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Item 9A. Controls and Procedures

2021-04-21 compared with 2020-02-13 · 982 added, 605 removed, 605 unchanged (72% of the section changed)

3 unchanged sentences

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 December 31, 2019 .

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 December 31, 2019 .

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 February 28, 2021.

Management’s Annual Report on Internal Control over Financial Reporting

3 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019 .

The assessment was based on criteria established in the Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2019 .

Ernst & Young LLP, the independent registered public accounting firm that audited our Consolidated Financial Statements included in this Annual Report on Form 10-K, audited the effectiveness of our controls over financial reporting as of December 31, 2019 .

Ernst & Young LLP has issued its report which is included below.

Based on this assessment, management concluded that our internal control over financial reporting was effective as of February 28, 2021.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2019 , that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Aircastle Limited

Opinion on Internal Control over Financial Reporting

We have audited Aircastle Limited and Subsidiaries’ internal control over financial reporting as of December 31, 2019 , based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).

In our opinion, Aircastle Limited and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019 , based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018 , and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019 and the related notes (collectively referred to as the “consolidated financial statements”) of the Company and our report dated February 13, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

February 13, 2020

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended February 28, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

OTHER INFORMATION

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The Code of Business Conduct and Ethics is posted on our website at www.aircastle.com under Investors - Corporate Governance.

Information about our Directors .

In connection with the Merger and effective immediately after the Effective Time, the members of the board of directors of the Company (the “Board”) are Douglas A.

Hacker, Michael J.

Inglese, Takashi Kurihara, Charles W.

Pollard, Taro Kawabe, Takayuki Sakakida and Noriyuki Yukawa.

Takashi Kurihara

Takayuki Sakakida

Noriyuki Yukawa

Hacker was appointed to our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from August 2, 2006 to the consummation of the Merger.

Hacker is currently an independent business executive and formerly served as Executive Vice President, Strategy for UAL Corporation, an airline holding company, and has served in such position from December 2002 to May 2006.

Prior to that, Mr.

Hacker served with UAL Corporation as President, UAL Loyalty Services from September 2001 to December 2002, and as Executive Vice President and Chief Financial Officer from July 1999 to September 2001.

Hacker served as a director of Travelport from 2016 until May 2019.

Hacker serves as a director or trustee of a series of open-end investment companies that are part of the Columbia family of mutual funds and as lead independent director of SpartanNash Company (“SpartanNash”).

In March 2021, the nominating and corporate governance committee of SpartanNash nominated Mr.

Hacker to serve as the Chairman of SpartanNash Company.

Inglese was appointed a member of our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from June 2017 to the consummation of the Merger.

He became our Chief Executive Officer in June 2017, having served as Aircastle’s Acting Chief Executive Officer from January 2017.

He was previously our Chief Financial Officer from April 2007 to January 2017.

Prior to joining the Company, Mr.

Inglese served as Chief Financial Officer of PanAmSat Holding Corporation from June 2000 until the closing of PanAmSat’s sale to Intelsat in July 2006.

Inglese joined PanAmSat in May 1998 as Vice President, Finance after serving as Chief Financial Officer for DIRECTV Japan, Inc.

He is a Chartered Financial Analyst who holds a BS in Mechanical Engineering from Rutgers University College of Engineering and his MBA from Rutgers Graduate School of Business Management.

Taro Kawabe was appointed to our Board on March 27, 2020 following the consummation of the Merger.

Kawabe is currently an Executive Officer, Chief Operating Officer of Finance and Leasing Business Division of

Previously, he was Senior Operating Officer of Finance and Leasing Business Division of Marubeni from April 2019 to March 2020.

Prior to that, Mr.

Kawabe was the General Manager of the Leasing Business Department of Marubeni from April 2016 to March 2019.

Kawabe joined Marubeni in April 1990.

Kawabe received his degree from Waseda University in 1990.

Takashi Kurihara was appointed to our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from May 2019 to the consummation of the Merger, and was nominated by Marubeni.

Kurihara is the Advisor to the President of Marubeni America Corporation.

From January 2017 to March 2019, Mr.

Kurihara was a director of Agricultural Solutions Business Division of Bridgestone.

Prior to that, Mr.

Kurihara was Deputy General Manager, Regional Coordination and Administration Department at Marubeni from April 2016 to September 2016.

From July 2013, he was Vice President and a Board member of Gavilon Agriculture Investment until April 2015, when Mr.

Kurihara became Executive Vice President and a Board member of Gavilon Agriculture Investment.

Kurihara received his MBA at Columbia Business School in New York and his bachelor degree of political science at Keio University in Tokyo.

Kurihara has over 30 years’ experience at Marubeni including the structured finance for Energy & Chemical plant projects in various countries, the management of the investment decision making process by conducting the analysis and the recommendation to its CEO, various M&A activities including Gavilon and its post-merger integration, and brings to the Board extensive experience in operations, strategic planning and financial matters.

Pollard was appointed to our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from July 6, 2010 to the consummation of the Merger.

Pollard joined Omni Air International, Inc., a passenger charter carrier, in 1997, where he served variously as Managing Director, President and CEO, and Vice Chairman until 2009.

Previously he spent ten years in senior management positions, including President and CEO, at World Airways, Inc.

Prior to joining World Airways, Inc., he practiced corporate law at Skadden, Arps, Slate, Meagher & Flom.

He currently serves on the board of directors of Allegiant Travel Company.

Takayuki Sakakida was appointed to our Board on March 27, 2020 upon the consummation of the Merger and served on the prior Board of Aircastle Limited from June 9, 2017 to the consummation of the Merger, and was nominated by Marubeni.

In April 2019, Mr.

Sakakida was appointed as General Manager, Finance & Leasing Business Dept.

– II, Marubeni.

In April 2017, Mr.

Sakakida was appointed as Vice President and General Manager, Aerospace and Ship Unit, Marubeni America Corporation, which is a subsidiary of Marubeni, a general trading company, engaged as an intermediary, importer/exporter, facilitator or broker in various types of trade between and among business enterprises and countries.

In April 2016, Mr.

Sakakida was appointed as Assistant General Manager, Aerospace and Defense Systems Department, Marubeni.

From April 2015 to April 2016, he served as General Manager, Business Administration Section, Aerospace and Defense Systems Department of Marubeni.

From April 2011 to 2015, he seconded to MD Aviation Capital Pte Ltd (Singapore) as Managing Director.

Sakakida has over twelve years’ experience in the aviation industry and brings to the Board extensive experience in operations, strategic planning and financial matters relevant to the aviation industry.

He maintains high-level contacts with major manufacturers in the aviation industry as well as Asian airlines which may in the future be customers of the Company.

Noriyuki Yukawa was appointed to our Board on March 27, 2020 following the consummation of the Merger.

Yukawa is currently an Advisor at Mizuho Leasing, and from April 2013 until March 2020, he also held the title of Managing Executive Officer.

From April 2017 to March 2020, he led the Aviation, Finance and Real Estate Departments, and from April 2013 to March 2017 he was in charge of Real Estate.

Prior to joining Mizuho Leasing in April 2009, Mr.

Yukawa had a 28 year career at Mizuho Bank.

His roles included General Manager of the M&A Advisory Division, Joint General Manager of the M&A Finance Division, and Deputy General Manager of the Real Estate Finance Division, as well as an Executive Assistant for the Chairman of the Board.

Yukawa received a Master of Comparative Laws from the University of Illinois, College of Law and a Bachelor of Law from the University of Tokyo.

Yukawa is also a member of the Board of Directors of PLM Fleet LLC.

Information about our Executive Officers .

The names of the executive officers of the Company and their ages, titles and biographies may be found in:

Information about our Executive Officers.

Code of Business Conduct and Ethics .

To help ensure that the Company abides by applicable corporate governance standards, our Board has adopted a Code of Business Conduct and Ethics and a Code of Ethics for Chief Executive and Senior Financial Officers, which are posted on our website at http://www.aircastle.com under “Investors—Governance Documents” and which are available in print to any shareholder of the Company upon request.

Audit Committee of the Board of Directors .

After the Effective Time, Takashi Kurihara (Chairman), Noriyuki Yukawa and Douglas A.

Hacker were designated as members of the Audit Committee.

EXECUTIVE COMPENSATION

Information on compensation of our directors and certain named executive officers will be contained under the captions “Directors’ Compensation” and “EXECUTIVE COMPENSATION,” respectively, in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

All of the foregoing information is incorporated herein by reference.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Given that we changed our fiscal year in 2020 to begin on March 1 and end on the last day of February of each year, all references herein to a year shall mean our fiscal year unless otherwise noted.

Our 2020 fiscal year began on March 1, 2020 and ended on February 28, 2021.

This Compensation Discussion and Analysis describes and analyzes our executive compensation philosophy and programs.

This Compensation Discussion and Analysis focuses on the compensation paid for our 2020 fiscal year and the transition period from January 1, 2020, to February 29, 2020 (the “Transition Period”) to our current Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers, together referred to as our named executive officers, or NEOs.

For 2020, our NEOs were:

Named Executive Officer Title

Inglese Chief Executive Officer

Dahlke Chief Financial Officer

Chief Commercial Officer

Christopher L.

Chief Legal Officer & Secretary

Chief Strategy Officer

Pay for Performance Philosophy

We believe executive compensation should be tied to Company performance weighted in favor of long-term performance, and our compensation program for 2020 and the Transition Period rewarded executives and employees in two areas:

• Annual Corporate Performance :

Achievement of internal corporate financial metrics focused on:

(i) adjusted return on equity;

(ii) cash flow per share;

and (iii) growth through new investments;

• Individual Performance :

Achievement of individual performance goals set at the beginning of each year.

For 2020, we made annual incentive compensation awards, comprised of a cash bonus and restricted cash award, the payment and vesting of which were based on a mix of corporate performance and individual performance.

For more highly compensated employees, including our NEOs, achievement of corporate financial metrics carried a greater weighting relative to individual performance, as illustrated in the table below:

Position Corporate Performance Individual Performance

Other NEOs 80% 20%

2020 Corporate Financial Metrics .

We based corporate performance targets on the Company’s business plan and established a performance range for each metric.

Results below the low end of each range would not yield any contribution to the Company’s incentive compensation pool for that metric.

Conversely, performance above target would result in an enhanced contribution to the Company’s incentive compensation pool, up to a 200% contribution at the upper end of the performance range for each metric.

For 2020, we established the following targets, performance ranges and relative weightings for the three financial metrics:

Target Performance Range Weighted Score

Adjusted return on equity (1)

9.49 % 25%-150% 25%

Cash flow (2)

$ 537.20 85%-115% 50%

Net investments (3) (in billions)

$ 1.40 50%-150% 25%

_______________

(1) Adjusted Return on Equity is Adjusted Net Income divided by the average shareholders’ equity.

Adjusted Net Income, or ANI, is net income before certain expenses related to our financings and interest rate derivative accounting, and other items we have deemed unusual when viewed in the context of our ongoing business.

Our presentation of ANI may not be comparable to similarly-titled measures used by other companies.

A reconciliation between non-GAAP performance metrics and U.S.

GAAP results is included as Appendix A to this Form 10-K.

(2) Cash Flow for a period is Cash Flow from Operations before changes in working capital plus principal payments from our finance leases and distributions from our joint venture investment.

A reconciliation between non-GAAP performance metrics and U.S.

GAAP results is included as Appendix A to this Form 10-K.

(3) New Investments measures the total annual amount invested in aviation assets.

Individual and Functional Performance Goals and Compensation.

We set individual performance goals for every employee at the beginning of each year and measure each employee’s performance against those goals at the end of the year to determine incentive compensation levels.

For 2020, we determined incentive pay for each employee by applying the weighted corporate and individual performance.

We set individual bonus targets based on an employee’s function, role and seniority within the organization, among other factors.

For 2020, for our executive officers, annual incentive compensation will be paid out in the form of cash and restricted cash awards.

For additional retention purposes, the restricted cash awards vest over three years, subject to continued service with us through such period.

Compensation Overview

For 2020 and the Transition Period, there were three primary elements of total direct compensation:

base salary, annual cash bonus, annual restricted cash award.

Base salaries provide fixed compensation and allow us to attract and retain talented management.

We set base salaries for our named executive officers and review them periodically by taking into account the current market environment and the responsibilities, experience, value to the Company and demonstrated performance of our named executive officers.

Annual Incentive Compensation .

As discussed below, we make incentive compensation awards based on the Company’s performance against corporate financial metrics, performance against individual performance goals, and, if applicable, functional performance goals for each year.

Long-Term Incentive Plan .

As a result of the global pandemic and its impact on the commercial aviation industry in 2020, no long-term performance awards (“LTIP”) were granted.

In connection with the Merger and in lieu thereof, restricted cash awards vesting on February 15, 2021 were awarded to certain senior professionals, including our NEOs, in an amount equal to 1/3 of the target dollar amount of LTIP awarded in 2019.

Other Compensation .

We also offered NEOs severance payments and accelerated vesting of restricted cash awards in certain circumstances, as described in greater detail below in the section entitled “Potential Payments upon Termination or Change in Control.” Severance and change in control benefits provide transitional assistance for separated employees and are essential to recruiting and retaining talented executives in a competitive market.

In addition, our NEOs are also eligible to participate in our employee benefit plans, including medical, dental, life insurance and 401(k) plans.

These plans are available to all employees and do not discriminate in favor of our named executive officers.

Recoupment Policy .

In January 2016, we adopted a clawback policy covering certain incentive compensation awarded to our executive officers.

The policy requires reimbursement of incentive payments awarded to an executive

officer based upon financial results that were subsequently the subject of a restatement due to the Company’s material noncompliance with financial reporting requirements.

The amount of reimbursement would be to the extent that a lower payment would have been awarded to the executive based on the restated financial results.

The policy applies to all incentive compensation awarded or paid to an executive officer in the three years prior to the restatement, even if the executive officer did not engage in conduct which contributed to the restatement.

In addition, we may seek to recover any portion of incentive compensation when we determine that an executive officer engaged in a certain misconduct, namely involving:

(i) material acts of fraud or dishonesty in connection with employment by the Company;

(ii) willfully not complying with material policies or procedures of the Company;

or (iii) the commission of a felony or a crime involving material dishonesty.

The primary goals of our compensation programs are to attract, motivate and retain the most talented and dedicated employees and to align incentive compensation.

What We Don’t Pay or Provide

• Individual contractual rights to change in control benefits based on a single trigger;

• Deferred compensation plans;

• Company cars or aircraft;

• Individual contractual rights to income tax gross-ups;

• Special or enhanced pension or retirement programs.

