option.~~minimum of $20,000 revolving credit outstanding throughout the term of the facility. This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

As of November 30, 2021, we had no borrowings outstanding under our revolving credit facilities and had $1,415,000 available for borrowing.

Senior Notes due 2022

On ~~August 11, 2020,~~July 30, 2021, we redeemed all of the ~~Company issued $650,000~~$500,000 outstanding aggregate principal amount of our 5.5% Senior Notes due ~~2025~~2022, including $12,604 of accrued interest and a $13,314 call premium.

As of November 30, 2021, we were in compliance with all applicable covenants in our financings.

Note 7. Shareholders' Equity

On June 8, 2021, the Company issued 400 shares of 5.250% Series A Cumulative Redeemable Perpetual Preference Shares, $0.01 par value, with a liquidation preference of $1,000 per share (the ~~“Senior Notes due 2025”~~“Preference Shares”). The Preference Shares are perpetual and have no maturity date.

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

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

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

On August 19, 2021, the Company’s Board of Directors approved a quarterly dividend for the Company’s Preference Shares in the amount of $5,658, which was paid on September 15, 2021.

Note 8. Related Party Transactions

On April 26, 2021, the Company entered into an ~~issue price~~amendment that reduced the size and extended the term of ~~99.057%. The Senior Notes due 2025 will mature on August 11, 2025 and~~our unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 6 for additional information.

On December 6, 2021, the Company entered into a $100,000 senior unsecured revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party – see Note 6 for additional information. This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2020~~2021

~~bear interest at a rate of 5.25% per annum, payable semi-annually on February 11~~During the three and ~~August 11 of each year, commencing on February 11, 2021. Interest accrues on the Senior Notes due 2025 from August 11, 2020.~~

~~As of November 30, 2020, we had 0 borrowings outstanding under our revolving credit facilities and had $1,250,000 available for borrowing.~~

~~As of November 30, 2020, we were in compliance with all applicable covenants in our financings.~~

~~Note 8. Shareholders' Equity and Share-Based Payment~~

On March 27, 2020, (the “Merger Date”), the total authorized share capital of the Company was $3,000, comprised of 250,000,000 common shares of $0.01 each and 50,000,000 preference shares of $0.01 each, and the issued share capital of the Company was comprised of 14,048 common shares of $0.01 each.

In December 2019, the Company accelerated the vesting of certain restricted common share awards and the vesting and payment of certain Performance Share Units (“PSUs”) held by the Company’s executive officers, initially granted under the Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan. Share-based compensation expense of $914 related to restricted common shares and $4,247 related to PSUs represents the cost of this accelerated vesting from March 1, 2020 through the Merger Date.

As per the Agreement and Plan of Merger, dated as of November 5, 2019, (the “Merger Agreement”), on the Merger Date, the Company paid $4,063 and $21,473 representing the payment for 126,971 unvested restricted common shares and 671,030 unvested PSUs, respectively. Concurrently, the Company received $25,536 from MM Air Limited, which was recorded as an additional paid-in-capital as of the Merger Date.

~~Included in share-based compensation expense for the~~ nine months ended November 30, 2020 is $3,921 and $18,967 related to remaining outstanding restricted common shares and remaining outstanding PSUs, respectively, that were accelerated and paid out (in the case of PSUs, at the maximum level of performance) in accordance with the Merger Agreement.

~~On February 13, 2020,~~2021, the Company ~~declared~~incurred $951 and $2,866, respectively, in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides certain management and administrative services to the Company. The Company also entered into a ~~dividend~~parts management services and supply agreement with an affiliate of ~~$0.32 per share~~Marubeni under which we purchased parts totaling $2,682 and ~~paid $24,025 on March 6, 2020 for all shareholders of record as of February 28, 2020.~~$4,640 during the three and nine months ended November 30, 2021, respectively.

Note 9. Income Taxes

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. Consequently, the provision for income taxes 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 (loss) from continuing operations before income taxes and earnings of our unconsolidated equity method investments for the ~~two months ended August 31, 2020 and 2019, and the~~ three and nine months ended November 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


		Two Months Ended August 31,				Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended November 30,				Nine Months Ended November 30,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020
U.S. operations	U.S. operations	$	5,161	$	3,655	$	15,291	$	80	$	28,188	$	6,381	U.S. operations	$	6,218	$	15,291	$	14,408	$	28,188
Non-U.S. operations	Non-U.S. operations	(7,457)		12,835		(10,882)		66,527		(252,768)		132,944		Non-U.S. operations	(45,586)		(10,882)		(55,098)		(252,768)
Income (loss) from continuing operations before income taxes and earnings (loss) of unconsolidated equity method investments		$	(2,296)	$	16,490	$	4,409	$	66,607	$	(224,580)	$	139,325
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments														Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	$	(39,368)	$	4,409	$	(40,690)	$	(224,580)

~~Aircastle Limited and Subsidiaries~~

~~Notes to Unaudited Consolidated Financial Statements~~

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

~~November 30, 2020~~

Our aircraft-owning ~~subsidiaries that are recognized as corporations for U.S. tax purposes are primarily non-U.S. corporations. These~~ subsidiaries generally earn income from sources outside the ~~United States~~U.S. and typically are not subject to U.S. federal, state or local income taxes.The aircraft owning subsidiaries resident in Ireland ~~Mauritius~~ and the U.S. are subject to tax in those respective jurisdictions.

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

The consolidated income tax expense for the two months ended August 31, 2020, and the three and nine months ended November 30, 2020 was determined based upon estimates of the Company’s consolidated effective income tax rates for the fiscal year ending February 28, 2021. The consolidated income tax expense for the two months ended August 31, 2019, and the three and nine months ended November 30, 2019 was based upon estimates of the Company’s consolidated effective income tax rate for the calendar year ended December 31, 2019.

The Company’s effective tax rates (“ETRs”) for two months ended August 31, 2020 and 2019 were (406.1)% and 7.8%, respectively. The Company’s ETRs for the three and nine months ended November 30, 2020 and 2019 were 51.5% and (6.6)%, and 11.5% and 12.4%, respectively. The two months ended August 31, 2020 includes an adjustment to change from calendar year to fiscal year ETR for the six months ended June 30, 2020. Excluding this adjustment, the two months August 2020 ETR would have been (55.5)%. Movements in the ETR are generally caused by changes in the proportion of the Company’s pre-tax earnings in taxable and non-tax jurisdictions. During the nine months ended November 30, 2020, we incurred net impairment charges of $191,697 in low tax jurisdictions and a significant decrease in Bermuda income.

~~Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income (loss) from continuing operations consisted of the following:~~

Two Months Ended
August 31, Three Months Ended November 30, Nine Months Ended November 30,
2020 2019 2020 2019 2020 2019
Notional U.S. federal income tax expense (benefit) at the statutory rate $ (482) $ 3,463 $ 925 $ 13,987 $ (47,162) $ 29,258
U.S. state and local income tax, net 492 229 917 221 2,998 611
Non-U.S. operations:
Bermuda 7,853 1,503 (1,719) (8,037) 56,572 (10,562)
Ireland 781 (1,422) (287) 147 1,470 (1,055)
Singapore (10) (16) (1) (3) 80 (18)
Other low tax jurisdictions 30 (1,372) 25 578 (412) (1,779)
Non-deductible expenses in the U.S. 661 45 38 766 3,385 825
Other 0 (1,147) 2,371 0 (2,193) 0
Income tax provision $ 9,325 $ 1,283 $ 2,269 $ 7,659 $ 14,738 $ 17,280

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation and technical correction to the tax depreciation methods for qualified improvement property. The CARES Act did not materially impact the Company’s effective tax rate for the nine months ended November 30, ~~2020.~~2021.

The Company’s effective tax rates (“ETRs”) for the three and nine months ended November 30, 2021 and 2020 were (59.7)% and 51.5%, and (56.2)%, and (6.6)%, respectively. The movement in the ETR is primarily caused by changes in the mix of the Company’s pre-tax earnings/(losses) in its taxable and non-tax jurisdictions. The nine months ended November 30, 2021 included income from the sale of unsecured claims related to the LATAM Bankruptcy and certain impairment charges, which were recorded in a low tax jurisdiction. Further, the nine months ended November 30, 2020 included discrete items related to stock compensation and the impact of the CARES act.

2019

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2020~~2021

Note 10. Interest, Net

The following table shows the components of interest, net:


		Two Months Ended August 31,				Three Months Ended November 30,				Nine Months Ended November 30,					Three Months Ended November 30,				Nine Months Ended November 30,
		2020		2019		2020		2019		2020		2019			2021		2020		2021		2020
Interest on borrowings and other liabilities	Interest on borrowings and other liabilities	$	35,088	$	41,975	$	56,087	$	59,959	$	163,821	$	186,012	Interest on borrowings and other liabilities	$	47,152	$	56,087	$	153,287	$	163,821

Amortization of deferred financing fees and debt discount	Amortization of deferred financing fees and debt discount	2,319		2,589		3,929		3,810		10,642		11,105		Amortization of deferred financing fees and debt discount	4,099		3,929		12,483		10,642
Interest expense	Interest expense	37,407		44,564		60,016		63,769		174,463		197,117		Interest expense	51,251		60,016		165,770		174,463
Less: Interest income	Less: Interest income	(52)		(493)		(71)		(565)		(467)		(2,165)		Less: Interest income	(448)		(71)		(1,160)		(467)

Less: Capitalized interest														Less: Capitalized interest	(288)		—		(645)		—

Interest, net	Interest, net	$	37,355	$	44,071	$	59,945	$	63,204	$	173,996	$	194,952	Interest, net	$	50,515	$	59,945	$	163,965	$	173,996

Note 11. Commitments and Contingencies

Rent expense, primarily for the corporate offices and sales and marketing offices, was ~~$252~~$405 and $1,213 for the ~~two~~three and nine months ended ~~August 31, 2020,~~November 30, 2021, and $413 and ~~$1,213~~$1,213 for the three and nine months ended November 30, 2020, ~~respectively, and $276 for the two months ended August 31, 2019, and $415 and $1,216 for the three and nine months ended November 30, 2019,~~ respectively.