2020 Compensation

Performance versus Corporate Financial Metrics .

In 2020, the Company’s performance against its corporate financial metrics resulted in an incentive compensation pool equal to 0% of the total target as a result of the COVID-19 pandemic and its acute impact on the commercial aviation industry.

Target Weighting 2020 Performance Performance Range Performance Weighted Score

Adjusted Return on Equity (1)

9.49 % 25% (14.60) % 25% - 150% — % — %

Cash flow (1)

$ 537.20 50% $ 376.40 85% - 115% — % — %

New investments (in billions) $ 1.40 25% $ 0.18 50% - 150% — % — %

_______________

(1) A reconciliation between non-GAAP performance metrics and U.S.

GAAP results is included as Appendix A to this Form 10-K.

Pursuant to the Merger Agreement, annual incentive awards prior to the Merger could be paid in cash and at target bonus levels.

Pre-Merger annual bonuses could be paid at target and in cash to our bonus eligible employees, including our NEOS, but only for the Transition Period.

Annual bonus awards for our fiscal year 2020 were determined solely by corporate and individual performance levels.

Based on the foregoing and given the corporate performance achievement of 0%, the Compensation Committee took the following actions for our NEOs.

For the Transition Period, our NEO received their base salaries and have been awarded pro-rata bonuses at target levels paid in cash.

Named Executive Officer 2020 Incentive Compensation (1)

Pre-Merger Bonus Payable in Cash at Target

Inglese $101,250 cash and $202,500 restricted cash grant

$337,500 cash

Dahlke $96,000 cash and $96,000 restricted cash grant

$133,333 cash

$120,000 cash and $120,000 restricted cash grant

$166,667 cash

Christopher L.

$120,000 cash and $120,000 restricted cash grant

$166,667 cash

$96,000 cash and $96,000 restricted cash grant

$133,333 cash

_______________

(1) All restricted cash awards are expected to be granted in April 2021 and will vest in equal installments on March 15, 2022, 2023 and 2024.

How We Make Decisions

The Compensation Committee reviews the risks and rewards associated with the Company’s compensation programs.

We believe that our compensation programs encourage prudent business judgment and appropriate risk-taking, with the overall goal of building sustainable and profitable growth.

We believe none of our compensation programs create risks that are reasonably likely to have a material adverse impact on the Company.

Base salary is a fixed amount that does not encourage risk taking.

Role of Executive Officers.

For 2020, the Committee set the corporate financial metrics at the beginning of the year based on the annual business plan endorsed by the Board.

We set performance goals for the Chief Executive Officer, who in turn established individual performance goals for the other NEOs.

Regularly during the year, the senior management team presented to us the Company’s actual performance against the corporate performance metrics.

We shared these discussions with the full Board on a regular basis.

Tax Implications of Our Compensation

The Tax Cuts and Jobs Act, enacted on December 22, 2017, substantially modified Section 162(m) of the Internal Revenue Code and, among other things, eliminated the performance-based exception to the $1 million deduction limit effective as of January 1, 2018.

As a result, beginning in 2018, compensation paid to certain executive officers in excess of $1 million will generally be nondeductible, whether or not it is performance-based.

In addition, beginning in 2018, the executive officers subject to Section 162(m) (the “Covered Employees”) will include any individual who served as the CEO or Chief Financial Officer (“CFO”) at any time during the taxable year and the three other most highly compensated officers (other than the CEO and CFO) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual will remain a Covered Employee for all future years.

The Tax Cuts and Jobs Act includes a transition rule under which the changes to Section 162(m) described above will not apply to compensation payable pursuant to a written binding contract that was in effect on November 2, 2017, and is not materially modified after that date.

To the extent applicable to our pre-Merger contracts and awards, the Compensation Committee might have availed itself of this transition rule.

However, to maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee does not limit its actions with respect to executive compensation to preserve deductibility under Section 162(m) if the Compensation Committee determines that doing so is in the best interests of the Company.

Effective as of the closing of the Merger, Section 162(m) no longer applied to the Company.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Board is currently comprised of three Directors and operates pursuant to a written charter, which is available at http://www.aircastle.com under “Investors—Governance Documents.”

The Compensation Committee is primarily responsible for reviewing, approving and overseeing the Company’s compensation plans and practices and works with management to establish the Company’s executive compensation philosophy and programs.

The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and based on that review and discussion, has recommended to the Board that it be included in this Form 10-K.

Respectfully submitted,

The Compensation Committee

Pollard, Chair

Takashi Kurihara

Summary Compensation Table for 2020

The table below sets forth information regarding 2020 (FY), the Transition Period (“2020 (2mo)”), 2019 and 2018 compensation for each of our NEOs.

Name and Principal Position Fiscal Year Salary Bonus Annual Equity Award (3)

Long Term Incentive Plan (3)

All Other Compensation (4)

Inglese 2020 (FY) $ 675,000 $ 1,076,868 $ — $ — $ 12,840 $ 1,764,708

Chief Executive Officer 2020 (2mo) 112,500 469,123 — — 2,140 583,763

2019 675,000 717,930 1,522,966 7,717,531 126,114 10,759,541

2018 675,000 935,550 1,091,583 3,442,058 110,288 6,254,479

Dahlke 2020 (FY) 400,000 344,331 — — 12,840 757,171

Chief Financial Officer 2020 (2mo) 66,667 181,349 — — 2,140 250,156

2019 400,000 425,440 449,194 1,860,818 42,543 3,177,995

2018 400,000 554,400 312,330 755,710 32,874 2,055,314

Winter 2020 (FY) 500,000 506,803 — — 21,527 1,028,330

Chief Commercial Officer 2020 (2mo) 83,333 233,631 — — 2,094 319,058

2019 337,180 531,800 696,850 1,090,700 44,767 2,701,297

2018 — — — — — —

Christopher L.

Beers 2020 (FY) 500,000 506,803 — — 13,250 1,020,053

Chief Legal Officer & 2020 (2mo) 83,333 233,631 — — 2,208 319,172

Secretary 2019 500,000 531,800 567,047 3,155,948 65,010 4,819,805

2018 500,000 693,000 420,396 1,444,308 71,564 3,129,268

Roy Chandran (5)

2020 (FY) 400,000 344,331 — — 12,840 757,171

Chief Strategy Officer 2020 (2mo) 66,667 181,349 — — 2,140 250,156

(formerly EVP Corporate 2019 400,000 425,440 454,826 1,880,591 43,279 3,204,136

Finance & Strategy) 2018 400,000 562,400 312,330 761,238 34,944 2,070,912

_______________

(1) The amounts reported in the Annual Equity Award column for 2019 and 2018 reflect, in part, the aggregate fair value on the grant date of the restricted share awards granted to our NEOs determined in accordance with FASB ASC Topic 718.

The amounts reported in the Long-Term Incentive Plan column for 2019 and 2018 reflect, in part, the aggregate fair value on the grant date of the AROE PSUs and the TSR PSUs granted to our NEOs determined in accordance with FASB ASC Topic 718 based on the probable achievement of the applicable AROE and TSR performance conditions as of the grant date.

The aggregate fair value on the grant date that would have been included for the AROE PSUs and TSR PSUs, assuming that the highest level of the performance conditions would be achieved, is as follows:

Inglese $2,475,000;

Winter $1,000,000;

Dahlke $600,000;

Beers $1,000,000;

Chandran $600,000.

For a summary of the assumptions made in the valuation of these awards, please see Note 8 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Pursuant to SEC guidance, the amounts included in both of these columns also include the incremental fair value of certain restricted share awards and PSUs that were materially modified in December 2019 as a result of their accelerated vesting in connection with the 280G mitigation actions taken in connection with the Merger, as described in greater detail above.

See “Grants of Plan-Based Awards for 2019” below for additional information regarding (i) the restricted share awards and PSUs made to our NEOs in 2019 and 2018 and (ii) the incremental fair value attributable to the awards that were materially modified in December 2019.

(2) Bonus compensation consists of:

(i) cash bonuses;

(ii) cash-based long-term incentive compensation awarded in 2020 with a one-year vesting period;

and (iii) the portion of 2019 restricted cash awards vesting in 2020.

(3) Please refer to the Company's Form 10K/A for the year ended December 31, 2019, (filed April 22, 2020) for a description of the Annual Equity Awards and performance-based Long Term Incentive awards for the years 2019 and earlier.

No Annual Equity Awards or performance-based Long Term Incentive awards were granted in fiscal year 2020 or the Transition period.

(4) The amounts reported in this column consist of Company contributions made to each named executive officer’s 401(k) plan account and certain insurance premiums paid by the Company, in addition to $8,960 paid to Douglas C.

Winter as a dividend payment on unvested restricted common shares.”

(5) In March 2020, Mr.

Chandran was promoted to Chief Strategy Officer.

Stock Vested for 2020

The following table summarizes the restricted share awards and performance share units held by our NEOs that vested in connection with the closing of the Merger during the fiscal year ended February 28, 2021:

Name Number of Shares Acquired on Vesting Value Realized on Vesting (US$) (1)

Inglese 207,914 $ 6,653,248

Dahlke 50,404 1,612,928

Winter 112,006 3,584,192

Christopher L.

Beers 120,594 3,859,008

Roy Chandran 72,820 2,330,240

_______________

(1) The aggregate dollar value realized is calculated based on the US$32.00 per share price of our common shares on March 26, 2020, the last business day preceding the closing of the Merger.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table and summary set forth potential amounts payable to our NEOs upon termination of employment or a change in control, as described below.

The table below reflects amounts payable to our NEOs assuming termination of employment on February 28, 2021:

Name and Principal Position Voluntary

by us for cause

by us without

Termination by

us without cause

or by executive

for good reason

Termination by executive for good reason Normal

Cash Severance $ — $ — $ 1,350,000 $ 2,700,000 $ 1,350,000 $ — $ —

COBRA Reimbursement — — 52,743 52,743 52,743 — 52,743

Vacation 72,692 72,692 72,692 72,692 72,692 72,692 72,692

Remainder of 2019 Restricted Cash Award — — 478,620 478,620 478,620 — 478,620

Cash Severance — — 800,000 1,600,000 800,000 — —

Pro-rata Bonus (assumes

February 27 termination) — — 400,000 400,000 400,000 — 400,000

COBRA Reimbursement — — 52,743 52,743 52,743 — 52,743

Vacation 43,077 43,077 43,077 43,077 43,077 43,077 43,077

Remainder of 2019 Restricted Cash Award — — 141,813 141,813 141,813 — 141,813

Cash Severance — — 1,000,000 2,000,000 1,000,000 — —

Pro-rata Bonus (assumes

February 27 termination) — — 500,000 500,000 500,000 — 500,000

COBRA Reimbursement — — 52,743 52,743 52,743 — 52,743

Vacation 53,846 53,846 53,846 53,846 53,846 53,846 53,846

Remainder of 2019 Restricted Cash Award — — 177,267 177,267 177,267 — 177,267

Christopher L.

Cash Severance — — 1,000,000 2,000,000 1,000,000 — —

Pro-rata Bonus (assumes

February 27 termination) — — 500,000 500,000 500,000 — 500,000

COBRA Reimbursement — — 52,743 52,743 52,743 — 52,743

Vacation 53,846 53,846 53,846 53,846 53,846 53,846 53,846

Remainder of 2019 Restricted Cash Award — — 177,267 177,267 177,267 — 177,267

Cash Severance — — 800,000 1,600,000 800,000 — —

Pro-rata Bonus (assumes

February 27 termination) — — 400,000 400,000 400,000 — 400,000

COBRA Reimbursement — — 52,743 52,743 52,743 — 52,743

Vacation 43,077 43,077 43,077 43,077 43,077 43,077 43,077

Remainder of 2019 Restricted Cash Award — — 141,813 141,813 141,813 — 141,813

As described below in the section entitled “Employment Agreements with NEOs,” we, through our subsidiary, Aircastle Advisor LLC, have entered into employment agreements (as amended) with our named executive officers which set forth certain terms and conditions of their employment relating to termination and termination payments.

Under the employment agreements for our named executive officers:

• if the employment of such named executive officer is terminated without “cause” or with “good reason” (as defined in such employment agreement), and if he signs a general release of claims and complies with the covenants described below, then he will be entitled to receive:

(i) an amount equal to the sum of the base salary

and target annual cash bonus for the year of termination, payable over a one-year period (two times such amount and payable in a lump sum if the termination occurs within 120 days prior to or within two years following a “change in control” as defined in such employment agreement);

(ii) a pro-rata annual bonus for the year of termination;

(iii) reimbursement of COBRA premiums for up to twelve months;

and (iv) accelerated vesting of all outstanding restricted share awards;

• if any amounts to be paid to such named executive officer would constitute “excess parachute payments” subject to the excise tax imposed under Section 4999 of the Internal Revenue Code, the amount will be reduced to the extent necessary to avoid the excise tax, but only if such reduction results in a higher after-tax payment to him;

• such named executive officer covenants not to compete with Aircastle for six months following termination of his employment for any reason and will not solicit the employees of Aircastle or the clients or customers of Aircastle for competing business, in each case, for a period of twelve months following termination.

Each of the employment agreements were amended effective as of December 19, 2019 to provide that any grants of restricted cash awards in lieu of the annual PSU grants for 2020 and the equity-based portion of the annual bonuses in respect of 2019 will not constitute a good reason event for purposes of the employment agreements or for any other purpose.

Employment Agreements with NEOs

Through our subsidiary, Aircastle Advisor LLC, we have entered into an employment agreement (as amended) with each of our NEOs.

These employment agreements generally provide for payment of an annual base salary and the executives’ eligibility to receive an annual cash bonus with indicated target annual cash bonus and equity incentive award levels.

Each employment agreement provides that the NEO is employed “at-will” and may be terminated at any time and for whatever reason by either us or him.

A summary of the payments and benefits to be provided to the NEOs upon a termination of employment, along with a description of the restrictive covenants applicable to each NEO, is set forth below in the section entitled “Potential Payments upon Termination or Change in Control.”

Director Compensation

During 2020 and the Transition Period, cash compensation to the independent Directors for service on our Board is set forth in the table below.

On the first business day of calendar year 2020, our independent Directors prior to the Merger received a restricted cash awards equal to $135,000.

These restricted cash award fully vested on the closing of Merger.

Our affiliated and management Directors are not separately compensated by us for their Board or committee service.

All members of the Board were reimbursed for reasonable costs and expenses incurred in attending meetings of the Board or otherwise incurred in connection with carrying out their duties as Directors.