As of November 30, ~~2020,~~2021, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut; Dublin, Ireland; and Singapore for future minimum lease payments as follows:


Year Ending February 28/29,	Year Ending February 28/29,	Amount		Year Ending February 28/29,	Amount
Remainder of 2020		$	483
2021		1,923
Remainder of 2021				Remainder of 2021	$	486
2022	2022	1,783		2022	1,768
2023	2023	1,716		2023	1,703
2024	2024	1,747		2024	1,735
2025				2025	1,766
Thereafter	Thereafter	5,840		Thereafter	4,358
Total	Total	$	13,492	Total	$	11,816

At November 30, ~~2020,~~2021, we had commitments to acquire ~~25 Embraer E-Jet E2~~27 aircraft for ~~$1,008,096, excluding manufacturer credits.~~$964,292.

Commitments, including ~~$110,946~~$76,675 of remaining progress payments, contractual price escalations and other adjustments for these aircraft, at November 30, ~~2020,~~2021, net of amounts already paid, are as follows:

Year Ending February 28/29, Amount
Remainder of 2020 $ 9,015
2021 181,455
2022 448,408
2023 157,274
2024 84,829
Thereafter 127,115
Total $ 1,008,096


Year Ending February 28/29,	Amount
Remainder of 2021	$	183,051
2022	410,296
2023	277,763
2024	61,189
2025	31,993
Thereafter	—

Total	$	964,292

2120

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

November 30, ~~2020~~2021

Note 12. Other Assets

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


		November 30, 2020		August 31, 2020		February 29, 2020			November 30, 2021		February 28, 2021
Deferred income tax asset	Deferred income tax asset	$	1,135	$	1,531	$	636	Deferred income tax asset	$	617	$	637
Lease incentives and lease premiums, net of amortization of $73,081, $70,234 and $63,010, respectively		81,809		93,322		103,161
Lease incentives and lease premiums, net of amortization of $78,182 and $75,126, respectively								Lease incentives and lease premiums, net of amortization of $78,182 and $75,126, respectively	55,013		75,169
Flight equipment held for sale	Flight equipment held for sale	53,218		5,632		13,083		Flight equipment held for sale	46,854		53,289
Aircraft purchase deposits and Embraer E-2 progress payments	Aircraft purchase deposits and Embraer E-2 progress payments	42,901		42,901		39,038		Aircraft purchase deposits and Embraer E-2 progress payments	67,246		52,092

Right-of-use asset(1)	Right-of-use asset(1)	8,341		8,620		9,148		Right-of-use asset(1)	7,473		8,056
Deferred rent receivable	Deferred rent receivable	47,237		59,354		4,494		Deferred rent receivable	58,625		69,103
Other assets	Other assets	36,596		36,112		37,057		Other assets	99,592		53,598

Total other assets	Total other assets	$	271,237	$	247,472	$	206,617	Total other assets	$	335,420	$	311,944

______________

(1)Net of lease incentives and tenant allowances.

Note 13. Accounts Payable, Accrued Expenses and Other Liabilities

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


		November 30, 2020		August 31, 2020		February 29, 2020			November 30, 2021		February 28, 2021
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities	$	49,151	$	43,210	$	64,034	Accounts payable, accrued expenses and other liabilities	$	61,368	$	43,088
Deferred income tax liability	Deferred income tax liability	78,159		71,130		65,928		Deferred income tax liability	84,101		75,124
Accrued interest payable	Accrued interest payable	51,005		54,525		62,196		Accrued interest payable	44,554		43,676
Lease liability	Lease liability	11,486		11,846		12,510		Lease liability	10,231		11,003
Lease discounts, net of amortization of $44,627, $45,359 and $44,968, respectively		1,636		1,898		2,446
Lease discounts, net of amortization of $45,557 and $44,887, respectively								Lease discounts, net of amortization of $45,557 and $44,887, respectively	705		1,376

Total accounts payable, accrued expenses and other liabilities	Total accounts payable, accrued expenses and other liabilities	$	191,437	$	182,609	$	207,114	Total accounts payable, accrued expenses and other liabilities	$	200,959	$	174,267

2221

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

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this report. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those described under “Risk Factors” and included in our Annual Report on Form 10-K for the year ended ~~December 31, 2019, as amended, and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.~~February 28, 2021. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and, unless otherwise indicated, the other financial information contained in this report has also been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all references to “dollars” and “$” in this report are to, and all monetary amounts in this report are presented in, U.S. dollars.

All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “report”), other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA and Adjusted EBITDA and the global aviation industry and aircraft leasing sector. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “may,” “will,” “would,” “could,” “should,” “seeks,” “estimates” and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on our historical performance and that of our subsidiaries and on our current plans, estimates and expectations and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any such forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. These risks or uncertainties include, but are not limited to, those described from time to time in Aircastle’s filings with the Securities and Exchange Commission (the “SEC”) and previously disclosed under “Risk Factors” in Part I - Item 1A of Aircastle’s ~~2019~~ Annual Report on Form 10-K ~~as amended, and in our Quarterly Report on Form 10-Q~~ for the ~~quarterly period~~year ended ~~March 31, 2020.~~February 28, 2021. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.

WEBSITE AND ACCESS TO THE COMPANY’S REPORTS

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

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

2322

OVERVIEW

Aircastle acquires, leases, and sells commercial jet aircraft to airlines throughout the world. As of November 30, ~~2020,~~2021, we owned and managed on behalf of our joint ventures ~~269~~264 aircraft leased to 8079 lessees located in 4543 countries. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are generally subject to net leases whereby the lessee is ~~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. As of November 30, ~~2020,~~2021, the net book value of our flight equipment (including flight equipment held for lease and net investment in leases, or “net book value”) was ~~$6.98~~$6.73 billion compared to ~~$7.57~~$6.69 billion at February ~~29, 2020.~~28, 2021. Our total revenues, net income (loss) and ~~net loss~~Adjusted EBITDA for the three and nine months ended November 30, ~~2020~~2021 were ~~$180.9 millionand $2.7~~$191.5 million and ~~$634.8~~$514.9 million, $(62.4) million and ~~$237.3~~$(62.4) million, ~~respectively.~~

~~On March 27, 2020, the Company successfully completed its merger (the “Merger”)~~ and ~~is now controlled by affiliates of Marubeni Corporation~~$174.1 million and Mizuho Leasing Company, Limited (“Mizuho Leasing”). The Merger has not resulted in any change of the Company’s business strategy, and we believe the Company will benefit by having stable investors with a long-term investment horizon. We also may benefit by being affiliated with Mizuho Leasing, part of the Mizuho Financial Group, one of the largest Japanese financial institutions.

As previously disclosed, on September 30, 2020, the Company’s Board of Directors unanimously agreed to change the Company’s fiscal year end to the twelve-month period ended the last day in February. This change better aligns the Company’s financial reporting period with the financial reporting cycle of its shareholders, Marubeni Corporation and Mizuho Leasing.$519.9 million, respectively.

Historically, growth in commercial air traffic has been correlated with world economic activity. ~~In recent years~~Prior to the COVID-19 pandemic, commercial air traffic growth expanded at a rate ~~1.5~~1.3 to 2 times that of global GDP growth. ~~The~~This expansion of air travel has driven ~~the~~ growth in the world aircraft fleet; and there are approximately ~~22,000~~24,000 commercial mainline passenger and freighter aircraft in the world fleet today. Aircraft leasing companies own approximately ~~45%~~52% of the world’s commercial jet aircraft. Under normal circumstances, we would expect the global fleet to continue expanding at a ~~three~~two to four percent average annual rate.

~~The~~ COVID-19 ~~crisis~~ has had an unprecedented negative impact on the ~~global economy, and~~aviation sector, resulting in ~~particular on the aviation sector. As a result of COVID-19, there has been~~ a dramatic slowdown in air ~~traffic, with many markets in near complete shutdown.~~traffic. While there have been some ~~limited~~ improvements in certain markets recently, according to IATA, as of November ~~2020,~~30, 2021, air travel iswas still down to approximately ~~34% of~~53% compared to normal levels and a full recovery to pre-pandemic levels is not expected for several years. ~~IATA estimates this situation will cost the airline industry over $510 billion of lost revenue, a number which may be revised upwards.~~ Substantially all of the world’s airlines ~~are experiencing~~have experienced financial difficulties and liquidity challenges, including ~~certain~~many of our customers, and this could adversely affect our lessees’ ability to fulfill their lease payment obligations to us. According to IATA, total net losses for the airline industry will reach $118 billion in 2020 and $39 billion in 2021.customers. While we believe long-term demand for air travel will return to historical trends over time, the near-term impacts of ~~the COVID-19~~COVID-19’s economic shock are material; the extent and duration of those impacts cannot currently be determined.

~~Airlines have been seeking~~Even as the airline industry begins to ~~preserve liquidity by obtaining~~recover, airlines continue to seek support from their respective governments, ~~raising~~raise debt and equity, ~~delaying~~delay or ~~canceling~~cancel new aircraft orders, ~~furloughing~~furlough employees, ~~and requesting~~request concessions from ~~lessors. Some have sought~~lessors, and in certain cases, seek judicial protection. ~~We have agreed to defer lease payments with numerous airline customers, which they are obligated to repay over time.~~ As of January ~~8, 2021, we~~7, 2022, our total deferrals, net of repayments, were $87.2 million. These deferrals have ~~agreed~~been granted to ~~defer approximately $101.0 million in near-term~~nineteen customers for an average of six to twelve months of lease payments, including $76.5 million that appear in our Consolidated Balance Sheets as components of Accounts receivable, Net investment in leases, or Other assets as of November 30, 2020. This represents approximatelyrentals and represent 15% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended November 30, ~~2020. Deferrals~~2021. Of the total deferrals, $81.8 million is included in Accounts receivable or Other assets as of November 30, 2021, with the balance representing future lease payments. Approximately 87% of our total deferrals as of January 7, 2022, have been agreed to ~~with 37 airlines, representing 46%~~as part of ~~our customers,~~broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for ~~an average deferral of five~~near-term economic concessions. Many have repayment terms that extend beyond twelve months ~~of lease rentals. In~~and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of ~~contractual terms, for example obtaining better security packages, term extensions, or other valuable considerations in exchange for short-term economic concessions.~~all of lease payments.

If air traffic ~~continues to remain~~remains depressed ~~over an extended period~~ and if our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to ~~our~~certain customers

or extend the period of repayment for deferrals we have already made. We may ultimately not be able to collect all the amounts we have deferred.

As of January ~~8, 2021, seven~~7, 2022, six of our customers are subject to judicial insolvency proceedings or similar protection. WeThese customers lease 2221 aircraft, ~~to these customers,~~ which ~~comprise~~represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and ~~11%~~12% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended November 30, 2020. One of these customers is LATAM, our second largest customer, which represents 7% of our net book value of flight equipment and 6% of our Lease rental revenue as of and for the twelve months ended November 30, 2020. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved.2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers ~~grounding our aircraft,~~ negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done on a cash basis of accounting rather than the accrual method depending on the ~~customers~~customers’ lease security arrangements.

~~We believe we have sufficient liquidity to meet~~LATAM, our ~~contractual obligations over~~second largest customer, is included in the ~~next~~above group and represents 7% of our net book value of

flight equipment and 7% of our Lease rental revenue as of and for the twelve months ~~and as of December 31, 2020, have $2.21 billion of liquidity from cash on hand, working capital and/or available credit lines. As of~~ended November 30, ~~2020, we~~2021. We have ~~commitments~~signed restructured leases for all thirteen of our LATAM aircraft, subject only to ~~acquire 25 aircraft~~LATAM emerging from the Chapter 11 process. During the second quarter of 2021, the Company entered into claims sale and purchase agreements with a third party for ~~$1.01 billion, excluding manufacturer credits, between 2020-2026.~~the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered). The allowed amount of our unsecured claims was approved by the Bankruptcy Court. Proceeds from the sales of these claims in the amount of $55.2 million were received during the second quarter of 2021 and recognized in Other income (expense).

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

We believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and ~~low fuel prices.~~as of January 1, 2022, total liquidity of $2.1 billion includes $1.4 billion of undrawn credit facilities, $0.2 billion of unrestricted cash, $0.1 billion of contracted asset sales and $0.4 billion of projected operating cash flows through December 31, 2022. As of November 30, 2021, we have commitments to acquire 27 aircraft for $964.3 million between 2021-2025.

We also believe our platform and personnel position us to effectively manage through the COVID-19 crisis and will enable us to take advantage of new investment opportunities when they arise. Our Company employs a team of experienced senior professionals with extensive industry and financial experience. Our leadership team members have an average of more than 30twenty years of relevant industry experience, including managing through prior downturns in the aviation industry, like the 2008 global financial crisis and the September 11, 2001 terror attacks.

Our business approach will remain differentiated from those of other large leasing companies. We have intentionally limited large, long-term capital commitments and are less reliant on orders for new aircraft from aircraft manufacturers as a source of new investments than many of our competitors. While our current posture is defensive given the macro situation, over the long-term we plan to grow our business and profits while maintaining a conservative, flexible capital structure.

~~Revenues~~

Our revenues are comprised primarily of operating lease rentals on flight equipment held for lease, revenue from maintenance payments related to lease expirations, lease termination payments, interest recognized from direct financing and sales-type leases and gains on the sale of flight equipment.

Typically, our aircraft are subject to net leases whereby the lessee pays lease rentals and is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs arising during the term of the lease. Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease and the amount of the contracted rent will depend upon the type, age, specification and condition of the aircraft and market conditions at the time the lease is committed. The amount of rent we receive will depend on several factors, including the creditworthiness of our lessees and the occurrence of restructurings and defaults. Our lease rental revenues are also affected by the extent to which aircraft are off-lease and our ability to remarket aircraft that are nearing the end of their leases in order to minimize their off-lease time. Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry conditions and trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.

As a result of the COVID-19 pandemic, the Company has provided lease concessions to certain customers, primarily in the form of lease rental deferrals. While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease is generally the same as that which was

required under the original lease agreement. We account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other assets in our Consolidated Balance Sheets. In a limited number of situations, we have agreed to broader restructurings of contractual terms, for example obtaining better security packages, term extensions, or other valuable considerations in exchange for short-term economic concessions.

If we determine that the collectability of rental payments is no longer probable (including any deferral thereof), we recognize lease rental revenue using a cash basis of accounting rather than an accrual method. In the period we conclude that collection of lease payments is no longer probable, we recognize any difference between revenue amounts recognized to date under the accrual method and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to lease rental revenue.

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

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

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

Fiscal Year ~~2020~~2021 Lease Expirations and Lease Placements

At November 30, ~~2020,~~2021, the Company had ~~sixteen~~13 off-lease aircraft and ~~thirteen~~twelve aircraft with scheduled lease expirations in fiscal ~~2020.~~2021. As of January ~~8, 2021,~~7, 2022, of these 2925 aircraft, we have ~~sixteen~~ten aircraft, which account for 6%3.8% of our net book value at November 30, ~~2020,~~2021, still to be placed or sold.

Fiscal ~~Year 2021-2024~~Years 2022-2025 Lease Expirations and Lease Placements

Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the ~~period~~ fiscal ~~2021-2024,~~years 2022-2025, representing the percentage of our net book value of flight equipment (including flight equipment held for lease and net investment in leases) at November 30, ~~2020,~~2021, specified below:

•~~2021: 12~~2022: 16 aircraft, representing 4%;

•~~2022: 29~~2023: 42 aircraft, representing 9%12%;

•~~2023: 27~~2024: 50 aircraft, representing 7%19%; and

•~~2024: 55~~2025: 31 aircraft, representing ~~21%~~14%.

~~Operating Expenses~~

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

~~Income Tax Provision~~

We obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 2035, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

Our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are primarily non-U.S. corporations. These subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland, Mauritius and the U.S. are subject to tax in those respective jurisdictions.

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

The CARES Act was signed into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation and technical correction to the tax depreciation methods for qualified improvement property. The CARES Act did not materially impact the Company’s effective tax rate for the nine months ended November 30, 2020.

2724

Acquisitions and Sales

During the nine months ended November 30, ~~2020,~~2021, we acquired ~~five~~twelve aircraft for ~~$154.3~~$514.3 million. As of January ~~8, 2021,~~7, 2022, we ~~have not~~ acquired ~~any~~three additional aircraft. At November 30, ~~2020,~~2021, we had commitments to acquire ~~25 new E-Jet E2~~27 aircraft ~~from Embraer~~ for ~~$1.01 billion, excluding manufacturer credits.~~$964.3 million. Of this amount, ~~approximately $9.0~~$183.1 million represents commitments for the remainder of ~~2020.~~fiscal year 2021.

During the nine months ended November 30, ~~2020,~~2021, we sold ~~six~~seven aircraft and other flight equipment for net proceeds of ~~$113.6~~$127.6 million, and recognized net gains on sales of ~~$24.2~~$17.9 million. As of January ~~8, 2021,~~7, 2022, we have sold ~~four~~three additional aircraft.

The following table sets forth certain information with respect to the aircraft owned by us as of November 30, ~~2020:~~2021:

AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)


Owned Aircraft	Owned Aircraft	As of November 30, 2020(1)			As of November 30, 2019(1)			Owned Aircraft	As of November 30, 2021(1)			As of November 30, 2020(1)
Net Book Value of Flight Equipment	Net Book Value of Flight Equipment	$	6,979		$	7,717		Net Book Value of Flight Equipment	$	6,734		$	6,979

Net Book Value of Unencumbered Flight Equipment	Net Book Value of Unencumbered Flight Equipment	$	5,406		$	5,900		Net Book Value of Unencumbered Flight Equipment	$	5,619		$	5,406
Number of Aircraft	Number of Aircraft	260			270			Number of Aircraft	255			260
Number of Unencumbered Aircraft	Number of Unencumbered Aircraft	224			229			Number of Unencumbered Aircraft	223			224
Number of Lessees	Number of Lessees	80			85			Number of Lessees	79			80
Number of Countries	Number of Countries	45			48			Number of Countries	43			45
Weighted Average Age (years)(2)	Weighted Average Age (years)(2)	10.5			9.9			Weighted Average Age (years)(2)	10.6			10.5
Weighted Average Remaining Lease Term (years)(2)	Weighted Average Remaining Lease Term (years)(2)	4.3			4.8			Weighted Average Remaining Lease Term (years)(2)	4.8			4.3
Weighted Average Fleet Utilization during the three months ended November 30, 2020 and 2019(3)		94.0		%	99.3		%
Weighted Average Fleet Utilization during the nine months ended November 30, 2020 and 2019(3)		94.8		%	96.7		%
Portfolio Yield for the three months ended November 30, 2020 and 2019(4)		8.4		%	11.1		%
Portfolio Yield for the nine months ended November 30, 2020 and 2019(4)		9.1		%	10.9		%
Weighted Average Fleet Utilization during the three months ended November 30, 2021 and 2020(3)								Weighted Average Fleet Utilization during the three months ended November 30, 2021 and 2020(3)	94.0		%	94.0		%
Weighted Average Fleet Utilization during the nine months ended November 30, 2021 and 2020(3)								Weighted Average Fleet Utilization during the nine months ended November 30, 2021 and 2020(3)	93.7		%	94.8		%
Portfolio Yield for the three months ended November 30, 2021 and 2020(4)								Portfolio Yield for the three months ended November 30, 2021 and 2020(4)	9.7		%	8.4		%
Portfolio Yield for the nine months ended November 30, 2021 and 2020(4)								Portfolio Yield for the nine months ended November 30, 2021 and 2020(4)	8.9		%	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	$	315		$	329		Net Book Value of Flight Equipment	$	302		$	315
Number of Aircraft	Number of Aircraft	9			9			Number of Aircraft	9			9

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

(2)Weighted by net book value.

(3)Aircraft on-lease days as a percent of total days in period weighted by net book value. The decrease from our historical utilization rate for the three and nine months ended November 30, ~~2020~~2021 and ~~2019,~~2020, was primarily due to off-lease aircraft as a result of early lease ~~terminations.~~terminations and scheduled lease expirations.

(4)Lease rental revenue, interest income and cash collections on our net investment in leases for the period as a percent of the average net book value for the period; quarterly information is annualized. The calculation of portfolio yield includes our net investment in leases in the average net book value, and the interest income and cash collections from our net investment in ~~lease rentals.~~leases.