The table below describes our compensation of Directors during the Transition Period:

Name Fees Earned

Cash Award Total Compensation Earned for the Two Months Ended February 29, 2020

Allen $ 18,550 $ 93,103 $ 111,653

Giovanni Bisignani 15,117 93,103 108,220

Cave 20,236 93,103 113,339

Hacker 34,455 93,103 127,558

Jun Horie (1)

Takashi Kurihara (1)

Merriman 21,079 93,103 114,182

Agnes Mura 18,550 93,103 111,653

Pollard 22,766 93,103 115,869

Takayuki Sakakida (1)

Ueberroth 40,472 93,103 133,575

_______________

(1) Our affiliated and management Directors, Messrs.

Inglese, Horie, Kurihara and Sakakida were not separately compensated by us for their Board or committee service.

The table below describes our compensation of Directors during the fiscal year ended February 28, 2021:

Name Fees Earned

Cash Award Total Compensation Earned for the Year Ended February 28, 2021

Allen $ 8,347 $ 41,897 $ 50,244

Giovanni Bisignani 6,830 41,897 48,727

Cave 9,106 41,897 51,003

Hacker 177,195 41,897 219,092

Jun Horie (1)

Taro Kawabe (1)

Takashi Kurihara (1)

Merriman 9,486 41,897 51,383

Agnes Mura 8,317 41,897 50,214

Pollard 176,436 41,897 218,333

Takayuki Sakakida (1)

Ueberroth 9,486 41,897 51,383

Noriyuki Yukawa (1)

_______________

(1) Our affiliated and management Directors, Messrs.

Inglese, Kawabe, Kurihara, Sakakida, and Yukawa were not separately compensated by us for their Board or committee service.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information on the number of shares of Aircastle’s common shares beneficially owned by each director, each named executive officer and by all directors and executive officers as a group will be contained under the captions “OWNERSHIP OF THE COMPANY’S COMMON SHARES - Security Ownership by Management” and information on each beneficial owner of more than 5% of Aircastle’s common shares will be contained under the captions “OWNERSHIP OF THE COMPANY’S COMMON SHARES - Security Ownership of Certain Beneficial Owners” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

All of the foregoing information is incorporated herein by reference.

Information regarding our equity compensation will be contained under the caption “COMPENSATION COMMITTEE REPORT - Equity Compensation Plan Information” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

The foregoing information is incorporated herein by reference.

Equity Compensation Plan Information .

The table below sets forth certain information as of December 31, 2019, the last day of the fiscal year, for (i) all equity compensation plans previously approved by our shareholders and (ii) all equity compensation plans not previously approved by our shareholders.

Plan Category Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in column (a))

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Total 3,948,503

_______________

(1) Represents 798,001 common shares subject to outstanding PSU awards (assuming payout at maximum).

Security Ownership of Certain Beneficial Owners and Management .

The table below sets forth information as of April 22, 2020 as to the beneficial ownership of our Common Shares.

Name and Address of Beneficial Owner Common Shares Held Percent of Class

Marubeni Corporation (1)

7-1 Nihonbashi 2-chome

Chuo-ku, Tokyo, 103-6060 Japan

MM Air Limited (2)

c/o Compass Administration Services Ltd.

Crawford House

50 Cedar Avenue

Hamilton, HM11, Bermuda

_______________

(1) Marubeni beneficially owns 7,024 Common Shares through its wholly owned subsidiary MHC.

On March 27, 2020, Aircastle consummated the Merger.

At the Effective Time, each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) shares canceled or converted into shares of the surviving company pursuant to the Merger Agreement and (ii) restricted shares canceled and exchanged pursuant to the Merger Agreement) was canceled and converted into the right to receive the Merger Consideration.

The shares that were owned by MHC immediately prior to the Effective Time were converted into the same percentage of shares of the surviving company in the Merger.

As a result, immediately following the Effective Time, MHC beneficially owned 28.8% of the outstanding common shares of the surviving company in the Merger, and MM Air Limited beneficially owned the remaining 71.2%.

On March 27, 2020, MM Air Limited transferred 2,976 Common Shares to MHC, resulting in MHC owning 7,024 Common Shares.

(2) MM Air Limited beneficially owns 7,024 Common Shares.

MM Air Limited is controlled by affiliates of Marubeni and Mizuho Leasing.

On March 27, 2020, Aircastle consummated the Merger.

At the Effective Time, each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) shares canceled or converted into shares of the surviving company pursuant to the Merger Agreement (as described in footnote (1) above) and (ii) restricted shares canceled and exchanged pursuant to the Merger Agreement) was canceled and converted into the right to receive the Merger Consideration.

The shares that were owned by MHC immediately prior to the Effective Time were converted into the same percentage of shares of the surviving company in the Merger.

On March 27, 2020, MM Air Limited transferred 2,976 Common Shares to MHC, resulting in MM Air Limited owning 7,024 Common Shares.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information relating to certain transactions between Aircastle and its affiliates and certain other persons will be contained under the caption “CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

All of the foregoing information is incorporated herein by reference.

Information relating to director independence will be contained under the caption “CORPORATE GOVERNANCE - Director Independence” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

The foregoing information is incorporated herein by reference.

Certain Relationships and Related Party Transactions

The following is a summary of material provisions of certain transactions we entered into with our executive officers, Directors or 5% or greater shareholders.

We believe the terms and conditions set forth in such agreements were reasonable and customary for transactions of this type.

Marubeni Corporation Shareholder Agreement Amendment and Limited Waiver

On February 18, 2015, the Company, Marubeni and a subsidiary of Marubeni entered into an amendment and restatement of the Shareholder Agreement, which (i) modified the terms of the Shareholder Agreement to immediately permit acquisitions by Marubeni and its affiliates of voting securities of the Company in the secondary market pursuant to a Rule 10b5-1 plan that would result in Marubeni and its affiliates collectively holding more than 21.0%, but no more than 27.5% of the voting power of the Company and (ii) extended the term of the standstill provision of the Shareholder Agreement (the “Marubeni Standstill”) by eighteen months to January 2025.

On September 23, 2016, the Company, Marubeni and a subsidiary of Marubeni entered into an amendment increasing the Change of Control threshold from 30% to 35%.

On October 23, 2019, the Company granted Marubeni a limited waiver of the Marubeni Standstill solely to allow Marubeni, either alone or in concert with Mizuho Leasing, to make an offer or proposal to the Board or the Company’s senior management to acquire all of the outstanding Common Shares that Marubeni did not already own.

The Shareholder Agreement terminated upon completion of the Merger.

Merger Agreement with Affiliates of Marubeni and Mizuho Leasing

On March 27, 2020, the Company was acquired by a newly-formed entity controlled by affiliates of Marubeni and Mizuho Leasing pursuant to the terms of the previously announced Merger Agreement and related Statutory Merger Agreement, by and among the Company, Parent and Merger Sub.

Pursuant to the Merger, Merger Sub merged with and into the Company, with the Company as the surviving company in the Merger and becoming a privately-held company whose only shareholders are Marubeni Aviation Holding Coöperatief U.A., which is an indirect subsidiary of Marubeni, and Parent.

Parent is controlled by affiliates of Marubeni and Mizuho Leasing.

At the Effective Time, subject to the terms and conditions of the Merger Agreement, the Common Shares of the Company (other than (i) shares canceled or converted into shares of the surviving company pursuant to the Merger Agreement and (ii) restricted shares canceled and exchanged pursuant to the Merger Agreement) were converted into the right to receive the Merger Consideration.

Policies and Procedures for Review, Approval or Ratification of Transactions with Related Persons

Our Board has adopted a Policy and Procedures with Respect to Related Person Transactions, our Related Person Policy.

Pursuant to the terms of the Related Person Policy, the Audit Committee must review and approve in advance any transaction involving an affiliate or related party (as defined under Accounting Standards Codification Topic 850), in which the amount involved exceeds $5,000,000, other than those that are pre-approved pursuant to pre-approval guidelines or rules that may be established by the Audit Committee to cover specific categories of transactions, including the guidelines described below.

All Related Persons, as defined below, are required to report to our legal department any such related person transaction prior to its completion, and the legal department will determine whether it should be submitted to the Audit Committee for consideration.

Our Related Person Policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Company or any of its subsidiaries was, is or will be a participant, in which the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest.

A Related Person is any person who is, or at any time since the beginning of the Company’s last fiscal year was, a Director or executive officer of the Company or a nominee to become a Director of the Company;

Marubeni and Mizuho Leasing or their affiliates;

any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Director, executive officer, nominee or Marubeni and Mizuho Leasing or their affiliates, and any person (other than a tenant or employee) sharing the household of such Director, executive officer, nominee or Marubeni and Mizuho Leasing or their affiliates.

Director Independence

Prior to the consummation of the Merger, the Board was comprised of the following individuals:

Allen, Giovanni Bisignani, Michael J.

Cave, Douglas A.

Hacker, Jun Horie, Michael J.

Inglese, Takashi Kurihara, Ronald L.

Merriman, Agnes Mura, Charles W.

Pollard, Takayuki Sakakida, and Peter V.

The Board determined that Messrs.

Allen, Bisignani, Cave, Hacker, Merriman, Pollard and Ueberroth and Ms.

Mura were independent within the meaning of the NYSE director independence standards and SEC rules.

In addition, the Board determined that all

members of the Audit (Messrs.

Allen, Cave, Hacker and Merriman), Compensation (Messrs.

Hacker, Merriman, Pollard and Ms.

Mura) and Nominating and Corporate Governance Committees (Messrs.

Bisignani, Pollard, Ueberroth and Ms.

Mura) were independent within the meaning of the NYSE director independence standards and SEC rules.

The Board previously determined, under the NYSE standards and SEC rules, that former Directors Hajime Kawamura and Gentaro Toya were not independent because of their affiliation with Marubeni.

Although the Common Shares are no longer listed on NYSE or any other national securities exchange and we are therefore not required to have a majority of independent directors, the Board considers the current Directors Messrs.

Hacker and Pollard to be independent and that Directors Messrs.

Inglese, Kawabe, Kurihara, Sakakida and Yukawa to be not independent.

As a non-listed company, we do not have a standing nominating committee and our Audit (Messrs.

Kurihara and Yukawa) and Compensation Committees (Messrs.

Inglese and Kurihara) include non-independent Directors.

In addition, the Board considered transactions described above under “Item 13.

Certain Relationships and Related Transactions, and Director Independence—Certain Relationships and Related Party Transactions” in making the independence determinations.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information relating to audit fees, audit-related fees, tax fees and all other fees billed in fiscal 2019 and by Ernst & Young LLP, for services rendered to Aircastle will be contained under the caption “INDEPENDENT AUDITOR FEES” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

The foregoing information is incorporated herein by reference.

Information relating to the pre-approval policies and procedures of the Audit Committee will be contained under the caption “INDEPENDENT AUDITOR FEES - Pre-Approval Policies and Procedures” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

The foregoing information is incorporated herein by reference.

Audit Fees, Audit Related Fees, Tax Fees and All Other Fees .

In connection with the audit of the 2019 and 2020 financial statements, the Company entered into an engagement letter with Ernst & Young LLP (“EY”) which set forth the terms by which EY has performed audit services for the Company.

The following summarizes the fees paid by us to EY for professional services rendered in 2020 and 2019:

Twelve Months Ended February 28, 2021 Two

Months Ended February 29, 2020 (3)

Audit Fees (1)

$ 2,168,000 $ 450,000

All Other Fees 5,200 —

_______________

(1) Represents fees for the audit of the Company’s consolidated financial statements and internal control over financial reporting, the reviews of interim financial statements included in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, certain Current Reports on Form 8-K, audits of IBJ Air joint venture, consultations concerning financial accounting and reporting standards, statutory audits and services rendered relating to the Company’s registration statements.

(2) Represents fees related primarily to assistance with tax compliance matters, including international, federal and state tax return preparation, and consultations regarding tax matters.

(3) Estimate based on approved fees, subject to finalization upon completion of audit work.

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee or one of its members of all services performed by the Company’s independent registered public accounting firm and related fee arrangements.

In the early part of each year, the Audit Committee approves the proposed services, including the nature, type and scope of services contemplated, and the related fees, to be rendered by these firms during the year.

In addition, pre-approval by the Audit Committee or one of its members is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees pre-approved by the Audit Committee pursuant to the Sarbanes-Oxley Act.

In accordance with this policy, the Audit Committee pre-approved all services to be performed by the Company’s independent registered accounting firm.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

2 unchanged sentences

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets as of December 31, 2019 and 2018.

Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017.

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017.

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017.

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2019, 2018 and 2017.

Consolidated Balance Sheets as of February 28, 2021, February 29, 2020 and December 31, 2019.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the years ended February 28, 2021, two months ended February 29, 2020, and years ended December 31, 2019 and 2018 December 31, 2019, and 2018.

Consolidated Statements of Cash Flows for the year ended February 28, 2021, two months ended February 29, 2020, and years ended December 31, 2019 and 2018.

Consolidated Statements of Changes in Shareholders’ Equity for the year ended February 28, 2021, two months ended February 29, 2021, and years ended December 31, 2019 and 2018.

Notes to Consolidated Financial Statements.

9 unchanged sentences

333-182242) filed on June 20, 2012).

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

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

4.1 Specimen Share Certificate (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1 (Amendment No.

12 unchanged sentences

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

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

Description of Aircastle Limited’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

Description of Exhibit

4.12 Sixth Supplemental Indenture, dated as of September 25, 2018, 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 September 25, 2018).

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

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

4.15 Description of Aircastle Limited’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.13 to the Company’s Annual Report on Form 10-K filed on February 13, 2020).

10.1 Form of Restricted Share Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (No.

16 unchanged sentences

10.13 Third Amended and Restated Credit Agreement, dated as of March 28, 2016, by and among Aircastle Limited, the several lenders from time to time parties thereto, and Citibank N.A., in its capacity as agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2016).

Description of Exhibit

10.14 Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 23, 2014).

2 unchanged sentences

10.17 Form of Performance Share Unit Agreement for Certain Executive Officers under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2016).

Description of Exhibit

10.18 Form of Restricted Share Unit Agreement Under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2017).

31 unchanged sentences

(incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2017).

Description of Exhibit

10.31 Amendment No.

7 unchanged sentences

10.34 Letter Agreement, dated as of October 4, 2016, by and between Aircastle Advisor LLC and Aaron Dahlke (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 7, 2016).