2825

PORTFOLIO DIVERSIFICATION


		Owned Aircraft as of November 30, 2020				Owned Aircraft as of November 30, 2019					Owned Aircraft as of November 30, 2021				Owned Aircraft as of November 30, 2020
		Number of Aircraft		% of Net Book Value(1)		Number of Aircraft		% of Net Book Value(1)			Number of Aircraft		% of Net Book Value(1)		Number of Aircraft		% of Net Book Value(1)
Aircraft Type	Aircraft Type									Aircraft Type
Passenger:	Passenger:									Passenger:
Narrow-body		233		77	%	241		74	%
Narrow-body - new technology(2)										Narrow-body - new technology(2)	23		15	%	13		9	%

Wide-body		23		19	%	25		22	%
Narrow-body - current technology										Narrow-body - current technology	206		65	%	220		68	%
Wide-body - current technology										Wide-body - current technology	22		16	%	23		19	%
Total Passenger	Total Passenger	256		96	%	266		96	%	Total Passenger	251		96	%	256		96	%
Freighter		4		4	%	4		4	%
Freighter - current technology										Freighter - current technology	4		4	%	4		4	%
Total	Total	260		100	%	270		100	%	Total	255		100	%	260		100	%

Manufacturer	Manufacturer									Manufacturer
Airbus	Airbus	176		65	%	175		62	%	Airbus	168		64	%	176		65	%
Boeing	Boeing	79		33	%	90		37	%	Boeing	79		33	%	79		33	%
Embraer	Embraer	5		2	%	5		1	%	Embraer	8		3	%	5		2	%
Total	Total	260		100	%	270		100	%	Total	255		100	%	260		100	%

Regional Diversification	Regional Diversification									Regional Diversification
Asia and Pacific	Asia and Pacific	80		37	%	96		39	%	Asia and Pacific	74		32	%	80		37	%
Europe	Europe	99		28	%	90		25	%	Europe	99		31	%	99		28	%
Middle East and Africa	Middle East and Africa	11		4	%	16		7	%	Middle East and Africa	10		4	%	11		4	%
North America	North America	28		11	%	40		13	%	North America	35		16	%	28		11	%
South America	South America	26		13	%	26		15	%	South America	24		12	%	26		13	%
Off-lease	Off-lease	16	(2)	7	%	2	(3)	1	%	Off-lease	13	(3)	5	%	16	(4)	7	%

Total	Total	260		100	%	270		100	%	Total	255		100	%	260		100	%

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

(2) ~~Consisted of one~~Includes Airbus ~~A320-200~~A320-200neo, Boeing 737-MAX8 and Embraer E2 aircraft.

(3) Of the thirteen off-lease aircraft ~~which delivered during the fourth quarter of 2020 to a lessee in North America, one Airbus A320-200~~at November 30, 2021, we have two narrow-body aircraft and two Boeing 737-800 aircraft, which are subject to executed leases with airlines in Europe, one Airbus A330-200 aircraft, which is subject to a confirmed letter of intent to lease with an airline in Europe, and one Airbus A319-100, three ~~Airbus A320-200 aircraft, three Airbus A330-200 aircraft, and four Boeing 737-800~~wide-body aircraft which we are currently marketing for lease or sale.

~~(3) Consisted of one Airbus A320-200~~(4) Of the sixteen off-lease aircraft at November 30, 2020, we have three wide-body aircraft which ~~delivered during the fourth quarter of 2019 to a lessee in Europe, and one Airbus A330-200 aircraft, which delivered during the second quarter of 2020 to a lessee in Europe.~~

we are currently marketing for lease or sale.

2926

~~Our~~The top ten customers ~~with respect to~~ for aircraft we owned ~~as of~~at November 30, ~~2020, representing 105 aircraft and 42.4% of our net book value of flight equipment (includes Flight equipment held for lease and Net investment in leases),~~2021, are asfollows:


Customer	Customer	Percent of Net Book Value	Country	Number of Aircraft	Customer	Country	Percent of Net Book Value	Number of Aircraft
IndiGo	IndiGo	8.3%	India	14	IndiGo	India	7.4%	11
LATAM(1)	LATAM(1)	7.4%	Chile	13	LATAM(1)	Chile	7.3%	13
Air Canada					Air Canada	Canada	3.5%	5
Iberia					Iberia	Spain	3.4%	14
American Airlines					American Airlines	United States	3.4%	8
Lion Air					Lion Air	Indonesia	3.3%	7
easyJet	easyJet	5.2%	United Kingdom	30	easyJet	United Kingdom	3.3%	18
Iberia		3.8%	Spain	15
Air Canada		3.7%	Canada	5
Lion Air		3.4%	Indonesia	7
Frontier Airlines					Frontier Airlines	United States	3.0%	4
Aerolineas Argentinas	Aerolineas Argentinas	2.9%	Argentina	5	Aerolineas Argentinas	Argentina	2.9%	5
American Airlines		2.7%	United States	7
AirBridgeCargo(2)	AirBridgeCargo(2)	2.5%	Russia	2	AirBridgeCargo(2)	Russia	2.4%	2
Jeju Air		2.5%	South Korea	7

Total top ten customers	Total top ten customers	42.4%		105	Total top ten customers		39.9%	87
All other customers	All other customers	57.6%		155	All other customers		60.1%	168

Total all customers	Total all customers	100.0%		260	Total all customers		100.0%	255

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

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

Finance

We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital over the last ~~fifteen~~sixteen years. Since our inception in late 2004, we have raised ~~$1.69~~$2.09 billion in equity capital from private and public investors. We also raised ~~$18.19~~$18.92 billion in debt capital from a variety of sources including export credit agency-backed debt, commercial bank debt, the aircraft securitization markets and the unsecured bond market. The diversity and global nature of our financing sources demonstrates our ability to adapt to changing market conditions and seize new growth opportunities.

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

See “Liquidity and Capital Resources — Secured Debt Financings” and “Liquidity and Capital Resources — Unsecured Debt Financings” below.

3027

RESULTS OF OPERATIONS

Comparison of the three months ended November 30, ~~2020~~2021 to the three months ended November 30, ~~2019:~~2020:


		Three Months Ended November 30,					Three Months Ended November 30,
		2020		2019			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Revenues:	Revenues:					Revenues:
Lease rental revenue	Lease rental revenue	$	139,493	$	199,847	Lease rental revenue	$	156,088	$	139,493
Direct financing and sales-type lease revenue	Direct financing and sales-type lease revenue	4,839		7,760		Direct financing and sales-type lease revenue	2,724		4,839
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	(5,384)		(5,819)		Amortization of lease premiums, discounts and incentives	(8,867)		(5,384)
Maintenance revenue	Maintenance revenue	24,843		15,360		Maintenance revenue	33,510		24,843
Total lease revenue	Total lease revenue	163,791		217,148		Total lease revenue	183,455		163,791
Gain (loss) on sale of flight equipment		12,951		26,512
Gain on sale of flight equipment						Gain on sale of flight equipment	7,420		12,951
Other revenue	Other revenue	4,169		5,215		Other revenue	605		4,169
Total revenues	Total revenues	180,911		248,875		Total revenues	191,480		180,911
Operating expenses:	Operating expenses:					Operating expenses:
Depreciation	Depreciation	86,845		90,737		Depreciation	84,526		86,845
Interest, net	Interest, net	59,945		63,204		Interest, net	50,515		59,945
Selling, general and administrative	Selling, general and administrative	15,145		18,389		Selling, general and administrative	17,141		14,403
Provision for credit losses						Provision for credit losses	958		742
Impairment of flight equipment	Impairment of flight equipment	9,867		—		Impairment of flight equipment	69,111		9,867
Maintenance and other costs	Maintenance and other costs	4,207		6,696		Maintenance and other costs	8,660		4,207
Total operating expenses	Total operating expenses	176,009		179,026		Total operating expenses	230,911		176,009

Other expense:
Other income (expense):						Other income (expense):
Loss on extinguishment of debt	Loss on extinguishment of debt	(43)		—		Loss on extinguishment of debt	—		(43)
Merger expenses	Merger expenses	(450)		(3,044)		Merger expenses	—		(450)
Other	Other	—		(198)		Other	63		—
Total other expense		(493)		(3,242)
Total other income (expense)						Total other income (expense)	63		(493)

Income from continuing operations before income taxes and earnings of unconsolidated equity method investments		4,409		66,607
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments						Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments	(39,368)		4,409
Income tax provision	Income tax provision	2,269		7,659		Income tax provision	23,504		2,269
Earnings of unconsolidated equity method investments, net of tax	Earnings of unconsolidated equity method investments, net of tax	572		601		Earnings of unconsolidated equity method investments, net of tax	465		572

Net income		$	2,712	$	59,549
Net income (loss)						Net income (loss)	$	(62,407)	$	2,712

Revenues

Total revenues ~~decreased~~increased by ~~$68.0~~$10.6 million for the three months ended November 30, ~~2020,~~2021 as compared to the three months ended November 30, ~~2019.~~2020.

Lease rental revenue~~. The decrease in~~ increased by $16.6 million as a result of:

•a $20.8 million increase related to certain customers which lease rental revenue was recognized using a cash basis of ~~$60.4~~accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy. The three months ended November 30, 2020 included a higher number of customers for which lease rental revenue was recognized using a cash basis of accounting; and

•a $9.3 million increase in revenue related to fourteen aircraft purchased since September 1, 2020.

These increases were partially offset by decreases in revenue of $7.3 million due to the sale of fourteen aircraft since September 1, 2020 and $6.2 million related to lease extensions, amendments, transitions and other changes.

Direct financing and sales-type lease revenue decreased $2.1 million for the three months ended November 30, ~~2020,~~2021 as compared to the ~~same period~~three months ended November 30, 2020, primarily attributable to the reclassification of six aircraft to operating leases and the early lease termination of one aircraft.

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


	Three Months Ended November 30,
	2021		2020
	(Dollars in thousands)
Amortization of lease premiums	$	(5,724)	$	(3,353)
Amortization of lease discounts	213		262
Amortization of lease incentives	(3,356)		(2,293)

Amortization of lease premiums, discounts and incentives	$	(8,867)	$	(5,384)

The amortization of lease premiums increased $2.4 million primarily due to the write-off of unamortized lease premiums resulting from early lease terminations.

The amortization of lease incentives increased $1.1 million primarily due to the transition of aircraft to new lessees.

Maintenance revenue. For the three months ended November 30, 2021, we recorded $33.5 million of maintenance revenue, comprised primarily of $28.9 million related to the early lease terminations of four narrow-body and one wide-body aircraft and $4.2 million related to the scheduled lease expirations of four narrow-body aircraft. For the three months ended November 30, 2020, we recorded $24.8 million of maintenance revenue, of which $18.2 million related to the scheduled lease expirations of six narrow-body aircraft.

Gain on sale of flight equipment decreased $5.5 million to $7.4 million for the three months ended November 30, 2021 as compared to $13.0 million for the three months ended November 30, 2020. We sold three aircraft in ~~2019,~~each of the three month periods ended November 30, 2021 and 2020.

Other revenue decreased $3.6 million to $0.6 million for the three months ended November 30, 2021 as compared to $4.2 million for the three months ended November 30, 2020. The three months ended November 30, 2020 included $4.0 million of security deposits recognized into revenue primarily related to the early lease terminations of two narrow-body aircraft.

Operating expenses

Total operating expenses increased by $54.9 million for the three months ended November 30, 2021 as compared to the three months ended November 30, 2020.

Depreciation expense decreased by $2.3 million primarily attributable to a decrease of $6.2 million resulting from fourteen aircraft sold since September 1, 2020 and lower depreciation on aircraft subject to impairment charges. This was partially offset by higher depreciation of $4.1 million related to fourteen aircraft acquired since September 1, 2020.

Interest, net consisted of the following:


	Three Months Ended November 30,
	2021		2020
	(Dollars in thousands)
Interest on borrowings and other liabilities	$	47,152	$	56,087


Amortization of deferred financing fees and debt discount	4,099		3,929
Interest expense	51,251		60,016
Less: Interest income	(448)		(71)
Less: Capitalized interest	(288)		—

Interest, net	$	50,515	$	59,945

Interest, net decreased $9.4 million due to a lower weighted average debt outstanding and a lower average cost of borrowing.

Selling, general and administrative expenses for the three months ended November 30, 2021 increased $2.7 million as compared to the three months ended November 30, 2020 primarily due to higher personnel and travel costs.

Impairment of aircraft. During the three months ended November 30, 2021, the Company recorded transactional impairment charges totaling $69.1 million related to two narrow-body and one wide-body aircraft on lease to Garuda Indonesia, resulting from the lessee’s default on its lease obligations. The Company recognized $24.3 million of maintenance revenue for these three aircraft. During the three months ended November 30, 2020, the Company recorded transactional impairment charges totaling $9.9 million, primarily related to the scheduled lease expirations of two narrow-body aircraft. The Company recognized $15.2 million of maintenance revenue for these two aircraft.

Maintenance and other costs were $8.7 million for the three months ended November 30, 2021, an increase of $4.5 million as compared to the three months ended November 30, 2020. The increase is primarily attributable to aircraft that have transitioned or will transition to new lessees as a result of scheduled lease expirations or related to aircraft that returned due to lease terminations.

Income tax provision

Our income tax provision for the three months ended November 30, 2021 and 2020 was $23.5 million and $2.3 million, respectively. The increase in our income tax provision of $21.2 million was primarily attributable to changes in the mix of pre-tax book income/(loss) in Bermuda, Ireland and the United States. The three months ended November 30, 2021 included certain impairment charges which were recorded in a low tax jurisdiction. Further, the three months ended November 30, 2020 included discrete items related to stock compensation and the impact of the CARES Act.

RESULTS OF OPERATIONS

Comparison of the nine months ended November 30, 2021 to the nine months ended November 30, 2020:


	Nine Months Ended November 30,
	2021		2020
	(Dollars in thousands)
Revenues:
Lease rental revenue	$	425,802	$	473,566
Direct financing and sales-type lease revenue	8,377		14,903
Amortization of lease premiums, discounts and incentives	(20,026)		(17,360)
Maintenance revenue	81,204		121,508
Total lease revenue	495,357		592,617
Gain on sale of flight equipment	17,944		24,181
Other revenue	1,641		17,962
Total revenues	514,942		634,760
Operating expenses:
Depreciation	250,308		262,806
Interest, net	163,965		173,996
Selling, general and administrative	48,714		70,897
Provision for credit losses	970		5,255
Impairment of flight equipment	110,926		299,551
Maintenance and other costs	24,275		14,044
Total operating expenses	599,158		826,549

Other income (expense):
Loss on extinguishment of debt	(14,156)		(108)
Merger expenses	—		(32,492)
Other	57,682		(191)
Total other income (expense)	43,526		(32,791)

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments	(40,690)		(224,580)
Income tax provision	22,877		14,738
Earnings of unconsolidated equity method investments, net of tax	1,210		1,978

Net loss	$	(62,357)	$	(237,340)

Revenues

Total revenues decreased $119.8 million for the nine months ended November 30, 2021 as compared to the nine months ended November 30, 2020.

Lease rental revenue decreased by $47.8 million as a result of:

•a ~~$52.5~~$27.9 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy;

•a $21.6 million decrease related to the sale of fifteen aircraft since March 1, 2020; and

•a ~~$9.6~~$15.0 million decrease due to ~~the sale of 22 aircraft since September 1, 2019.~~lease extensions, amendments, transitions and other changes.

~~This decrease was~~These decreases were partially offset by a ~~$6.9~~$16.7 million increase in revenue ~~reflecting the impact of twenty~~related to seventeen aircraft purchased since ~~September~~March 1, ~~2019.~~2020.

Direct financing and sales-type lease revenue~~. For~~decreased $6.5 million for the ~~three~~nine months ended November 30, ~~2020, $4.8 million of interest income from direct financing and sales-type leases was recognized,~~2021 as compared to ~~$7.8 million recorded for~~ the ~~same period in 2019,~~nine months ended November 30, 2020, primarily attributable to the early lease terminations of eight aircraft ~~during 2020~~ and ~~sales~~the reclassification of ~~two~~seven aircraft ~~subject~~ to ~~direct financing and sales-type~~operating leases.

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


		Three Months Ended November 30,					Nine Months Ended November 30,
		2020		2019			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Amortization of lease premiums	Amortization of lease premiums	$	(3,353)	$	(4,227)	Amortization of lease premiums	$	(12,224)	$	(11,819)
Amortization of lease discounts	Amortization of lease discounts	262		653		Amortization of lease discounts	671		810
Amortization of lease incentives	Amortization of lease incentives	(2,293)		(2,245)		Amortization of lease incentives	(8,473)		(6,351)

Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives	$	(5,384)	$	(5,819)	Amortization of lease premiums, discounts and incentives	$	(20,026)	$	(17,360)

The amortization of lease incentives increased $2.1 million primarily due to the transition of aircraft to new lessees.

Maintenance ~~revenue.~~revenue. For the ~~three~~nine months ended November 30, ~~2020,~~2021, we recorded ~~$24.8~~$81.2 million of maintenance revenue, comprised primarily of ~~which $18.2~~$53.7 million related to the early lease terminations of six narrow-body and one wide-body aircraft and $20.5 million related to the scheduled lease expirations of six narrow-body aircraft.~~The remaining activity primarily related to the early lease terminations of two narrow-body aircraft.For the same period in 2019,~~ In addition, we recorded ~~$15.4 million maintenance revenue, of which $11.5 million related to the scheduled lease expirations of two wide-body aircraft.~~

~~Gain on sale of flight equipment.~~ ~~We recorded gains on sale of $13.0 million for the three months ended November 30, 2020, as compared to $26.5 million for the same period in 2019.During the three months ended of 2020, we sold three aircraft, as compared to the sale of ten aircraft during the three months ended of 2019.~~

~~Operating expenses~~

~~Total operating expenses~~ ~~decreased by $3.0 million for the three months ended November 30, 2020, as compared to the three months ended November 30, 2019.~~

~~Depreciation expense~~ decreased by $3.9 million for the three months ended November 30, 2020 as compared to the same period in 2019, primarily due to a decrease of $8.6 million resulting from 22 aircraft sold since September 1, 2019 and lower depreciation on aircraft subject to impairment charges recorded during 2020. This is partially offset by higher depreciation of $3.1 million due to 23 aircraft acquired since September 1, 2019.

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

Three Months Ended November 30,
2020 2019
(Dollars in thousands)
Interest on borrowings and other liabilities $ 56,087 $ 59,959
Amortization of deferred financing fees and debt discount 3,929 3,810
Interest expense 60,016 63,769
Less: Interest income (71) (565)
Interest, net $ 59,945 $ 63,204

~~Interest, net~~ ~~decreased by $3.3 million as compared to the three months ended November 30, 2019, primarily as a result of lower weighted average interest rates and lower weighted average debt outstanding.~~

~~Selling, general and administrative expenses~~ ~~for the three months ended November 30, 2020 decreased $3.2 million as compared to the same period in 2019, due to lower share-based compensation expense of $3.2 million.~~

~~Impairment of aircraft.~~ We recorded impairment charges of $9.9 million, primarily related to the scheduled lease expiration of two narrow-body aircraft during the three months ended November 30, 2020. The Company recognized $15.2$5.8 million of maintenance revenue related to ~~these two~~one narrow-body and one wide-body aircraft ~~during~~for which the three months ended November 30, 2020. During the three months ended November 30, 2019, we did not record any impairment charges. See “Summary of Recoverability Assessment and Other Impairments” below for a detailed discussion of impairment charges related to certain aircraft.

~~Maintenance and other costs~~ were $4.2 million for the three months ended November 30, 2020, a decrease of $2.5 million compared to the same period in 2019, The three months ended November 30, 2019 included higher than projected lessor contributions towards the cost of maintenance events for aircraft acquired with attached leases.

~~Other expense~~

~~Total other expense~~ decreased by $2.7 million for the three months ended November 30, 2020, as compared to the three months ended November 30, 2019. The three months ended November 30, 2019 included $3.0 million of legal and banking expenses related to the Merger.

~~Income tax provision~~

~~Our~~ ~~provision for income taxes~~ for the three months ended November 30, 2020 and 2019 was $2.3 million and $7.7 million, respectively. Income taxes have been provided based on the applicable tax laws and rates of those countries in which operationscustomers are conducted and income is earned, primarily the United States and Ireland. The decrease in our income tax provision of $5.4 million for the three months ended November 30, 2020, as compared to the same period in 2019, was primarily attributable to changes in operating income subject to tax in Ireland, the United States and other jurisdictions. During the three months ended November 30, 2020, we had net maintenance revenue of $5.0 million in low tax jurisdictions and a significant decrease in Bermuda income, offset by aircraft sales and increased leasing activity in the U.S.