Description of Exhibit

10.35 Retirement and Transition Agreement, dated September 17, 2018, for Michael L.

1 unchanged sentence

10.36 Voting and Support Agreement, dated as of November 5, 2019, by and among Aircastle Limited, Marubeni Corporation, Marubeni Aviation Corporation and Marubeni Aviation Holding Coöperatief U.A.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K on filed November 7, 2019).

Subsidiaries of the Registrant *

Consent of Ernst & Young LLP *

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

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

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 7, 2019).

10.37 Form of Indemnification Agreement with directors and officers (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 27, 2020).

21.1 Subsidiaries of the Subsidiaries of the Registrant * *

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

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

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley 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 * 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 *

Owned Aircraft Portfolio at December 31, 2019 *

The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, formatted in iXBRL (Inline eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets as of December 31, 2019 and 2018;

(ii) Consolidated Statements of Income for the years ended December 31, 2019, 2018 and 2017;

(iii) Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017;

(iv) Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017;

(v) Consolidated Statements of Changes in Shareholders’ Equity and Comprehensive Income for the years ended December 31, 2019, 2018 and 2017;

and (vi) Notes to Consolidated Financial Statements*

Section 1350, as adopted pursuant to Section 906 of the 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 * Act of 2002 *

32.2 The following materials from the Company’s Annual Report on Form 10-K for the year ended February 28, 2021, formatted in iXBRL (Inline eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets as of February 28, 2021, February 29, 2020 and December 31, 2019;

(ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018;

(iii) Consolidated Statements of Cash Flows for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018;

(iv) Consolidated Statements of Changes in Shareholders’ Equity for the year ended February 29, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018;

and (v) Notes to Consolidated Financial Statements*

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

10 unchanged sentences

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2019 and 2018

Consolidated Statements of Income for the years ended December 31, 201 9, 2018 and 2017

Consolidated Statements of Comprehensive Income for the years ended December 31, 201 9, 2018 and 2017

Consolidated Statements of Cash Flows for the years ended December 31, 201 9, 2018 and 2017

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 201 9, 2018 and 2017

Notes to Consolidated Financial Statements

Consolidated Balance Sheets as of February 28, 2021, February 29, 2020 and December 31, 2019 F - 5

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the year ended February 28, 2021, two months ended February 29, 2020, and years ended December 31, 2019 and, 2018 F - 6

Consolidated Statements of Cash Flows for the year ended February 28, 2021, two months ended February 29, 2020, and years ended December 31, 2019, and 2018 F - 7

Consolidated Statements of Changes in Shareholders’ Equity for the year ended February 28, 2021, two months ended February 29, 2020, and years ended December 31, 2019, and 2018 F - 8

Notes to consolidated financial statements F - 9

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Aircastle Limited

To the Shareholders and the Board of Directors of Aircastle Limited and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Aircastle Limited and Subsidiaries (the Company) as of December 31, 2019 and 2018 , and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2019 , and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 , in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Aircastle Limited and Subsidiaries (the Company) as of February 28, 2021, February 29, 2020 and December 31, 2019, the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders' equity and cash flows for the years ended February 28, 2021, December 31, 2019 and 2018 and the two-months ended February 29, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 28, 2021, February 29, 2020 and December 31, 2019, and the results of its operations and its cash flows for the years ended February 28, 2021, December 31, 2019 and 2018 and the two-months ended February 29, 2020 in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019 , based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 13, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Recoverability assessment of flight equipment held for lease

Recoverability assessment and Impairment of flight equipment held for lease

Description of

As of December 31, 2019, the Company had $7.4 billion of flight equipment held for lease.

As more fully described in Note 2 to the consolidated financial statements, flight equipment held for lease is assessed for recoverability by management on an aircraft-by-aircraft basis annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's processes to determine whether the book value of each aircraft is recoverable.

the Matter As more fully described in Note 1 to the consolidated financial statements, flight equipment held for lease is assessed for recoverability by management on an aircraft-by-aircraft basis annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

As a result of the assessments during the two-month period ended February 29, 2020 and the year ended February 28, 2021, the Company recorded impairment charges of $63 million and $426 million respectively related to the flight equipment held for lease.

Auditing the Company’s assessment of recoverability of flight equipment held for lease was complex and highly judgmental due to the higher estimation required in determining the future undiscounted cash flows to evaluate whether such cash flows were less than the carrying amount of flight equipment.

Further, auditing this analysis also involved evaluating the assumptions utilized in estimating the fair values to calculate the impairment charges.

In particular, the undiscounted future cash flows were sensitive to changes related to significant assumptions such as the estimation of the future projected lease rates and future maintenance cash flows, as well as the value of aircraft adjusted for maintenance condition at the end of the useful life.

The calculation of impairment charges was sensitive to the changes of the weighted average cost of capital (WACC) used in the estimation of fair value.

Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's processes to determine whether the book value of each aircraft is recoverable.

This included controls over management’s review of the significant assumptions described above which are included in the Company’s recoverability analysis.

To test the estimated undiscounted future cash flows attributable to the flight equipment held for lease, we performed audit procedures on a sample of transactions that included, among others, evaluating and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We also considered current industry and economic trends and changes to the business.

We assessed the historical accuracy of certain assumptions by performing a look back analysis.

Our testing of the Company’s significant assumptions included, among others, comparing data to currently contracted lease rental and maintenance cash flows, evaluating future projected lease rates to third party data, evaluating the timing and cost of estimated future maintenance cash flows to manufacturers’ specifications and/or historical data, recalculating end of life value of aircraft based on projected maintenance condition at the end of its useful life and comparing it to published third party and/or historical sales data.

In addition, for the assumptions that most significantly impact recoverability we performed a sensitivity analysis to evaluate the changes to the undiscounted future cash flows from changes in the significant assumptions.

We also involved our valuation specialists to assist in evaluating the reasonableness of the WACC rates and the fair value of certain assets used in the calculation of the impairment charges recorded.

We considered current industry and economic trends and changes to the business.

We assessed the historical accuracy of certain assumptions by performing a look back analysis.

Accounting for Income Tax

Description of

The Company is incorporated in Bermuda and leases its aircraft within over 40 countries.

the Matter The Company is incorporated in Bermuda and leases its aircraft within over 40 countries.

The Company’s income is subject to U.S.

federal, state and local income taxes, as well as foreign income tax in many of the jurisdictions it leases aircraft.

As more fully described in Note 11 to the consolidated financial statements, the Company recognized a consolidated provision for income taxes of $22.7 million for the year ended December 31, 2019.

As more fully described in Note 10 to the consolidated financial statements, the Company recognized a consolidated provision for income taxes of $2 million and of $10 million for the two-month period ended February 29, 2020 and for the year ended February 28, 2021, respectively.

Auditing the Company’s income tax accounting was complex due to the complicated international tax structure maintained by the Company.

Specifically, the auditing of the application of changes in tax law and transactions to transfer, buy or sell aircraft in foreign jurisdictions required increased auditor effort, including the use of tax professionals with specialized skills, to evaluate the Company’s application of the tax laws in relevant jurisdictions and the related income tax.

Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to prepare the consolidated income tax provision.

Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to prepare the consolidated income tax provision.

Our procedures also included, among others, an evaluation of management’s review and consideration of the international tax structure, identification of changes to tax laws in the various jurisdictions in which it operates and its treatment of the transactions to transfer, buy and sell aircraft.

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We have served as the Company’s auditor since 2004.

February 13, 2020

April 21, 2021

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except share data)

February 28, February 29, December 31,

2021 2020 2019

Cash and cash equivalents $ 578,004 $ 166,083 $ 140,882

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Flight equipment held for lease, net of accumulated depreciation of $ 2,076,972 , $ 1,542,938 and $ 1,501,664 , respectively

Net investment in direct financing and sales-type leases

6,492,471 7,142,987 7,375,018

Net investment in leases, net of allowance for credit losses of $864, $6,558 and $0, respectively 195,376 426,252 419,396

Unconsolidated equity method investments 35,377 33,470 32,974

Other assets 311,944 206,617 201,209

Total assets $ 7,698,338 $ 8,008,032 $ 8,202,046

LIABILITIES AND SHAREHOLDERS’ EQUITY

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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, 75,122,129 shares issued and outstanding at December 31, 2019;

Common shares, $ 0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at February 28, 2021;

75,076,794 shares issued and outstanding at February 29, 2020;

and 75,122,129 shares issued and outstanding at December 31, 2019

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Aircastle Limited and Subsidiaries

Consolidated Statements of Income

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

(Dollars in thousands, except per share amounts)

Year Ended December 31,

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Lease rental revenue $ 611,421 $ 131,119 $ 777,403 $ 722,694

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Operating expenses:

Depreciation 347,517 59,853 356,021 310,850

Interest, net 235,338 41,038 258,070 234,504

Selling, general and administrative (including non-cash share-based payment expense of $ 28,049 , $ 10,678 , $ 15,830 and $ 11,488 , respectively)

93,671 23,189 77,034 76,025

Impairment of aircraft 425,579 62,657 7,404 —

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Loss on extinguishment of debt ( 2,640 ) ( 3,955 ) ( 7,577 ) —

Merger expenses ( 32,605 ) ( 321 ) ( 7,372 ) —

Other ( 191 ) ( 94 ) ( 4,492 ) 1,636

Total other income (expense) ( 35,436 ) ( 4,370 ) ( 19,441 ) 1,636

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

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment ( 325,258 ) 4,838 175,140 261,647

Income tax provision 10,236 1,675 22,667 5,642

Earnings (loss) of unconsolidated equity method investment, net of tax

Earnings per common share — Basic:

Net income per share

Earnings per common share — Diluted:

Net income per share

Dividends declared per share

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

Aircastle Limited and Subsidiaries

Consolidated Statements of Comprehensive Income

(Dollars in thousands)

Year Ended December 31,

Other comprehensive income, net of tax:

Earnings (loss) of unconsolidated equity method investment,

net of tax 2,326 496 4,102 ( 8,086 )

Net income (loss) $ ( 333,168 ) $ 3,659 $ 156,575 $ 247,919

Net derivative loss reclassified into earnings — — 184 1,166

Other comprehensive income — — 184 1,166

Total comprehensive income

Total comprehensive income (loss) $ ( 333,168 ) $ 3,659 $ 156,759 $ 249,085

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

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(Dollars in thousands)

Year Ended December 31,

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Net income (loss) $ ( 333,168 ) $ 3,659 $ 156,575 $ 247,919

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

Depreciation 347,517 59,853 356,021 310,850

Amortization of deferred financing costs 14,791 2,446 14,578 14,627

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Impairment of aircraft 425,579 62,657 7,404 —

Provision for credit losses 5,258 288 — —

Other ( 2,305 ) ( 402 ) 206 3,032

Changes on certain assets and liabilities:

Accounts receivable ( 57,292 ) ( 6,377 ) ( 13,162 ) ( 12,328 )

Other assets ( 66,290 ) 5,786 2,594 5,065

Accounts payable, accrued expenses and other liabilities ( 13,655 ) 10,205 ( 5,483 ) 10,526

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Distributions from unconsolidated equity method investment in excess of earnings 419 — 36,750 3,900

Net cash and restricted cash used in investing activities

Other ( 676 ) ( 56 ) 4,259 4,745

Net cash and restricted cash provided by (used in) investing activities 21,472 75,974 ( 784,029 ) ( 974,687 )

Cash flows from financing activities:

Repurchase of shares ( 25,536 ) ( 2,370 ) ( 36,739 ) ( 71,421 )

Parent contribution at Merger 25,536 — — —

Proceeds from secured and unsecured debt financings 1,932,943 100,000 2,116,848 1,413,901

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Net cash and restricted cash provided by (used in) financing activities 212,667 ( 161,004 ) 235,201 386,091

Net decrease in cash and restricted cash

Net increase (decrease) in cash and restricted cash 409,161 15,994 ( 12,410 ) ( 66,004 )

Cash and restricted cash at beginning of year 171,437 155,443 167,853 233,857

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(Dollars in thousands)

Year Ended December 31,

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Reconciliation to Consolidated Balance Sheets:

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Cash paid during the year for interest $ 241,011 $ 21,487 $ 246,026 $ 214,350

Cash (received) paid during the year for income taxes

Cash paid (received) during the year for income taxes $ 1,469 $ ( 15 ) $ ( 656 ) $ 6,254

Supplemental disclosures of non-cash investing activities:

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(Dollars in thousands, except share amounts)

Capital Retained

(Deficit) Accumulated

Comprehensive

Income (Loss)

Income (Loss) Total

Shareholders’

Common Shares

Shares Amount

Balance, December 31, 2017 78,707,963 $ 787 $ 1,527,796 $ 380,331 $ ( 1,350 ) $ 1,907,564

Issuance of common shares to directors and employees

Issuance of common shares to stockholders, directors and employees 423,202 4 ( 4 ) — — —

Repurchase of common shares from stockholders, directors and employees ( 3,676,654 ) ( 37 ) ( 71,384 ) — — ( 71,421 )

Amortization of share-based payments — — 10,523 — — 10,523

Reclassification of prior year director stock award liability — — 1,848 — — 1,848

Dividends declared — — — ( 88,730 ) — ( 88,730 )

Net income — — — 247,919 — 247,919

Adoption of accounting standard — — — ( 188 ) — ( 188 )

Net derivative loss reclassified into earnings — — — — 1,166 1,166

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Dividends declared — — — ( 91,328 ) — ( 91,328 )

Net income — — — 156,575 — 156,575

Adoption of accounting standard — — — 690 — 690

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Dividends declared — — — ( 24,025 ) — ( 24,025 )

Net income — — — 3,659 — 3,659

Adoption of accounting standard — — — ( 6,442 ) — ( 6,442 )

Net derivative loss reclassified into earnings

Balance, December 31, 2019

Balance, February 29, 2020 75,076,794 $ 751 $ 1,456,977 $ 578,461 $ — $ 2,036,189

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

Net loss — — — ( 333,168 ) — ( 333,168 )

Payment of unvested shares at Merger ( 101,809 ) ( 1 ) ( 25,535 ) — — ( 25,536 )

Parent contribution at Merger — — 25,536 — — 25,536

Share cancellation and re-issuance at Merger ( 74,960,937 ) ( 750 ) 750 — — —

Balance, February 28, 2021 14,048 $ — $ 1,485,777 $ 245,293 $ — $ 1,731,070

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

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Aircastle’s business is investing in aviation assets, including 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 of the outstanding common shares of its subsidiaries.

Aircastle directly or indirectly owns all the outstanding common shares of its subsidiaries.