~~RESULTS OF OPERATIONS~~

~~Comparison of the nine months ended November 30, 2020 to the nine months ended November 30, 2019:~~

Nine Months Ended November 30,
2020 2019
(Dollars in thousands)
Revenues:
Lease rental revenue $ 473,566 $ 588,141
Direct financing and sales-type lease revenue 14,903 24,407
Amortization of lease premiums, discounts and incentives (17,360) (17,077)
Maintenance revenue 121,508 55,807
Total lease revenue 592,617 651,278
Gain on sale of flight equipment 24,181 39,134
Other revenue 17,962 9,370
Total revenues 634,760 699,782
Operating expenses:
Depreciation 262,806 269,689
Interest, net 173,996 194,952
Selling, general and administrative 76,152 55,060
Impairment of flight equipment 299,551 7,404
Maintenance and other costs 14,044 18,744
Total operating expenses 826,549 545,849
Other expense:
Loss on extinguishment of debt (108) (7,577)
Merger expenses (32,492) (3,044)
Other (191) (3,987)
Total other expense (32,791) (14,608)
Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments (224,580) 139,325
Income tax provision 14,738 17,280
Earnings of unconsolidated equity method investments, net of tax 1,978 2,281
Net income (loss) $ (237,340) $ 124,326

~~Revenues~~

~~Total revenues~~ ~~decreased by $65.0 million for the nine months ended November 30, 2020, as compared to the nine months ended November 30, 2019.~~

~~Lease rental revenue. The decrease in lease rental revenue of $114.6 million for the nine months ended November 30, 2020, as compared to the same period in 2019, was primarily the result of:~~

•a $90.8 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy; and

•~~a $40.5 million decrease due to the sale of 27 aircraft since March 1, 2019.~~

~~This decrease was partially offset by a $37.5 million increase in revenue, reflecting the impact of 46 aircraft purchased since March 1, 2019.~~

~~Direct financing and sales-type lease revenue. For the nine months ended November 30, 2020, $14.9 million of interest income from direct financing and sales-type leases was recognized, as compared to $24.4 million recorded for the~~

~~same period in 2019, primarily attributable to the early lease terminations of eight aircraft during 2020 and sales of two aircraft subject to direct financing and sales-type leases.~~

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

Nine Months Ended November 30,
2020 2019
(Dollars in thousands)
Amortization of lease premiums $ (11,819) $ (12,717)
Amortization of lease discounts 810 3,260
Amortization of lease incentives (6,351) (7,620)
Amortization of lease premiums, discounts and incentives $ (17,360) $ (17,077)

The decrease in amortization of lease discounts of $2.5 million for the nine months ended November 30, 2020, as compared to the same period in 2019 was primarily due to fully amortized lease discounts for aircraft that transitioned to new lesseesjudicial insolvency proceedings or ~~extended.~~

~~Maintenance revenue.~~similar protection. For the nine months ended November 30, 2020, we recorded $121.5 million of maintenance revenue, comprised primarily of $66.3 million related to the early lease terminations of fifteen narrow-body aircraft ~~as well as~~and $54.5 million related to the scheduled lease expirations of nine narrow-body ~~aircraft~~ and one wide-body ~~aircraft.~~For the same period in 2019, we recorded $55.8 million maintenance revenue, comprised of $35.2 million related to the scheduled lease expirations of five narrow-body aircraft and four wide-body aircraft and $17.1 million related to the early lease terminations of eight narrow-body aircraft.

Gain on sale of flight equipment decreased ~~by $15.0~~$6.2 million to $17.9 million for the nine months ended November 30, 2021 as compared to $24.2 million for the nine months ended November 30, ~~2020, as compared to gains of $39.1 million for the same period in 2019.~~2020. During the nine months ended ~~of 2020,~~November 30, 2021, we sold ~~six~~seven aircraft as compared to the sale of 25six aircraft during the nine months ended ~~of 2019.~~November 30, 2020. Gain on sale for ~~each of these periods~~the nine months ended November 30, 2020 includes the receipt of insurance proceeds for ~~which~~ one aircraft which was disposed.

Other revenue ~~increased by $8.6~~decreased $16.3 million to $1.6 million for the nine months ended November 30, 2021 as compared to $18.0 million for the nine months ended November 30, 2020. The nine months ended November 30, 2020 ~~as compared to $9.4 million for the same period in 2019, primarily due to $13.0~~included $17.5 million of lease termination fees and security deposits recognized into revenue related to ~~the~~ early lease termination of eight narrow-body aircraft. This was partially offset by lower service fees of $8.6 million related to the liquidation of our joint venture with an affiliate of the Ontario Teachers’ Pension Plan.terminations.

Operating expenses

Total operating expenses ~~increased by $280.7~~decreased $227.4 million for the nine months ended November 30, ~~2020,~~2021 as compared to the nine months ended November 30, ~~2019.~~2020.

Depreciation expense decreased ~~by $6.9~~$12.5 million ~~for the nine months ended November 30, 2020 as compared~~primarily attributable to ~~the same period in 2019. The decrease is primarily the result of lower depreciation of $26.7~~$19.5 million resulting from 28sixteen aircraft sold since March 1, ~~2019~~2020 and lower depreciation related to aircraft subject to aircraft ~~impairments recorded during 2020.~~impairments. This was partially offset by ~~higher depreciation~~an increase of ~~$16.9~~$8.6 million ~~due~~related to 51seventeen aircraft acquired since March 1, ~~2019.~~2020.

Interest, net consisted of the following:

Nine Months Ended November 30,
2020 2019
(Dollars in thousands)
Interest on borrowings and other liabilities $ 163,821 $ 186,012
Amortization of deferred financing fees and debt discount 10,642 11,105
Interest expense 174,463 197,117
Less: Interest income (467) (2,165)
Interest, net $ 173,996 $ 194,952


	Nine Months Ended November 30,
	2021		2020
	(Dollars in thousands)
Interest on borrowings and other liabilities	$	153,287	$	163,821


Amortization of deferred financing fees and debt discount	12,483		10,642
Interest expense	165,770		174,463
Less: Interest income	(1,160)		(467)
Less: Capitalized interest	(645)		—

Interest, net	$	163,965	$	173,996

Interest, net decreased $10.0 million due to a lower weighted average debt outstanding and a lower average cost of borrowing.

Selling, general and administrative expenses decreased $22.2 million, primarily attributable to a decrease in share-based compensation expense of $28.0 million as a result of the completion of the Merger, partially offset by ~~$21.0~~an increase in personnel costs.

Provision for credit losses decreased $4.3 million for the nine months ended November 30, 2021 as compared to the nine months ended November 30, ~~2019, primarily as a result of lower weighted average interest rates, partially offset by higher weighted average debt outstanding.~~

~~Selling, general and administrative expenses~~ ~~for the~~2020. The nine months ended November 30, 2020 ~~increased $21.1 million as compared to the same period in 2019, primarily attributable to an increase in share-based compensation expense of $18.3 million as~~included a ~~result of the Merger and a~~higher provision for credit losses resulting from changes in estimates of ~~$5.3 million related to the change in our allowance~~lessee default probabilities and loss given default percentages for ~~credit losses.~~certain customers.

Impairment of aircraft. During the nine months ended November 30, 2020, we recorded impairment charges of $299.6 million, of which $256.5 million were transactional impairments, which primarily related to thirteen narrow-body and five wide-body aircraft. The Company recognized $107.4 million of maintenance revenue and security deposits into revenue related to these eighteen aircraft during the nine months ended November 30, 2020.~~During the nine months ended November 30, 2019,~~2021, the Company recorded impairment charges ~~of $7.4 million related to two narrow-body aircraft.See “Summary of Recoverability Assessment and Other Impairments” below for a detailed discussion of impairment charges related to certain aircraft.~~

~~Maintenance and other costs~~ were $14.0 million for the nine months ended November 30, 2020, a decrease of $4.7 million compared to the same period in 2019. The nine months ended November 30, 2019 included higher than projected lessor contributions towards the cost of maintenance events for aircraft acquired with attached leases, as well as higher costs for unscheduled transitions.

~~Other expense~~

~~Total other expense~~ increased by $18.2 million to $32.8 million for the nine months ended November 30, 2020, as compared to $14.6 million for the nine months ended November 30, 2019. During the nine months ended November 30, 2020, we incurred $32.5totaling $110.9 million, of ~~legal and banking expenses related to the Merger. During the nine months ended November 30, 2019, we incurred a loss on extinguishment of debt of $7.6~~which $107.7 million due to the early repayment of our Senior Notes due 2019, unfavorable mark-to-market adjustments on our interest rate caps of $4.3 million, and $3.0 million of legal and banking expenses related to the Merger.

~~Income tax provision~~

~~Our~~ ~~provision for income taxes~~ for the nine months ended November 30, 2020 and 2019 was $14.7 million and $17.3 million, respectively. Income taxes have been provided based on the applicable tax laws and rates of those countries in which operations are conducted and income is earned, primarily the United States and Ireland. The decrease in our income tax provision of $2.5 million for the nine months ended November 30, 2020, as compared to the same period in 2019, was primarily attributable to changes in operating income subject to tax in Ireland, the United States and other jurisdictions. During the nine months ended November 30, 2020, we incurred net impairment charges of $191.7 million in low tax jurisdictions and a significant decrease in Bermuda income, offset by aircraft sales, increased leasing activity and the limitation on deductibility of officers compensation in the U.S.

~~Summary of Recoverability Assessment and Other Impairments~~

~~Impairment of Flight Equipment~~

~~For the two months ended August 31, 2020, the Company recorded~~were transactional ~~impairment charges of $9.6 million, which~~impairments, primarily related to six narrow-body and one narrow-body aircraft for which the customer rejected the lease due to judicial insolvency proceedings. We also recognized $9.4 million of maintenance reserves and security deposits into revenue for this onewide-body aircraft.

~~For the three months ended November 30, 2020, the Company recorded transactional~~ The impairment charges ~~totaling $9.9 million, which primarily related to the~~resulted from early lease terminations, scheduled lease expirations ~~of two narrow-body aircraft.~~and a lessee default. The Company ~~also~~ recognized ~~$15.2~~$61.4 million of maintenance revenue ~~related to~~for these ~~two~~seven aircraft.

During the nine months ended November 30, 2020, the Company recorded impairment charges totaling $299.6 million, of which $256.5 million were transactional impairments ~~which~~ primarily related to thirteen narrow-body and five wide-body aircraft. The Company ~~also~~ recognized $107.4 million of maintenance ~~reserves~~ and security deposits into revenue for these eighteen aircraft. The impairment charges were attributable to early lease terminations, scheduled lease

expirations, lessee defaults, ~~and/or~~ judicial insolvency proceedings, or as a result of our annual recoverability ~~assessment – refer to the section below for additional details.~~assessment.