The consolidated financial statements presented are prepared in accordance with U.S.

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Our chief executive officer is the chief operating decision maker.

On November 5, 2019, Aircastle entered into an Agreement and Plan of Merger (the “Merger Agreement”), with MM Air Limited, a Bermuda exempted company (“Parent”), and MM Air Merger Sub Limited, a Bermuda exempted company and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things, Merger Sub will merge with and into the Company, with Aircastle surviving as a wholly owned subsidiary of Parent (the “Merger”).

Parent and Merger Sub are newly-formed entities controlled by affiliates of Marubeni Corporation (“Marubeni”) and Mizuho Leasing Company, Limited (“Mizuho Leasing”).

The Marubeni Corporation is a related party and owns 28.8 % of the Company’s outstanding common shares as of December 31, 2019.

Pursuant to the Merger Agreement, subject to certain conditions set forth therein, at the effective time of the Merger (the “Effective Time”), each issued and outstanding common share, par value $ 0.01 per share, of the Company (the “Common Shares”) (other than (i) shares to be canceled or converted into shares of the surviving company pursuant to the Merger Agreement and (ii) restricted shares to be canceled and exchanged pursuant to the Merger Agreement), shall be converted into the right to receive $ 32.00 in cash, without interest (the “Merger Consideration”).

Consummation of the Merger is subject to the satisfaction of certain remaining customary closing conditions, including, without limitation, (i) approval of the Merger Agreement and the transactions contemplated thereby by the affirmative votes of a majority of the votes cast by holders of outstanding Common Shares at a meeting of the Company’s shareholders;

(ii) the receipt of any applicable pre-clearance or similar approval of certain remaining specified jurisdictions (i.e., Chile, Mexico and Morocco), and all required regulatory approvals being in full force and effect;

(iii) the absence of any law, judgment or other legal restraint that prevents, makes illegal or prohibits the consummation of the Merger and the other transactions contemplated by the Merger Agreement;

(iv) the accuracy of each party’s representations and warranties (subject to certain qualifications);

(v) each party’s performance in all material respects of its obligations contained in the Merger Agreement;

and (vi) the absence of a material adverse effect on the Company since the date of the Merger Agreement.

The Merger Agreement includes customary representations, warranties and covenants of Aircastle, Parent, and Merger Sub.

Among other things, Aircastle has agreed to customary covenants regarding the operation of the business of Aircastle and its subsidiaries prior to the closing.

Aircastle is permitted to pay regular quarterly dividends up to $ 0.32 per common share pursuant to the Merger Agreement.

The Company currently anticipates that the Merger will close in the first half of calendar year 2020, subject to the satisfaction of the remaining customary closing conditions.

Effective January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) which, together with all subsequent amendments, replaced the existing guidance in ASC 840, Leases (“ASC 840”).

The accounting for leases by lessors remained largely unchanged from the concepts that existed in ASC 840.

The FASB decided that lessors would be precluded from recognizing selling profit and revenue at lease commencement for any sales-type or direct financing lease that does not transfer control of the underlying asset to the lessee.

This requirement aligns the notion of what constitutes a sale in the lessor accounting guidance with that in the revenue recognition standard, which evaluates whether a sale has occurred from the customer’s perspective.

As a result of the Company’s adoption of ASC 842, we recognized right-of-use assets and lease liabilities on our Consolidated Balance Sheet as of December 31, 2019 , for our office leases classified as operating leases under ASC 842, existing at, or entered into after, January 1, 2019.

We adopted the standard using the required “modified retrospective”

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 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

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

approach and the available practical expedients.

ASC 842 requires collections on direct financing and sales-type leases to be reported within operating activities on our Consolidated Statement of Cash Flows for the year ended December 31, 2019.

Our financial statements for comparative periods have not been adjusted and continue to be reported in accordance with ASC 840.

The standard did not have a material impact on our consolidated financial statements and related disclosures.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure since the balance sheet date of December 31, 2019 through the date on which the consolidated financial statements included in this Form 10-K were issued.

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.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of February 28, 2021 through the date on which the consolidated financial statements included in this Annual Report were issued.

Principles of Consolidation

The consolidated financial statements include the accounts of Aircastle and all of its subsidiaries.

Aircastle consolidates four Variable Interest Entities (“VIEs”) of which Aircastle is the primary beneficiary.

The consolidated financial statements include the accounts of Aircastle and all its subsidiaries.

Aircastle consolidates two Variable Interest Entities (“VIEs”) of which Aircastle is the primary beneficiary.

All intercompany transactions and balances have been eliminated in consolidation.

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

Restricted cash and cash equivalents consists primarily of rent collections, maintenance payments and security deposits received from lessees pursuant to the terms of various lease agreements held in lockbox accounts in accordance with our financings.

Virtually all of our cash and cash equivalents and restricted cash and cash equivalents are held or managed by three major financial institutions.

Restricted cash and cash equivalents consist primarily of rent collections, maintenance payments and security deposits received from lessees pursuant to the terms of various lease agreements held in lockbox accounts in accordance with our financings.

Virtually all our cash and cash equivalents and restricted cash and cash equivalents are held or managed by three major financial institutions.

Aircastle Limited and Subsidiaries

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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

The factors considered in estimating the

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

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.

In monitoring the aircraft in our fleet for impairment charges, we identify those aircraft that are most susceptible to failing the recoverability assessment and monitor those aircraft more closely, which may result in more frequent recoverability assessments.

The recoverability in the value of these aircraft is more sensitive to changes in contractual cash flows, future cash flow estimates and residual values or scrap values for each aircraft.

These are typically older aircraft for which lessee demand is declining.

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 closely monitoring the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and have and will continue to perform additional customer and aircraft specific reviews should changes in facts and circumstances arise that may impact the recoverability of our aircraft.

We will focus on our customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of COVID-19 and value deterioration.

Net Investment in Direct Financing and Sales-Type Leases

If a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we recognize the lease as a direct financing or sales-type lease.

The net investment in direct financing and sales-type leases consists of the lease receivable, estimated unguaranteed residual value of the leased flight equipment at lease-end and, for direct financing leases, deferred selling profit.

For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of fight equipment.

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 lease revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease.

Collectability of direct financing and sales-type leases is evaluated at lease commencement and periodically during the lease term.

The evaluation is performed at an individual customer level and, among other things, considers the credit of the lessee and the value of the underlying aircraft.

A loss allowance is established if there is evidence that we will be unable to collect all amounts due according to the contractual terms of the lease.

At December 31, 2019, we had no allowance for credit losses for our Net investment in direct financing and sales-type leases.

Interest income on our net investment in leases is recognized as Direct financing and sales-type leases revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease.

The net investment in leases is recorded net of an allowance for credit losses.

The allowance for credit losses is recorded upon the initial recognition of the net investment in the lease based on the Company’s estimate of expected credit losses over the lease term.

The allowance reflects the Company’s estimate of lessee default probabilities and loss given default percentages.

When determining the credit loss allowance, we consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the net investment in the lease.

The allowance also considers potential losses due to non-credit risk related to unguaranteed residual values.

A provision for credit losses is recorded as a component of Selling, general, and administrative expenses to adjust the allowance for changes to management’s estimate of expected credit losses.

Unconsolidated Equity Method Investment

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Most of our operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit.

Security deposits represent cash received from the lessee that is held on deposit until lease expiration.

Aircastle’s operating leases also obligate the lessees to maintain flight equipment and comply with all governmental requirements applicable to the flight equipment, including without limitation, operational, maintenance, registration requirements and airworthiness directives.

Security deposits represent cash received from the lessee that is held on deposit until lease expiration or termination.

If a lease is terminated, we recognize security deposits in excess of outstanding lease payments as other revenue.

Maintenance Payments

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Whether to permit a lessee to make maintenance payments at the end of the lease term, rather than requiring such payments to be made monthly, depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease.

If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work.

If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease;

however, in some cases, we may owe a net payment to the lessee in the event heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception.

If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work.

If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease;

We record monthly maintenance payments by the lessee as accrued maintenance payments liabilities in recognition of our contractual commitment to refund such receipts.

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Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability.

We currently defer maintenance revenue recognition of most monthly maintenance payments collected until the end of the lease, when we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance.

We currently defer maintenance revenue recognition of most monthly maintenance payments until we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance, which generally occurs at or near the end of the lease.

End of lease term maintenance payments made to us are recognized as maintenance revenue, and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue.

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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 to rate-based lease rentals are recognized in the statements of income in the period of change.

Revenue is not recognized when collection is not reasonably assured.

When collectability is not probable, the customer is placed on non-accrual status, and revenue is recognized when cash payments are received.

Comprehensive Income

Comprehensive income consists of net income and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that, under U.S.

GAAP, are excluded from net income.

Operating lease rentals that adjust based on a London Interbank Offered Rate (“LIBOR”) index are recognized on a straight-line basis over the lease

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

term using the prevailing rate at lease commencement.

Changes to rate-based lease rentals are recognized in the statements of income (loss) in the period of change.

In certain instances, we may provide lease concessions to customers, generally in the form of lease rental deferrals.

While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease term is generally the same as that which was required under the original lease agreement.

We account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other assets.

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.

COVID-19 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 February 2021, air travel was down to approximately 30 % 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 COVID-19’s 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 April 15, 2021, we have agreed to defer approximately $ 108,400 in near-term lease payments of which approximately $ 87,400 are included in Accounts receivable or Other assets as of February 28, 2021.

This represents approximately 17 % of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended February 28, 2021.

These deferrals have been agreed to with 26 airlines, representing 35 % of our customer base, 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 April 15, 2021, seven of our customers are subject to judicial insolvency proceedings or similar protection.

We lease 23 aircraft to these customers, which comprise 14 % of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases) and 12 % of our Lease rental and direct financing and sales-type lease revenue as of and for the year ended February 28, 2021.

One of these customers is LATAM, our second largest customer, which represents 8 % of our net book value of flight equipment and 6 % of our Lease rental revenue as of and for the year ended February 28, 2021.

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.

Comprehensive Income (Loss)

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

GAAP, are excluded from net income (loss).

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Share-Based Compensation

Aircastle recognizes compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued.

Aircastle uses the straight-line method of accounting for compensation cost on share-based payment awards that contain pro-rata vesting provisions.

Aircastle recognized compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued.

Aircastle used the straight-line method of accounting for compensation cost on share-based payment awards that contained pro-rata vesting provisions.

Deferred Financing Costs

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Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments and related updates.

The standard affects entities holding financial assets and net investments in leases that are not accounted for at fair value through net income.

The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

The standard takes effect for annual periods beginning after December 15, 2019.

The Company’s net investments in direct financing and sales-type leases compose the financial assets principally affected by the standard.

Operating lease receivables are not within the scope of ASC 326.

Upon the Company’s adoption of ASC 326 in 2020, our net investments in direct financing and sales-type leases will be recorded in the consolidated financial statements net of an allowance for credit losses.

This allowance for credit losses will reflect the Company’s estimate of lessee default probabilities and loss given default percentages.

This estimate of expected credit losses will consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of reported amounts.

Additional consideration will be given for potential non-credit losses to unguaranteed residual values.

We will adopt the standard using the “modified retrospective” approach with a January 1, 2020 adjustment to the opening balance of retained earnings.

The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In August 2018, the FASB issued 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 standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted.

The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In August 2018, the FASB issued 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 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in any interim period.

The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

In October 2018, the FASB issued 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 standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.

Early adoption is permitted.

The adoption of the standard will not have a material impact on our consolidated financial statements or related disclosures.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

The standard applies to entities that have contracts, such as debt agreements, lease agreements or derivative instruments, which reference LIBOR or another reference rate expected 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 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 through December 31, 2022 and does not apply to contract modifications made after December 31, 2022.

We have not adopted ASC 848 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 the COVID-19 pandemic.

The Company has elected not to apply the lease modification guidance in ASC 842 for such lease concessions – see “Lease Revenue Recognition” above.

Fair Value Measurements

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• 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 and liabilities as of December 31, 2019 and 2018 that we measured at fair value on a recurring basis by level within the fair value hierarchy.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following tables set forth our financial assets and liabilities as of February 28, 2021, February 29, 2020 and December 31, 2019 that we measured at fair value on a recurring basis by level within the fair value hierarchy.

Assets and liabilities 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 December 31, 2019

2021 Fair Value Measurements at February 28, 2021

Using Fair Value Hierarchy

Cash and cash equivalents

Restricted cash and cash equivalents

Derivative assets

Level 1 Level 2 Level 3 Valuation

Cash and cash equivalents $ 578,004 $ 578,004 $ — $ — Market

Restricted cash and cash equivalents 2,594 2,594 — — Market

Total $ 580,598 $ 580,598 $ — $ —

2020 Fair Value Measurements at February 29, 2020

Using Fair Value Hierarchy

Level 1 Level 2 Level 3 Valuation

Cash and cash equivalents $ 166,083 $ 166,083 $ — $ — Market

Restricted cash and cash equivalents 5,354 5,354 — — Market

Derivative assets 19 — 19 — Market

Total $ 171,456 $ 171,437 $ 19 $ —

2019 Fair Value Measurements at December 31, 2019

Using Fair Value Hierarchy

Cash and cash equivalents

Restricted cash and cash equivalents

Derivative assets

Our cash and cash equivalents, along with our restricted cash and cash equivalents balances, consist largely of money market securities that are considered to be highly liquid and easily tradable.

Level 1 Level 2 Level 3 Valuation

Cash and cash equivalents $ 140,882 $ 140,882 $ — $ — Market

Restricted cash and cash equivalents 14,561 14,561 — — Market

Derivative assets 115 — 115 — Market

Total $ 155,558 $ 155,443 $ 115 $ —

Our cash and cash equivalents, along with our restricted cash and cash equivalents, consist largely of money market securities that are highly liquid and easily tradable.

These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy.

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We also considered the credit rating and risk of the counterparty providing the interest rate cap based on quantitative and qualitative factors.

For the years ended December 31, 2019 and 2018 , we had no transfers into or out of Level 3.

For the years ended February 28, 2021, the two months ended February 29, 2020 and the year ended December 31, 2019, we had no transfers into or out of Level 3.

We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S.

GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may

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

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(Dollars in thousands, except per share amounts)

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 an income approach which uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft.

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 circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

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

Transactional Impairments

On April 10, 2019, the Company early terminated the leases for seven Boeing 737NG aircraft on lease to Jet Airways (India) Limited (“Jet Airways”) due to lessee default.

As a result of these lease terminations, the Company recognized net maintenance revenue of $ 17,554 and impairment charges of $ 7,404 in the second quarter of 2019.

Impairment of Flight Equipment

During the year ended February 28, 2021, the Company recorded impairment charges totaling $ 425,579 , of which $ 378,247 were transactional impairments, which primarily related to seventeen narrow-body and eight wide-body aircraft.

The Company recognized $ 157,014 of maintenance revenue and security deposits into revenue related to these 25 aircraft during the year ended February 28, 2021.

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.

In February 2020, the Company initiated a process to accept the redelivery of four wide-body aircraft prior to their scheduled lease expirations due to a lessee default.

As a result, the Company recorded impairment charges of $ 62,657 and recognized $ 47,367 of maintenance revenue and security deposits into revenue during the first two months of 2020.

During the year ended December 31, 2019, the Company recognized net maintenance revenue of $ 17,554 related to the early lease terminations of seven narrow-body aircraft due to lessee default.

We recorded impairment charges of $ 7,404 related to two of these seven narrow-body aircraft.

We did not record any transactional impairments during 2018.

Annual Recoverability Assessment

We completed our annual recoverability assessment of our aircraft in the second quarter this year.

We also performed aircraft-specific analyses where there were changes in circumstances, such as approaching lease expirations.

Other than the transactional impairment discussed above, no other impairments were recorded during 2019.

We completed our annual recoverability assessment of our aircraft in the second quarter.

Of the $ 425,579 impairment charges recorded for the year ended February 28, 2021, we recorded $ 43,041 related to one narrow-body and one wide-body aircraft as a result our annual recoverability assessment.

Although we have completed our annual recoverability assessment, we continue to monitor the developments of COVID-19.

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 COVID-19 and value deterioration.

The recoverability assessment is a comparison of the carrying value of each aircraft to its undiscounted expected future cash flows.

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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.

Management believes that the net book value of each aircraft is currently supported by the estimated future undiscounted cash flows expected to be generated by that aircraft and, accordingly, no aircraft were impaired as a consequence of our annual recoverability assessment.

However, if our estimates or assumptions change, we may revise our cash flow assumptions and record future impairment charges.

While we believe that the estimates and related assumptions used in the annual recoverability assessment are appropriate, actual results could differ from those estimates.

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 recoverability assessment, and subsequent assessments, are appropriate, actual results could differ from those estimates.

Financial Instruments

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The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair value of our senior notes is estimated using quoted market prices.

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

The carrying amounts and fair values of our financial instruments at December 31, 2019 and 2018 are as follows:

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

December 31, 2019

December 31, 2018

Carrying Amount

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 February 28, 2021, February 29, 2020 and December 31, 2019 are as follows:

February 28, 2021 February 29, 2020 December 31, 2019

Carrying Amount

of Liability Fair Value

of Liability Carrying Amount

of Liability Fair Value

of Liability Carrying Amount

of Liability Fair Value

Credit Facilities $ — $ — $ 100,000 $ 100,000 $ 150,000 $ 150,000

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Bank Financings 738,353 740,086 971,693 1,002,620 993,593 1,010,482

Senior Notes 4,200,000 4,402,722 3,600,000 3,807,956 3,600,000 3,787,268

All of our financial instruments are classified as Level 2 with the exception of our senior notes, which are classified as Level 1.

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 December 31, 2019 were as follows:

Year Ended December 31,

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at February 28, 2021 were as follows:

Year Ended February 28/29, Amount

2022 $ 649,983

Thereafter 323,066

Total $ 2,649,986

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

Year Ended December 31,

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

Region 2021 2020 2019 2018

Asia and Pacific 40 % 43 % 43 % 36 %

Europe 31 % 26 % 27 % 28 %

Middle East and Africa 6 % 7 % 10 % 11 %

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South America 11 % 13 % 11 % 16 %

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:

Year Ended December 31,

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

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Number of Lessees Combined % of

Lease Rental Revenue Number of Lessees Combined % of

Lease Rental Revenue

Largest lessees by lease rental revenue 4 30 % 3 21 % 2 16 % 3 18 %

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

Year Ended December 31,

February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

For the year ended December 31, 2018 , total revenue included $ 72,242 of maintenance revenue related to early lease terminations with Avianca Brazil.

Total revenue attributable to Brazil was less than 10% for the years ended December 31, 2019 and 2017 .

Country Revenue % of

Revenue Revenue % of

$ — — % $ — — % $ — — % $ 116,527 13 %

99,522 12 % — — % 115,865 13 % — — %

Indonesia (3)

— — % 25,373 13 % — — % — —

89,314 11 % — — % — — % — —

South Africa (5)

— — % 50,781 26 % — — % — —

______________

(1) For the year ended December 31, 2018, total revenue attributable to Brazil included $ 72,242 of maintenance revenue due to early lease terminations as a result of lessee default.

Total revenue attributable to Brazil was less than 10% for the years ended February 28, 2021 and December 31, 2019, and for the two months ended February 29, 2020.

(2) For the year ended February 28, 2021 total revenue attributable to India included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $ 19,138 .

For the year ended December 31, 2019, total revenue attributable to India included maintenance revenue of $ 14,915 .

Total revenue attributable to India was less than 10% for the years ended December 31, 2018 and 2017 .

Total revenue attributable to India was less than 10% for the year ended December 31, 2018 and for the two months ended February 29, 2020.

(3) For the two months ended February 29, 2020, total revenue attributable to Indonesia included $ 14,987 of gain on sale of flight equipment.

Total revenue attributable to Indonesia was less than 10% for the years ended February 28, 2021, and December 31, 2019 and 2018.

(4) For the year ended February 28, 2021, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $ 79,799 .

Total revenue attributable to Mexico was less than 10% for the years ended December 31, 2019 and 2018, and for the two months ended February 29, 2020.

(5) For the two months ended February 29, 2020, total revenue attributable to South Africa included $ 47,367 of maintenance revenue and security deposits recognized into revenue.

Total revenue attributable to South Africa was less than 10% for the years ended February 28, 2021, and December 31, 2019 and 2018.

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

December 31, 2019

December 31, 2018

February 28, 2021 February 29, 2020 December 31, 2019

Region Number of

Aircraft Net Book

Value % Number of

Aircraft Net Book

Value % Number of

Aircraft Net Book

Asia and Pacific 79 37 % 90 38 % 94 38 %

Europe 92 27 % 99 27 % 99 26 %

Middle East and Africa 11 4 % 15 6 % 16 7 %

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South America 26 13 % 26 15 % 26 15 %

______________

Consisted of one Airbus A320-200 aircraft, which was delivered on lease to a customer in Europe during the first quarter of 2020, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Boeing 737-800 aircraft, which we are marketing for lease or sale.

Consisted of ten Airbus A320-200 aircraft, one Airbus A330-200 aircraft, one Boeing 737-800 aircraft and one Boeing 777-300ER aircraft, all of which delivered on lease to customers during 2019, one Airbus A330-200 aircraft, which is subject to a lease commitment, and one Airbus A320-200 aircraft, which was sold during 2019.

The following table sets forth net book value of flight equipment (includes net book value of flight equipment held for lease and net investment in direct financing and sales-type 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:

December 31, 2019

December 31, 2018

At December 31, 2019 and 2018 , the amounts of lease incentive liabilities recorded in maintenance payments on the Consolidated Balance Sheets were $ 9,176 and $ 15,636 , respectively.

Off-lease 16 (1)

Total 252 100 % 272 100 % 278 100 %

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

______________

(1) Consisted of one Airbus A320-200 and one Airbus A330-200 aircraft subject to executed leases with a customer in Europe, four Boeing 737-800 aircraft subject to executed leases or confirmed letters of intent with customers in Europe,, one Boeing 737-800 aircraft consigned for sale and four Airbus A320-200, three Airbus A330-200, and two Boeing 737-800 aircraft which we are marketing for lease or sale.

(2) Consisted of one Airbus A330-200 aircraft, which was delivered to a customer in Europe in August 2020, and one Boeing 737-800 aircraft, which is subject to a confirmed letter intent to lease with a customer in Europe.

(3) Consisted of one Airbus A320-200 aircraft, which was delivered on lease to a customer in Europe in February 2020, one Airbus A330-200 aircraft, which was delivered to a customer in Europe in the second quarter of 2020, and one Boeing 737-800 aircraft, which was sold in February 2020.

February 28, 2021 February 29, 2020 December 31, 2019

Region Net Book

Value Net Book

Value % Number

Lessees Net Book

Value Net Book

Value % Number

Lessees Net Book

Value Net Book

Value % Number

India $ 756,514 11 % 3 $ 917,793 12 % 4 $ 924,190 12 % 4

At February 28, 2021, February 29, 2020 and December 31, 2019, the amounts of lease incentive liabilities recorded in maintenance payments on the Consolidated Balance Sheets were $ 14,673 , $ 10,076 and $ 9,176 , respectively.

Net Investment in Direct Financing and Sales-Type Leases

At December 31, 2019 , our net investment in direct financing and sales-type leases consisted of 29 aircraft.

The components of our net investment in direct financing and sales-type leases at December 31, 2019 are as follows:

At February 28, 2021, February 29, 2020 and December 31, 2019, our net investment in leases consisted of fifteen , 30 and 29 aircraft, respectively.

The components of our net investment in leases at February 28, 2021, February 29, 2020 and December 31, 2019, were as follows:

February 28, 2021 February 29, 2020 December 31, 2019

Lease receivable $ 67,075 $ 166,060 $ 164,816

Unguaranteed residual value of flight equipment 129,165 266,750 254,580

Net investment in direct financing and sales-type leases

At December 31, 2019 , future lease payments on direct financing and sales-type leases are as follows:

Year Ending December 31,

Total undiscounted lease payments

Net investment leases 196,240 432,810 419,396

Allowance for credit losses ( 864 ) ( 6,558 ) —

Net investment in leases, net of allowance $ 195,376 $ 426,252 $ 419,396

The activity in the allowance for credit losses related to our net investment in leases for the two months ended February 29, 2020 and the year ended February 28, 2021 is as follows:

Balance at December 31, 2019 $ —

Adoption of accounting standard 6,270

Provision for credit losses 288

Balance at February 29, 2020 6,558

Provision for credit losses 5,258

Write-offs ( 10,952 )

Balance at February 28, 2021 $ 864

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

During the year ended February 28, 2021, we wrote-off $ 10,952 of lease rentals against the allowance for credit losses, primarily due to the early lease terminations of seven narrow-body aircraft which had been classified as Net investment in leases.

At February 28, 2021, future lease payments on net investment in leases are as follows:

Year Ending February 28/29, Amount

2022 $ 23,753

Thereafter 15,414

Total lease payments to be received 78,254

Present value of lease payments - lease receivable ( 67,075 )

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Unconsolidated Equity Method Investment

We have joint ventures with an affiliate of Ontario Teachers’ Pension Plan (“Teachers’”) and with Mizuho Leasing.

Investment in joint ventures at December 31, 2017

Investment in joint ventures

Loss from joint ventures, net of tax

Distributions

We have a joint venture with Mizuho Leasing that has nine aircraft with a net book value of $ 312,029 at February 28, 2021.

Investment in joint ventures at December 31, 2019 $ 32,974

Investment in joint ventures

Earnings from joint ventures, net of tax

Earnings from joint venture, net of tax 496

Investment in joint ventures at February 29, 2020 33,470

Distributions ( 419 )

Guarantee liabilities

Investment in joint venture at December 31, 2019

During 2019, the sale of all eight aircraft held by the joint venture with Teachers’ to a single buyer was completed.

Included in Other revenue is $ 5,431 in fees earned in relation to the sale of all eight aircraft in our Lancaster joint venture.

Guarantee liabilities in Maintenance payments and Security deposits were offset against the investment in joint venture, as we had no further obligations due to the sale of the joint venture’s aircraft.

Teachers’, as majority shareholder, chose to liquidate the joint venture and as a result we received a distribution of $ 36,750 during 2019.

As of December 31, 2019 , minimal assets remain in the joint venture as needed to complete its liquidation during 2020.

In 2019, we sold four aircraft to IBJ Air, in which we hold a 25 % equity interest.

Included in Other revenue is $ 1,985 in fees earned in relation to IBJ Air’s acquisition of these four aircraft.

These transactions were approved by our Audit Committee as arm’s length transactions under our related party policy.

At December 31, 2019 , the net book value of the IBJ Air joint venture’s nine aircraft was $ 327,839 .

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Earnings from joint venture, net of tax 2,326

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

Variable Interest Entities

Aircastle consolidates four VIEs of which it is the primary beneficiary.

The operating activities of these VIEs are limited to acquiring, owning, leasing, maintaining, operating and, under certain circumstances, selling the six aircraft discussed below.

ECA Financings

Aircastle, through various subsidiaries, each of which is owned by a charitable trust (such entities, collectively the “Air Knight VIEs”), has entered into six different twelve -year term loans, which are supported by guarantees from Compagnie Francaise d’ Assurance pour le Commerce Extérieur (“COFACE”), the French government sponsored export credit agency (“ECA”).

We refer to these COFACE-supported financings as “ECA Financings.”

Aircastle is the primary beneficiary of the Air Knight VIEs, as we have the power to direct the activities of the VIEs that most significantly impact the economic performance of such VIEs and we bear the significant risk of loss and participate in gains through a finance lease.

The activity that most significantly impacts the economic performance is the leasing of aircraft of which our wholly owned subsidiary is the servicer and is responsible for managing the relevant aircraft.

There is a cross collateralization guarantee between the Air Knight VIEs.

In addition, Aircastle guarantees the debt of the Air Knight VIEs.

The only assets that the Air Knight VIEs have on their books are net investments in direct financing and sales-type leases that are eliminated in the consolidated financial statements.

The related aircraft, with a net book value as of December 31, 2019 of $ 376,630 , 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 December 31, 2019 is $ 145,443 .

Aircastle consolidates two 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 the two aircraft discussed below.

During February 2020, we repaid the export credit agency (the “ECA Financings”) for four of the six aircraft owned by the Air Knight VIEs, which included principal and accrued interest amounts outstanding of $ 95,128 and incurred early extinguishment costs of $ 3,955 .

In June 2020, the leases of the four 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 February 28, 2021 of $ 89,320 , 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 February 28, 2021 is $ 36,058 .