~~Annual Recoverability Assessment~~

~~We completed our annual recoverability assessment of our aircraft in the second quarter of 2020. Of the $299.6~~Maintenance and other costs were $24.3 million ~~impairment charges recorded~~ for the nine months ended November 30, ~~2020, we recorded $43.0~~2021, an increase of $10.2 million ~~related~~as compared to ~~one narrow-body and one wide-body~~the nine months ended November 30, 2020. The increase is primarily attributable to aircraft that have transitioned or will transition to new lessees as a result of scheduled lease expirations or related to aircraft that returned due to lease terminations.

Other income (expense)

Total other income (expense) increased $76.3 million for the nine months ended November 30, 2021 as compared to the nine months ended November 30, 2020. During the nine months ended November 30, 2021, the Company recognized $55.2 million of proceeds from the sales of unsecured claims related to the LATAM Bankruptcy into Other income (expense). This was partially offset by a $14.2 million loss on extinguishment of debt related to the early redemption in full of $500.0 million outstanding aggregate principal amount of our 5.5% Senior Notes due 2022. The nine months ended November 30, 2020 included $32.5 million of legal and banking costs related to the Merger.

Income tax provision

Our income tax provision for the nine months ended November 30, 2021 and 2020 was $22.9 million and $14.7 million, respectively. The increase in our income tax provision of $8.1 million was primarily attributable to changes in the mix of pre-tax book income/(loss) in Bermuda, Ireland and the United States. The nine months ended November 30,

2021 included income from the sale of unsecured claims related to the LATAM Bankruptcy and certain impairment charges, which were recorded in a low tax jurisdiction. Further, the nine months ended November 30, 2020 included discrete items related to stock compensation and the impact of the CARES Act.

Aircraft Valuation

Annual Recoverability Assessment

We performed our annual recoverability ~~assessment.~~ assessment of all our aircraft during the fiscal third quarter for the nine months ended November 30, 2021. No impairments were recorded as a result of annual recoverability assessment – see Note 2 for further detail regarding transactional impairment charges recorded during the three and nine months ended November 30, 2021.

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

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

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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 ~~generate~~have historically generated a significant amount of cash, primarily from lease rentals and maintenance collections. We have also met our liquidity and capital resource needs by utilizing several sources over time, including:

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

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

•asset sales; and

•~~contributions from our shareholders.~~sales 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 nine months ended November 30, ~~2020,~~2021, we met our liquidity and capital resource needs with ~~$124.4~~$271.4 million of cash ~~flow~~flows from operations, ~~$1.19 billion from our revolving credit facilities and Senior Notes due 2025 and $113.6~~$127.6 million of cash from the sale of aircraft ~~sales.~~and other flight equipment, and $393.3 million in net proceeds from our preference share issuance.

As of November 30, ~~2020,~~2021, the weighted-average maturity of our secured and unsecured debt financings was ~~3.1~~3.3 years and we were in compliance with all applicable covenants.

We have agreed to defer ~~some near-term~~ lease payments with certain of our airline customers. As of January ~~8, 2021,~~7, 2022, we have agreed to defer approximately ~~$101.0~~$87.2 million ~~in near-term~~of lease payments with 37nineteen airlines, which ~~these airline customers have agreed~~they are obligated to repay over time. If air traffic remains depressed over an extended period and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to ~~extend~~provide further deferrals to ~~some of our other~~certain customers or to extend the deferrals we have ~~already made.~~previously granted. We may ultimately be unable to collect all the amounts we have deferred. As of November 30, 2021, we hold $72.6 million in security deposits, $499.0 million in maintenance payments and $143.1 million in letters of credit from our lessees.

We believe we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of January 1, 2022, total liquidity of $2.1 billion includes $1.4 billion of undrawn credit facilities, $0.2 billion of unrestricted cash, $0.1 billion of contracted asset sales and $0.4 billion of projected operating cash flows through December 31, ~~2020, have $2.21 billion of liquidity from cash on hand, working capital and/or available credit lines.~~2022. In addition, we believe payments received from lessees and other funds generated from operations, unsecured bond offerings, borrowings secured ~~borrowings for~~by our aircraft, borrowings under our revolving credit facilities and other borrowings and proceeds from future aircraft sales will be sufficient to satisfy our liquidity and capital resource needs over the next twelve months. Our liquidity and capital resource needs include payments due under our aircraft purchase obligations, required principal and interest payments under our long-term debt facilities, expected capital expenditures, lessee maintenance payment reimbursements and lease incentive ~~payments over the next twelve months.~~payments.

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Cash Flows


		Nine Months Ended November 30,					Nine Months Ended November 30,
		2020		2019			2021		2020
		(Dollars in thousands)					(Dollars in thousands)
Net cash flow provided by operating activities	Net cash flow provided by operating activities	$	124,380	$	410,979	Net cash flow provided by operating activities	$	271,435	$	124,380
Net cash flow used in investing activities	Net cash flow used in investing activities	(25,352)		(629,054)		Net cash flow used in investing activities	(417,582)		(25,352)
Net cash flow provided by financing activities		151,497		297,154
Net cash flow (used in) provided by financing activities						Net cash flow (used in) provided by financing activities	(155,422)		151,497

Operating Activities:

The COVID-19 pandemic has severely impacted the demand for air travel, which has negatively impacted our customers’ financial performance. As a result, lease concessions have been given to many of our customers in the form of lease rental deferrals or broader lease restructurings. Our cash flow from operating activities for the nine months ended November 30, 2021 includes the repayment of certain lease deferrals granted during fiscal year 2020 at the onset of the pandemic. We expect that our collections will remain under pressure due to the impact of COVID-19.

Cash flow provided by ~~operations~~operating activities was ~~$124.4~~$271.4 million and ~~$411.0~~$124.4 million for the nine months ended November 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decrease in cash flow provided by operations~~increase of ~~$286.6~~$147.1 million ~~for the nine months ended November 30, 2020~~ was primarily attributable to to:

•a $77.5 million decrease in ~~cash from working capital.~~

~~The COVID-19 pandemic has severely~~accounts receivable and ~~negatively impacted air travel and our customers’ financial performance~~other assets, primarily due to an increase in customer collections, including the repayment of existing lease deferrals as noted above, as well as a ~~result of a variety of factors. The impact of COVID-19, together with lease concessions given to certain of our airline customers~~reduction in ~~the form of lease rental~~requests for new deferrals ~~has resulted in slower cash collections during the nine months ended November 30, 2020.~~ ~~In addition,~~ as compared to the nine months ended November 30, ~~2019,~~2020;

•a $55.2 million increase in cash resulting from the sale of unsecured claims related to the LATAM Bankruptcy – see Note 1;

•a $48.5 million increase as the nine months ended November 30, 2020 ~~includes~~included advance lease rentals recognized into revenue primarily due to lease terminations; and

•a $32.5 million increase in cash as the nine months ended November 30, 2020 included banking and legal costs resulting from the Merger.

These inflows were offset by a $27.9 million decrease in cash due to lower lease rental ~~revenues due to~~revenue resulting from early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual ~~method – see Note 1 regarding our lease revenue recognition policy.~~

~~Cash flow provided by operations for the nine months ended November 30, 2020 also includes $32.5 million of cash paid for Merger expenses.~~method.

Investing Activities:

Cash flow used in investing activities was ~~$25.4~~$417.6 million and ~~$629.1~~$25.4 million for the nine months ended November 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decrease in cash flow used in investing activities~~net increase of ~~$603.7~~$392.2 million was primarily attributable to a ~~result of a $818.9~~$399.5 million ~~decrease~~increase in the acquisition and improvement of flight ~~equipment and a $9.0 million decrease in aircraft purchase deposits and progress payments, net of returned deposits.~~equipment.

These ~~inflows~~outflows were partially offset by a ~~$231.7~~$14.0 million ~~decrease~~increase in ~~aircraft~~ proceeds from the sale of flight equipment.

Financing Activities:

Cash flow ~~provided by~~used in financing activities was ~~$151.5 million and $297.2~~$155.4 million for the nine months ended November 30, ~~2020 and 2019, respectively. The decrease in~~2021 as compared to cash flow provided by financing activities of ~~$145.7~~$151.5 million for the nine months ended November 30, 2020. The net decrease of $306.9 million was primarily attributable to a ~~result of a $160.5~~$733.6 million decrease in proceeds from secured and unsecured debt financings, net of repayments.

These outflows were partially offset by a $393.3 million increase in net proceeds from the issuance of preference shares, a $27.0 million decrease in maintenance and security deposits returned, net of deposits received, and an $18.4 million decrease in dividends paid on common shares as a result of the Merger.

Debt Obligations

For complete information on our debt obligations, please refer to Note 76 – “Secured and Unsecured Debt Financings” in the Notes to Unaudited Consolidated Financial Statements above.

Contractual Obligations

Our contractual obligations consist of principal and interest payments on debt financings, aircraft acquisitions and rent payments related to our office leases. Total contractual obligations ~~increased slightly~~decreased to ~~$6.85~~$6.23 billion at November 30, ~~2020~~2021 from ~~$6.80~~$6.82 billion at February ~~29, 2020,~~28, 2021, primarily due to ~~an increase in~~the redemption of all of the $500.0 million outstanding aggregate principal ~~payments for senior notes, partially offset by an decrease in principal payments for secured financings and borrowings under~~amount of our ~~revolving credit facilities.~~

~~The following table presents our actual contractual obligations and their payment due dates as of November 30, 2020:~~

Payments Due by Period as of November 30, 2020
Contractual Obligations Total 1 year
or less 2-3 years 4-5 years More than
5 years
(Dollars in thousands)
Principal payments:
Senior Notes due 2021 - 2026 $ 3,950,000 $ 500,000 $ 1,650,000 $ 1,150,000 $ 650,000
DBJ Term Loan 215,000 — 60,000 155,000 —
Revolving Credit Facilities — — — — —
ECA Financings 40,055 14,715 17,291 8,049 —
Bank Financings 905,219 90,319 336,555 460,888 17,457
Total principal payments 5,110,274 605,034 2,063,846 1,773,937 667,457
Interest payments on debt obligations(1)
717,083 211,190 326,573 151,640 27,680
Office leases(2)
13,492 1,915 3,556 3,510 4,511
Purchase obligations(3)
1,008,096 188,726 603,518 94,264 121,588
Total $ 6,848,945 $ 1,006,865 $ 2,997,493 $ 2,023,351 $ 821,236

~~(1)Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at November 30, 2020.~~

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

(3) At November 30, 2020, we had commitments to acquire 25 new E-Jet E2 aircraft from Embraer S.A for $1.01 billion, excluding manufacturer credits. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments.

Senior Notes Due 2022.

Capital Expenditures

From time to time, we make capital expenditures to maintain or improve our aircraft. These expenditures include the cost of major overhauls necessary to place an aircraft in service and modifications made at the request of lessees. For the nine months ended November 30, ~~2020~~2021 and ~~2019,~~2020, we incurred a total of ~~$15.1~~$27.5 million and ~~$20.4~~$15.1 million, respectively, of capital expenditures (including lease incentives) related to the improvement of aircraft.

As of November 30, ~~2020,~~2021, the weighted average age by net book value of our aircraft was approximately ~~10.5~~10.6 years. In general, the costs of operating an aircraft, including maintenance expenditures, increase with the age of the aircraft. Our lease agreements call for the lessee to be primarily responsible for maintaining the aircraft. We may incur additional maintenance and modification costs in the future in the event we are required to remarket an aircraft, such as in the event of a lessee default or a lessee fails to meet its maintenance obligations under the lease agreement. These maintenance reserves are paid by the lessee to provide for future maintenance events. Provided a lessee performs scheduled maintenance of the aircraft, we are required to reimburse the lessee for scheduled maintenance payments. In certain cases, we are also

required to make lessor contributions, in excess of amounts a lessee may have paid, towards the costs of maintenance events performed by or on behalf of the lessee.

Actual maintenance payments to us by lessees in the future may be less than projected as a result of several factors, ~~including defaults by~~such as in the ~~lessees.~~event of a lessee default. Maintenance reserves may not cover the entire amount of actual maintenance expenses incurred and, where these expenses are not otherwise covered by the lessees, there can be no assurance that our operational cash flow and maintenance reserves will be sufficient to fund maintenance requirements, particularly as our aircraft age. See Item 1A. “Risk Factors - Risks Related to Our Business - Risks related to our leases - If lessees are unable to fund their maintenance obligations on our aircraft, we may incur increased costs at the conclusion of the applicable lease” in our ~~2019~~ Annual Report on Form 10-K ~~as amended.~~for the year ended February 28, 2021.

Off-Balance Sheet Arrangements

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

We hold a 25% equity interest in our joint venture with Mizuho Leasing and as of November 30, ~~2020,~~2021, the net book value of its nine aircraft was ~~$315.4~~$301.9 million.

Foreign Currency Risk and Foreign Operations

At November 30, ~~2020,~~2021, all our leases are payable to us in U.S. dollars. However, we incur Euro and Singapore dollar-denominated expenses in connection with our subsidiaries in Ireland and Singapore. For the nine months ended November 30, ~~2020,~~2021, expenses, such as payroll and office costs, denominated in currencies other than the U.S. dollar aggregated approximately ~~$15.5~~$13.0 million in U.S. dollar equivalents and represented ~~approximately 20.4%~~26.7% of total selling, general and administrative ~~expenses (or 25.8% when excluding share-based compensation expense, of which a large portion relates to employees domiciled in the U.S.).~~expenses. Our international operations are a significant component of our business strategy and permit us to more effectively source new aircraft, service the aircraft we own and maintain contact with our lessees. Therefore, our international operations and our exposure to foreign currency risk will likely increase over time. Although we have not yet entered into foreign currency hedges because our exposure to date has not been significant, if our foreign currency exposure increases, we may enter into hedging transactions in the future to mitigate this risk. For the nine months ended November 30, ~~2020~~2021 and ~~2019,~~2020, we incurred insignificant net gains and losses on foreign currency transactions.

Management’s Use of EBITDA and Adjusted EBITDA

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

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

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

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

The table below shows the reconciliation of net income (loss) to EBITDA and Adjusted EBITDA for the three and nine months ended November 30, ~~2020~~2021 and ~~2019:~~2020:


		Three Months Ended November 30,			Nine Months Ended November 30,				Three Months Ended November 30,						Nine Months Ended November 30,
			2020		2019		2020			2019			2021		2020		2021		2020
			(Dollars in thousands)
Net income (loss)	Net income (loss)		$	2,712	$	59,549	$	(237,340)		$	124,326	Net income (loss)	$	(62,407)	$	2,712	$	(62,357)	$	(237,340)
Depreciation	Depreciation		86,845		90,737		262,806			269,689		Depreciation	84,526		86,845		250,308		262,806
Amortization of lease premiums, discounts and incentives	Amortization of lease premiums, discounts and incentives		5,384		5,819		17,360			17,077		Amortization of lease premiums, discounts and incentives	8,867		5,384		20,026		17,360
Interest, net	Interest, net		59,945		63,204		173,996			194,952		Interest, net	50,515		59,945		163,965		173,996
Income tax provision	Income tax provision		2,269		7,659		14,738			17,280		Income tax provision	23,504		2,269		22,877		14,738
EBITDA	EBITDA		157,155		226,968		231,560			623,324		EBITDA	105,005		157,155		394,819		231,560
Adjustments:	Adjustments:											Adjustments:
Impairment of flight equipment	Impairment of flight equipment		9,867		—		299,551			7,404		Impairment of flight equipment	69,111		9,867		110,926		299,551
Equity share of joint venture impairment			—		—		—			2,724

Loss on extinguishment of debt	Loss on extinguishment of debt		43		—		280			7,577		Loss on extinguishment of debt	—		43		14,156		108
Non-cash share-based payment expense	Non-cash share-based payment expense		—		3,209		28,049			9,793		Non-cash share-based payment expense	—		—		—		28,049
Merger related expenses(1)	Merger related expenses(1)		437		3,043		35,039			3,043		Merger related expenses(1)	—		437		—		35,039
Loss on mark-to-market of interest rate derivative contracts	Loss on mark-to-market of interest rate derivative contracts		—		394		19			4,267		Loss on mark-to-market of interest rate derivative contracts	—		—		—		19

Contract termination expense												Contract termination expense	—		—		—		172

Adjusted EBITDA	Adjusted EBITDA		$	167,502	$	233,614	$	594,498		$	658,132	Adjusted EBITDA	$	174,116	$	167,502	$	519,901	$	594,498

______________

(1) Included $32.5 million in Other expense and $2.6 million in Selling, general and administrative expenses.

Limitations of EBITDA and Adjusted EBITDA

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

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

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

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

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

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

EBITDA and Adjusted EBITDA are not alternatives to net income (loss), income (loss) from operations or cash flows provided by or used in operations as calculated and presented in accordance with U.S. GAAP. You should not rely

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. These risks are highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our ~~lease agreements,~~ floating rate debt ~~obligations and interest rate derivatives.~~obligations. Rent payments under our aircraft lease agreements typically do not vary during the term of the lease according to changes in interest rates. However, our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities. If LIBOR is no longer available or in certain other circumstances as described in the borrowing agreements, the applicable borrowing agreements provide a mechanism for determining an alternative rate of interest. There is no assurance that any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, LIBOR.

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

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

Sensitivity Analysis

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

addresses only the potential interest expense impacts on our financial ~~instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives.~~instruments. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

A hypothetical 100-basis point increase/decrease in interest rates on our leases subject to variable rental rates would increase/decrease the minimum contracted rentals in our portfolio as of November 30, 2020 by $3.5 million and $0.9 million, respectively, over the next twelve months. As of November 30, ~~2020,~~2021, a hypothetical 100-basis point increase/decrease in interest rates on our variable rate borrowings would result in an interest expense increase/decrease of ~~$5.2~~$3.3 million and ~~$1.2~~$0.5 million, respectively, net of amounts received from our interest rate derivatives, over the next twelve months. ~~We have an~~Our interest rate cap ~~to hedge~~that hedged a portion of our floating rate interest exposure ~~which is set at 2% and has a current notional balance of $230.0 million and reduces over time to $215.0 million. The cap matures~~matured in September 2021.

ITEM 4. CONTROLS AND PROCEDURES

Management’s Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures as of November 30, ~~2020.~~2021. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of November 30, ~~2020.~~2021.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f), that occurred during the quarter ended November 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes to the disclosure related to the risk factors described in our Annual Report on Form 10-K for the year ended ~~December 31, 2019, as amended, and in our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020,~~February 28, 2021, as filed with the SEC.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

~~None.~~Environmental, Social and Governance

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

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Our Commitment to Environmental Sustainability

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

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

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

Our People

As of November 30, 2021, we had 109 employees. None of our employees are covered by a collective bargaining agreement, and we believe that we maintain excellent employee relations.

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

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

Our Culture & Governance

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

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

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

ITEM 6. EXHIBITS


Exhibit No.						Description of Exhibit

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

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

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

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

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

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

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

~~4.4~~						Third Supplemental Indenture, dated as of January 15, 2015, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 15, 2015).

~~4.5~~						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).

~~4.6~~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).

~~4.7~~4.5						Sixth Supplemental Indenture, dated as of September 25, 2018, between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 25, 2018).

~~4.8~~4.6						Seventh Supplemental Indenture, dated as of June 13, 2019, between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on June 13, 2019).

~~4.9~~4.7						Indenture, dated as of August 11, 2020, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 11, 2020).

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

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

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 November 30, ~~2020,~~2021, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of November 30, ~~2020, August 31, 2020~~2021 and February ~~29, 2020;~~28, 2021; (ii) Consolidated Statements of ~~Income (Loss)~~Loss and Comprehensive ~~Income (Loss)~~Loss for ~~the two months ended August 31, 2020 and 2019, and~~ the three and nine months ended November 30, ~~2020~~2021 and ~~2019;~~2020; (iii) Consolidated Statements of Cash Flows for the nine months ended November 30, ~~2020~~2021 and ~~2019;~~2020; (iv) Consolidated Statements of Changes in Shareholders’ Equity for the ~~two months ended August 31, 2020 and 2019, and for the~~ three and nine months ended November 30, ~~2020~~2021 and ~~2019;~~2020; and (v) Notes to Unaudited Consolidated Financial Statements.*

4643


Exhibit No.						Description of Exhibit

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

* Filed herewith.

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

4744

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: ~~1/14/2021~~January 13, 2022


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

4845


			Fair Value Measurements at August 31, 2020 Using Fair Value Hierarchy
	Fair Value as of August 31, 2020		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	$	514,917	$	514,917	$	0	$	0	Market
Restricted cash and cash equivalents	5,353		5,353		0		0		Market


Total	$	520,270	$	520,270	$	0	$	0