Aircastle Limited and Subsidiaries

3 unchanged sentences

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

At December 31, 2019

At February 28, 2021 At

February 29, 2020 At

December 31, 2019

Debt Obligation

Number of Aircraft

Interest Rate

Debt Obligation Outstanding

Borrowings Number of Aircraft Interest Rate Final Stated

Maturity Outstanding

Borrowings Outstanding

Secured Debt Financings:

ECA Financings (1)

3.02% to 3.96%

12/03/21 to 11/30/24

$ 36,423 2 3.49% to 3.96% 12/03/21 to 11/30/24 $ 50,745 $ 147,644

Bank Financings (2)

3.13% to 4.63%

06/17/23 to 01/19/26

738,353 31 2.31% to 4.55% 06/17/23 to 03/06/25 971,693 993,593

Debt Issuance Costs ( 5,926 ) ( 9,920 ) ( 11,892 )

2 unchanged sentences

Senior Notes due 2020 (3)

— 7.625 % 04/15/20 300,000 300,000

Senior Notes due 2021 (4)

— 5.125 % 03/15/21 500,000 500,000

Senior Notes due 2022 500,000 5.500 % 02/15/22 500,000 500,000

4 unchanged sentences

Senior Notes due 2026 650,000 4.250 % 06/15/26 650,000 650,000

Unsecured Term Loan

03/07/22 to 03/07/24

Revolving Credit Facilities

3.21% to 3.41%

12/27/21 to 06/27/22

Senior Notes due 2028 750,000 2.850 % 01/26/28 — —

Unsecured Term Loan 215,000 1.683 % 03/07/22 to 03/07/24 215,000 215,000

Revolving Credit Facilities — 1.25% to 2.00% 7/30/21 to 06/27/22 100,000 150,000

Debt issuance costs and discounts ( 48,739 ) ( 30,765 ) ( 32,509 )

2 unchanged sentences

_______________

The borrowings under these financings at December 31, 2019 have a weighted-average rate of interest of 3.58 % .

The borrowings under these financings at December 31, 2019 have a weighted-average fixed rate of interest of 3.82 % .

Repaid on July 15, 2019.

Secured Debt Financing:

(1) The borrowings under these financings at February 28, 2021 have a weighted-average rate of interest of 3.58 %.

During February 2020, the Company repaid the ECA Financings for four 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 February 28, 2021 have a weighted-average fixed rate of interest of 3.24 %.

(3) Repaid on April 15, 2020.

(4) Repaid on February 25, 2021.

Secured Debt Financings:

Bank Financings

On May 1, 2019, we entered into a full recourse $ 320,000 secured bank financing with BNP Paribas and Société Générale in relation to eight Airbus A320-200neo aircraft on lease with a customer in Asia.

This financing bears interest at a fixed rate of 3.61 % and matures in September 2024.

In addition, on May 1, 2019, we entered into a full recourse $ 120,000 secured bank financing with Crédit Agricole in relation to three Airbus A320-200neo aircraft on lease with a customer in Asia.

This financing bears interest at a fixed rate of 3.13 % and matures in March 2025.

On June 26, 2019, we amended and restated the original loan agreement, dated October 11, 2018, with National Bank of Australia to include an additional $ 40,000 in financing for two Boeing 737-800 aircraft on lease with a customer in North America.

This financing bears interest at a fixed rate of 3.14 % and matures in December 2024.

During the fourth quarter of 2021, we prepaid bank financings secured by three wide-body aircraft, which included principal amounts outstanding of $ 145,934 and incurred early extinguishment costs of $ 1,148 , primarily related to the write-off of deferred financing costs.

Aircastle Limited and Subsidiaries

3 unchanged sentences

Senior Notes due 2020

On June 13, 2019, Aircastle issued $ 650,000 aggregate principal amount of Senior Notes due 2026 (the “Senior Notes due 2026”) at an issue price of 99.515 % .

The Senior Notes due 2026 will mature on June 15, 2026 and bear interest at the rate of 4.250 % per annum, payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 2019.

Interest accrues on the Senior Notes due 2026 from June 13, 2019.

Prior to April 15, 2026, we may redeem all or part of the aggregate principal amount of the Senior Notes due 2026 at any time at a redemption price equal to the greater of (a) 100 % of the principal amount of the notes redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date and (b) the sum of the present values of 100 % of the principal amount of the notes redeemed and the remaining scheduled payments of interest on the notes from the redemption date through April 15, 2026 (computed using a discount rate equal to the Treasury Rate (as defined in the indenture governing the Senior Notes due 2026) as of such redemption date plus 0.35 % , plus accrued and unpaid interest thereon to, but not including, the redemption date).

In addition, on or after April 15, 2026, we may redeem all or part of the aggregate principal amount of the Senior Notes due 2026 at a redemption price equal to 100 % , plus accrued and unpaid interest thereon to, but not including, the redemption date.

If the Company undergoes a change of control (as defined in the indenture governing the Senior Notes due 2026) and, as a result of the change of control, the rating of the Senior Notes due 2026 is downgraded to below an investment grade rating by certain rating agencies in the manner specified in the indenture governing the Senior Notes due 2026, it must offer to repurchase the Senior Notes due 2026 at a price of 101 % of the principal amount thereof, plus accrued and unpaid interest to, but not including, the purchase date.

The Senior Notes due 2026 are not guaranteed by any of the Company's subsidiaries or any third-party.

The net proceeds from the issuance were used to repay amounts drawn under our existing revolving credit facility and to redeem the balance of our 6.25 % Senior Notes due 2019, including accrued interest of $ 3,733 and call premium of $ 7,183 , on July 15, 2019.

Unsecured Term Loan

On February 27, 2019, we entered into an aggregate $ 215,000 floating rate loan commitment with Development Bank of Japan Inc.

and certain other banks (the “Unsecured Term Loan”).

This loan is split into two tranches:

Tranche A for $ 60,000 with a three -year term;

and Tranche B for $ 155,000 with a five -year term.

The loan contains a $ 750,000 minimum net worth covenant, along with other customary provisions similar to our revolving credit facilities.

This loan was funded in March 2019.

The new Unsecured Term Loan replaced our existing term loan of $ 120,000 that matured on April 28, 2019.

On April 15, 2020, the Company repaid $ 300,000 aggregate principal amount of 7.625 % Senior Notes due 2020 due at their final stated maturity date.

Senior Notes due 2025

On August 11, 2020, the Company issued $ 650,000 aggregate principal amount of Senior Notes due 2025 (the “Senior Notes due 2025”) at an issue price of 99.057 %.

The Senior Notes due 2025 will mature on August 11, 2025 and bear interest at a rate of 5.25 % per annum, payable semi-annually on February 11 and August 11 of each year, commencing on February 11, 2021.

Interest accrues on the Senior Notes due 2025 from August 11, 2020.

Senior Notes due 2028 and 2021

On January 26, 2021, the Company issued $ 750,000 aggregate principal amount of Senior Notes due 2028 (the “Senior Notes due 2028”) at an issue price of 98.543 %.

The Senior Notes due 2028 will mature on January 26, 2028 and bear interest at a rate of 2.85 % per annum, payable semi-annually on January 26 and July 26 of each year, commencing on July 26, 2021.

Interest accrues on the Senior Notes due 2028 from January 26, 2021.

The net proceeds from the issuance were used to redeem the balance of our 5.125 % Senior Notes due 2021, including accrued interest of $ 11,389 and call premium of $ 1,265 , on February 25, 2021.

Revolving Credit Facility

On December 27, 2018, we entered into a $ 250,000 three -year, unsecured revolving credit facility with a group of banks based in Asia.

This new facility can be increased to a maximum of $ 350,000 .

On January 25, 2019, we increased the facility by $ 30,000 to $ 280,000 .

On June 20, 2019, we further increased the facility by $ 20,000 to $ 300,000 .

The facility bears interest at a rate of LIBOR plus 1.50 % and matures in December 2021.

The facility contains provisions similar to our existing credit facility, including a $ 750,000 minimum net worth covenant.

As a condition to this new facility, on January 9, 2019, we terminated our existing $ 135,000 revolving credit facility with a group of banks based in Asia.

At December 31, 2019 , we had $ 150,000 outstanding under our revolving credit facilities and had $ 950,000 available.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

On July 30, 2020, the Company entered into a $ 150,000 unsecured revolving credit facility with Mizuho Bank Ltd., a related party.

The facility bears interest at a rate of LIBOR plus 2 %, or a base rate plus 1 %, matures on July 31, 2021 and includes a one -year extension option.

This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

As of February 28, 2021, we had no borrowings outstanding under our revolving credit facilities and had $ 1,250,000 available.

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

Year Ending December 31,

As of December 31, 2019 , we were in compliance with all applicable covenants in our financings.

Shareholders’ Equity and Share-Based Payment

On March 21, 2017, the Board of Directors adopted the Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan (the “Amended and Restated 2014 Plan”).

The Amended and Restated 2014 Plan was approved by shareholders at the Company’s 2017 Annual General Meeting of Shareholders on May 19, 2017.

The maximum number of Common Shares reserved for issuance under the Amended and Restated 2014 Plan is 6,750,000 Common Shares.

Restricted common shares outstanding under prior plans in the amount of 333,974 shares will continue to vest subject to the terms and conditions of the prior plans and the applicable awards agreements which are included in the below table.

The purpose of the Amended and Restated 2014 Plan is to provide an incentive to selected officers, employees, non-employee directors, independent contractors, and consultants of the Company or its affiliates whose contributions are essential to the growth and success of the business of the Company and its affiliates, to strengthen the commitment of such persons to the Company and its affiliates, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its affiliates.

To accomplish such purposes, the Company may grant options, share appreciation rights, restricted shares, restricted share units, share bonuses, other share-based awards, cash awards or any combination of the foregoing.

The Amended and Restated 2014 Plan provides that grantees of restricted common shares will have all of the rights of shareholders, including the right to receive dividends, other than the right to sell, transfer, assign or otherwise dispose of the shares until the lapse of the restricted period.

Generally, the restricted common shares vest over three to five -year periods based on continued service and are being expensed on a straight-line basis over the requisite service period of the awards.

The terms of the grants provide for accelerated vesting under certain circumstances, including termination without cause following a change of control.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

A summary of the fair value of non-vested restricted common shares for the years ended December 31, 2019 , 2018 and 2017 is as follows:

Non-vested Shares

(in thousands)

Fair Value ($)

Non-vested at December 31, 2016

Non-vested at December 31, 2017

Non-vested at December 31, 2018

Vesting-accelerated (1)

Non-vested at December 31, 2019

Year Ending February 28/29, Amount

2022 $ 646,943

(1) See “ Share-based Compensation Related to Proposed Merger ” below .

The fair value of the restricted common shares granted in 2019 , 2018 and 2017 were determined based upon the market price of the shares at the grant date.

Performance Share Units

During 2019 , the Company issued performance share units (“PSUs”) to certain employees.

These awards were made under the Amended and Restated 2014 Plan.

The PSUs are denominated in share units without dividend rights, each of which is equivalent to one common share, and are subject to market and performance conditions and time vesting.

The PSUs granted in 2019 vest at the end of a three -year performance period which ends on December 31, 2021.

Half of the PSUs vest on achieving relative total stockholder return goals (the “TSR PSUs”) while the other half vest on attaining annual Adjusted Return on Equity goals (the “AROE PSUs”).

The table below shows the PSU awards issued during 2019 , including the number of common shares underlying the awards at the time of issuance:

The fair value of the time-based TSR PSUs was determined at the grant date using a Monte Carlo simulation model.

Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and dividend yield.

To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical time frame equal to the time from the valuation date until the end date of the performance period.

The number of TSR PSUs that will ultimately vest is based on the percentile ranking of the Company’s TSR among the S&P Midcap 400 Index.

The number of shares that will ultimately vest will range from 0 % to 200 % of the target TSR PSUs.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following table summarizes the assumption ranges used in calculating the fair value of TSR PSUs during the following periods:

Year Ended December 31,

24.8% to 32.6%

29.4% to 32.6%

Dividend yield

Risk-free interest rate

The number of shares vesting from the AROE PSUs at the end of the three -year performance period will depend on the Company’s Adjusted Return on Equity as measured against the targets set by the Compensation Committee annually during the performance period, consistent with the business plan approved by the Board.

The fair value of the 2019 AROE PSUs was determined based on the closing market price of the Company’s common shares on the date of grant reduced by the present value of expected dividends to be paid.

The number of shares that will ultimately vest will range from 0 % to 200 % of the target AROE PSUs.

During 2019 , the Company granted a target of 225,044 PSUs of which, 168,784 are TSR PSUs and 56,260 are AROE PSUs.

As of December 31, 2019 , the remaining target AROE PSUs will be considered granted upon the Compensation Committee’s setting the target AROE for the respective periods:

Remaining AROE

The following table summarizes the activities for our unvested PSUs for the years ended December 31, 2019 , 2018 and 2017 :

Unvested Performance Stock Units

Number of Units of TSR PSUs

Number of Units of AROE PSUs

TSR PSUs Weighted Fair Value on Date of Grant ($)

Weighted Fair

Value on Date

Unvested at December 31, 2016

Canceled/Forfeited (2)

Unvested at December 31, 2017

Canceled/Forfeited (2)

Unvested as of December 31, 2018

Canceled/Forfeited (2)

Vesting-accelerated (3)

Unvested as of December 31, 2019

Expected to vest after December 31, 2019

2024 1,532,697

Also includes shares above target.

Represents performance share units that were below target and as a result were forfeited.

See “ Share-based Compensation Related to Proposed Merger” below.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

During 2019 , the Company incurred share-based compensation expense of $ 6,602 related to restricted common shares and $ 9,228 related to PSUs.

As of December 31, 2019 , the Company has unrecognized compensation cost, adjusted for actual forfeitures, of $ 2,965 related to non-vested restricted common shares and $ 3,367 related to PSUs, which is expected to be recognized over a weighted average period of 1.96 years.

In addition, there is $ 15,149 of unrecognized expense due to the acceleration of RSAs and PSUs related to the Merger Agreement, which will be amortized through the estimated closing date.

Share-based Compensation Related to Proposed Merger

In connection with the Merger, the Company reserved the right to take certain actions, following reasonable consultation with Parent, to reduce the amount of any potential “parachute payments” subject to the excise tax imposed under Section 4999 of the Internal Revenue Code (including amounts payable to the Company’s executive officers), including accelerating the vesting and payment of certain equity and restricted cash awards and the payment of certain incentive compensation payments into 2019.

Effective as of December 24, 2019, the Company accelerated the vesting and payment of certain PSUs and the vesting of certain restricted share awards held by the Company’s executive officers provided that, as set forth in the employment agreement amendments, if the executive officer is terminated for cause or resigns without “good reason” (as defined in the executive officer’s employment agreement) prior to the earlier of the consummation of the Merger or the termination of the Merger Agreement, the executive officer must repay to the Company the gross amount of the accelerated awards.

In addition, the Merger Agreement contains additional repayment provisions as such if the Merger Agreement terminates.

Cash bonuses were accelerated and paid based on the target level of performance.

Any difference between the amounts accelerated for PSUs or bonuses paid in 2019 and the amounts earned based on actual performance for 2019 will be trued-up and paid to the executive officer (or repaid by the executive officer, if applicable) on the normal payment dates for such compensation in 2020.

On May 17, 2019, our Board of Directors increased the authorization to repurchase the Company’s common shares to $ 100,000 from the $ 76,019 that was remaining under the previous authorization.

During 2019 , we repurchased 973,528 common shares at an aggregate cost of $ 18,382 , including commissions.

At December 31, 2019 , the remaining dollar value of common shares that may be purchased under the repurchase program is $ 90,351 .

We also repurchased 640,452 shares totaling $ 18,357 from our employees and directors to settle tax obligations related to share vesting.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The following table sets forth the quarterly dividends declared by our Board of Directors for the three years ended December 31, 2019 :

Declaration Date

October 28, 2019

November 29, 2019

December 13, 2019

August 2, 2019

August 30, 2019

September 16, 2019

April 30, 2019

June 14, 2019

February 8, 2019

February 28, 2019

March 15, 2019

October 30, 2018

November 30, 2018

December 14, 2018

August 3, 2018

August 31, 2018

September 14, 2018

June 15, 2018

February 2, 2018

February 28, 2018

March 15, 2018

October 31, 2017

November 30, 2017

December 15, 2017

August 4, 2017

August 31, 2017

September 15, 2017

June 15, 2017

February 9, 2017

February 28, 2017

March 15, 2017

Earnings per Share

We include all common shares granted under our incentive compensation plan which remain unvested (“restricted common shares”) and contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid (“participating securities”), in the number of shares outstanding in our basic and diluted EPS calculations using the two-class method.

All of our restricted common shares are currently participating securities.

Our unvested PSUs are contingently issuable shares which are included in our diluted earnings per share calculations which do not include voting or dividend rights.

The PSUs that vested as of December 31, 2019 are included in basic and diluted EPS as issued shares.

Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings allocated to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period.

In applying the two-class method, distributed and undistributed earnings are allocated to both common shares and restricted common shares based on the total weighted average shares outstanding during the period as follows:

Year Ended December 31,

Weighted-average shares:

Common shares outstanding

Restricted common shares

Total weighted-average shares

Percentage of weighted-average shares:

Common shares outstanding

Restricted common shares

Thereafter 1,400,000

Total $ 5,189,776

As of February 28, 2021, we were in compliance with all applicable covenants in our financings.

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

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

The calculations of both basic and diluted earnings per share for the years ended December 31, 2019 , 2018 and 2017 are as follows:

Year Ended December 31,

Earnings per common share — Basic:

Income from continuing operations

Distributed and undistributed earnings allocated to restricted common shares (1)

Income from continuing operations available to common shareholders — Basic

Weighted-average common shares outstanding — Basic

Net income per common share — Basic

Earnings per common share — Diluted:

Income from continuing operations

Distributed and undistributed earnings allocated to restricted common shares (1)

Income from continuing operations available to common shareholders — Diluted

Weighted-average common shares outstanding — Basic

Effect of diluted shares (2)

Weighted-average common shares outstanding — Diluted

Net income per common share — Diluted

_____________

For the years ended December 31, 2019 , 2018 and 2017 , distributed and undistributed earnings to restricted shares was 0.66 % , 0.61 % and 0.71 % , respectively, of net income.

The amount of restricted share forfeitures for all periods present was immaterial to the allocation of distributed and undistributed earnings.

For the years ended December 31, 2019 , 2018 and 2017 , dilutive shares represented contingently issuable shares related to the Company’s PSUs .

$ 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 year ended February 28, 2021 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, the Company declared a dividend of $ 0.32 per common share and paid $ 24,025 on March 6, 2020, to all shareholders of record as of February 28, 2020.

Related Party Transactions

On April 10, 2020, we sold two engines to Magellan Aviation Group LLLP, an affiliate of Marubeni, for $ 5,355 for a minimal gain.

This transaction was approved by our Audit Committee as an arm’s length transaction under our related party policy.

On July 30, 2020, the Company entered into a $ 150,000 unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 7 for additional information.

On February 24, 2021, the Company entered into an intra-company service agreement with Marubeni, whereby Marubeni will provide management services, strategy consultancy, and general administrative support to the Company for an annual fee of $ 1,680 .

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.

1 unchanged sentence

Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

The sources of income from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended December 31, 2019 , 2018 and 2017 were as follows:

Year Ended December 31,

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

The sources of income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, were as follows:

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

operations $ 31,848 $ 3,084 $ 9,085 $ 8,104

operations ( 357,106 ) 1,754 166,055 253,543

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment $ ( 325,258 ) $ 4,838 $ 175,140 $ 261,647

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

The components of the income tax provision from continuing operations for the years ended December 31, 2019 , 2018 and 2017 consisted of the following:

Year Ended December 31,

The components of the income tax provision from continuing operations for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, consisted of the following:

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

United States:

Federal $ ( 1,232 ) $ 6 $ 782 $ 2,446

State 121 — 437 ( 136 )

4,842 217 1,225 3,828

Current income tax provision 3,731 223 2,444 6,138

United States:

Federal 3,150 1,578 7,205 2,901

State 1,598 561 2,018 759

1,757 ( 687 ) 11,000 ( 4,156 )

Deferred income tax provision (benefit) 6,505 1,452 20,223 ( 496 )

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2019 , 2018 and 2017 consisted of the following:

Year Ended December 31,

Total $ 10,236 $ 1,675 $ 22,667 $ 5,642

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2021, February 29, 2020, and December 31, 2019 and 2018, consisted of the following:

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Deferred tax assets:

1 unchanged sentence

Net operating loss carry forwards 95,462 74,045 69,806 48,660

Other 37,612 54,259 72,732 1,795

Total deferred tax assets 133,074 128,519 143,152 52,637

1 unchanged sentence

Accelerated depreciation ( 170,382 ) ( 140,363 ) ( 136,268 ) ( 95,107 )

Other ( 37,179 ) ( 53,448 ) ( 70,551 ) ( 338 )

Total deferred tax liabilities ( 207,561 ) ( 193,811 ) ( 206,819 ) ( 95,445 )

Net deferred tax liabilities $ ( 74,487 ) $ ( 65,292 ) $ ( 63,667 ) $ ( 42,808 )

The Company had $ 69,332 of net operating loss (“NOL”) carry forwards available at December 31, 2019 to offset future taxable income subject to U.S.

The Company had $ 86,365 of federal net operating loss (“NOL”) carry forwards available at February 28, 2021 to offset future taxable income subject to U.S.

graduated tax rates.

If not utilized, $ 45,821 of these carry forwards will expire by 2037, with $ 40,544 of these carry forwards having no expiration date.

The Company also had NOL carry forwards of $ 488,600 with no expiration date to offset future Irish and Mauritius taxable income.

Deferred tax assets and liabilities are included in Other assets and Accounts payable and accrued liabilities, respectively, in the accompanying Consolidated Balance Sheets.

The Company also had NOL carry forwards of $ 567,657 with no expiration date to offset future Irish taxable income.

Deferred tax assets and liabilities are included in Other assets and Accounts payable and accrued liabilities, respectively.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S.

subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings.

As of December 31, 2019 we have elected to permanently reinvest our accumulated undistributed U.S.

As of February 28, 2021, we have elected to permanently reinvest our accumulated undistributed U.S.

earnings of $ 36,503 .

2 unchanged sentences

Withholding tax of $ 1,825 would be due if such earnings were remitted.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Our aircraft-owning subsidiaries that are recognized as corporations for U.S.

5 unchanged sentences

are subject to tax in those respective jurisdictions.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S.

2 unchanged sentences

subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations at December 31, 2019 , 2018 and 2017 consisted of the following:

Year Ended December 31,

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, consisted of the following:

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Notional U.S.

federal income tax expense at the statutory rate:

$ ( 68,304 ) $ 1,016 $ 36,779 $ 54,946

state and local income tax, net 1,723 390 1,549 525

Bermuda 82,190 ( 1,845 ) ( 16,950 ) ( 41,064 )

Ireland 1,545 ( 1,147 ) ( 99 ) ( 2,567 )

Singapore 75 ( 6 ) ( 28 ) ( 3,232 )

Other low tax jurisdictions ( 381 ) 2,533 ( 2,504 ) ( 3,246 )

Non-deductible expenses in the U.S.

( 1,904 ) 734 3,581 157

Other ( 4,708 ) — 339 123

Provision for income taxes $ 10,236 $ 1,675 $ 22,667 $ 5,642

6 unchanged sentences

We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the year.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Interest, Net

The following table shows the components of interest, net for the years ended December 31, 2019 , 2018 and 2017 :

Year Ended December 31,

The following table shows the components of interest, net for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018:

Year Ended February 28, Two Months Ended February 29, Year Ended December 31,

2021 2020 2019 2018

Interest on borrowings, net settlements on interest rate derivatives, and other liabilities $ 221,246 $ 38,915 $ 245,673 $ 221,987

5 unchanged sentences

Interest, net $ 235,338 $ 41,038 $ 258,070 $ 234,504

Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 1,626 , $ 278 , $ 1,601 and $ 2,865 for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, respectively.

As of February 28, 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, Amount

Thereafter 4,063

Total $ 13,028

At February 28, 2021, we had commitments to acquire 25 new E-Jet E2 aircraft from Embraer S.A.

for $ 825,119 .

Remaining commitments, including $ 101,933 of progress payments, contractual price escalations and other adjustments for these aircraft at February 28, 2021, net of amounts already paid, are as follows:

Year Ending February 28/29, Amount

2022 $ 199,990

Included a loan termination gain of $ 838 related to the sale of aircraft during the year ended December 31, 2018 .

Included $ 172 and $ 300 in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2019 and 2018 , respectively.

Total $ 825,119

As of April 15, 2021, we have commitments to acquire 25 aircraft for $ 825,119 .

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 1,601 , $ 2,865 and $ 2,143 for the years ended December 31, 2019 , 2018 and 2017 , respectively.

As of December 31, 2019 , 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 December 31,

At December 31, 2019 , we had commitments to acquire 31 aircraft for $ 1,112,825 , including 25 Embraer E2 aircraft.

Remaining commitments, including $ 120,887 of progress payments, contractual price escalations and other adjustments for these aircraft at December 31, 2019 , net of amounts already paid, are as follows:

Year Ending December 31,

As of February 10, 2020 , we have commitments to acquire 31 aircraft for $ 1,112,825 .

As of December 31, 2019, two lawsuits related to the Merger Agreement were filed against the Company by purported shareholders.

The Company has not recognized a contingent liability as a result of these lawsuits as it believes the claims asserted are without merit.

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

February 28, February 29, December 31,

2021 2020 2019

Deferred income tax asset $ 637 $ 636 $ 1,007

Lease incentives and premiums, net of amortization of $71,851 and $47,304, respectively

Lease incentives and premiums, net of accumulated amortization of $75,126, $63,010 and $71,851, respectively 75,169 103,161 112,923

Flight equipment held for sale 53,289 13,083 333

Aircraft purchase deposits and progress payments (1)

Fair value of interest rate cap

Note receivable (2)

Aircraft purchase deposits and Embraer E-2 progress payments 52,092 39,038 33,754

Right-of-use asset (1)

8,056 9,148 9,329

Deferred rent receivable 69,103 4,494 —

Other assets 53,598 37,057 43,863

Total other assets $ 311,944 $ 206,617 $ 201,209

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

______________

Includes progress payments for Embraer E2 aircraft order.

Related to the sale of aircraft during the year ended December 31, 2017.

(1) Net of lease incentives and tenant allowances.

1 unchanged sentence

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

February 28, February 29, December 31,

2021 2020 2019

Accounts payable and accrued expenses $ 43,088 $ 64,034 $ 47,228

2 unchanged sentences

Lease liability 11,003 12,510 12,800

Lease discounts, net of amortization of $44,696 and $43,935, respectively

Lease discounts, net of accumulated amortization of $44,887, $44,968 and $44,696, respectively 1,376 2,446 2,718

Total accounts payable, accrued expenses and other liabilities $ 174,267 $ 207,114 $ 172,114

Quarterly Financial Data (Unaudited)

Quarterly results of our operations for the years ended December 31, 2019 and 2018 are summarized below:

Basic earnings per share:

Diluted earnings per share:

Basic earnings per share:

Diluted earnings per share:

The sum of the quarterly earnings per share amounts may not equal the annual amount reported since per share amounts are computed independently for each period presented.

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

February 13, 2020

April 21, 2021

Aircastle Limited

3 unchanged sentences

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

/s/ Michael Inglese

Chief Executive Officer and Director

February 13, 2020

SIGNATURE TITLE DATE

/s/ Michael Inglese Chief Executive Officer and Director April 21, 2021

Michael Inglese

/s/ Aaron Dahlke

Chief Financial Officer

February 13, 2020

Chief Accounting Officer

February 13, 2020

Chairman of the Board

February 13, 2020

/s/ Ronald W.

February 13, 2020

/s/ Giovanni Bisignani

February 13, 2020

Giovanni Bisignani

/s/ Michael J.

February 13, 2020

/s/ Douglas A.

February 13, 2020

/s/ Jun Horie

February 13, 2020

/s/ Takashi Kurihara

February 13, 2020

/s/ Aaron Dahlke Chief Financial Officer April 21, 2021

Connelly Chief Accounting Officer April 21, 2021

/s/ Takashi Kurihara Chairman of the Board April 21, 2021

Takashi Kurihara

/s/ Ronald L.

February 13, 2020

/s/ Agnes Mura

February 13, 2020

/s/ Douglas A.

Hacker Director April 21, 2021

/s/ Taro Kawabe Director April 21, 2021

/s/ Charles W.

February 13, 2020

/s/ Takayuki Sakakida

February 13, 2020

Pollard Director April 21, 2021

/s/ Takayuki Sakakida Director April 21, 2021

Takayuki Sakakida

/s/ Noriyuki Yukawa Director April 21, 2021

Noriyuki Yukawa

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures