What changed in this filing

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Item 1. Financial Statements

2021-10-13 compared with 2021-07-14 · 162 added, 129 removed, 431 unchanged (40% of the section changed)

22 unchanged sentences

SHAREHOLDERS’ EQUITY

Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding — —

Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at May 31, 2021 and February 28, 2021 — —

Preference shares, $0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $400,000) shares issued and outstanding at August 31, 2021 and no shares issued and outstanding at February 28, 2021 — —

Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at August 31, 2021 and February 28, 2021 — —

Additional paid-in capital 1,879,139 1,485,777

4 unchanged sentences

Aircastle Limited and Subsidiaries

Consolidated Statements of Loss and Comprehensive Loss

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

(Dollars in thousands)

Three Months Ended May 31,

Three Months Ended August 31, Six Months Ended

2021 2020 2021 2020

Lease rental revenue $ 137,589 $ 150,895 $ 269,714 $ 334,073

3 unchanged sentences

Total lease revenue 155,748 171,047 311,902 428,827

Gain on sale of flight equipment 9,021 12,078

Gain (loss) on sale of flight equipment 1,502 ( 848 ) 10,524 11,230

Other revenue 402 1,123 1,036 13,793

3 unchanged sentences

Interest, net 55,413 55,324 113,450 114,050

Selling, general and administrative (including non-cash share-based payment expense of $0 and $28,049 for the three months ended May 31, 2021 and 2020, respectively) 15,589 47,451

Selling, general and administrative (including non-cash share-based payment expense of $0 and $0 for the three months ended, and $0 and $28,049 for the six months ended August 31, 2021 and 2020, respectively) 15,996 13,555 31,585 61,006

Impairment of flight equipment 21,232 212,387 41,815 289,685

5 unchanged sentences

Other 57,609 ( 173 ) 57,619 ( 192 )

Total other expense ( 14 ) ( 32,094 )

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments ( 18,332 ) ( 27,821 )

Income tax benefit ( 8,292 ) ( 551 )

Total other income (expense) 43,477 ( 203 ) 43,463 ( 32,299 )

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments 17,010 ( 201,167 ) ( 1,322 ) ( 228,988 )

Income tax provision (benefit) 7,665 13,020 ( 627 ) 12,469

Earnings of unconsolidated equity method investments, net of tax 458 674 745 1,405

Net loss $ ( 9,753 ) $ ( 26,539 )

Total comprehensive loss $ ( 9,753 ) $ ( 26,539 )

Net income (loss) $ 9,803 $ ( 213,513 ) $ 50 $ ( 240,052 )

Preference share dividends ( 5,658 ) — ( 5,658 ) —

Net income (loss) available to common shareholders $ 4,145 $ ( 213,513 ) $ ( 5,608 ) $ ( 240,052 )

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

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

2 unchanged sentences

(Dollars in thousands)

Three Months Ended May 31,

Six Months Ended August 31,

Cash flows from operating activities:

Net loss $ ( 9,753 ) $ ( 26,539 )

Adjustments to reconcile net loss to net cash and restricted cash provided by operating activities:

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

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

Depreciation 165,782 175,961

15 unchanged sentences

Lease rentals received in advance ( 704 ) ( 42,311 )

Net cash and restricted cash provided by (used in) operating activities 69,990 ( 44,475 )

Net cash and restricted cash provided by operating activities 179,714 25,592

Cash flows from investing activities:

1 unchanged sentence

Proceeds from sale of flight equipment 77,900 53,229

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

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

Other ( 64 ) ( 594 )

Net cash and restricted cash provided by investing activities 4,549 17,848

Net cash and restricted cash (used in) provided by investing activities ( 282,348 ) 15,529

Cash flows from financing activities:

1 unchanged sentence

Parent contribution at Merger — 25,536

Net proceeds from preference share issuance 393,362 —

Proceeds from secured and unsecured debt financings — 1,193,871

6 unchanged sentences

Net cash and restricted cash (used in) provided by financing activities ( 137,769 ) 307,712

Net decrease in cash and restricted cash:

Net (decrease) increase in cash and restricted cash:

( 240,403 ) 348,833

5 unchanged sentences

(Dollars in thousands)

Three Months Ended May 31,

Six Months Ended August 31,

Reconciliation to Consolidated Balance Sheets:

3 unchanged sentences

Supplemental disclosures of cash flow information:

Cash paid for interest $ 44,948 $ 74,457

Cash paid for interest, net of amounts capitalized $ 107,102 $ 116,137

Cash paid for income taxes $ 1,201 $ 730

8 unchanged sentences

(Dollars in thousands, except share amounts)

Three Months Ended May 31, 2021

Capital Retained

Earnings Total

Shareholders’

Common Shares

Shares Amount

Common Shares Preference Shares Additional Paid-In Capital Retained Earnings (Deficit) Total Shareholders’ Equity

Shares Amount Shares Amount

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

1 unchanged sentence

Balance, May 31, 2021 14,048 $ — — $ — $ 1,485,777 $ 235,540 $ 1,721,317

Three Months Ended May 31, 2020

Capital Retained

Earnings Total

Shareholders’

Common Shares

Shares Amount

Net income — — — — — 9,803 9,803

Issuance of preference shares — — 400 — 393,362 — 393,362

Preference share dividends — — — — — ( 5,658 ) ( 5,658 )

Balance, August 31, 2021 14,048 $ — 400 $ — $ 1,879,139 $ 239,685 $ 2,118,824

Common Shares Preference Shares Additional Paid-In Capital Retained Earnings (Deficit) Total Shareholders’ Equity

Shares Amount Shares Amount

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

5 unchanged sentences

Balance, May 31, 2020 14,048 $ — — $ — $ 1,485,777 $ 551,922 $ 2,037,699

Net loss — — — — — ( 213,513 ) ( 213,513 )

Balance, August 31, 2020 14,048 $ — — $ — $ 1,485,777 $ 338,409 $ 1,824,186

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

2 unchanged sentences

(Dollars in thousands, except per share amounts)

August 31, 2021

Summary of Significant Accounting Policies

16 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2021.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of May 31, 2021, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of August 31, 2021, through the date on which the consolidated financial statements included in this Form 10-Q were issued.

Principles of Consolidation

5 unchanged sentences

Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings.

Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of the Company’s aircraft.

Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of early lease terminations and depress lease rates and the value of the Company’s aircraft.

Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its business or to refinance existing debt facilities.

6 unchanged sentences

(Dollars in thousands, except per share amounts)

August 31, 2021

COVID-19 Pandemic

COVID-19 has had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic.

While there have been some improvements in certain markets recently, according to IATA, as of May 31, 2021, air travel was still down to approximately 37 % of normal levels and a full recovery to pre-pandemic levels is not expected for several years.

While there have been some improvements in certain markets recently, according to IATA, as of August 31, 2021, air travel was still down to approximately 44 % compared to normal levels and a full recovery to pre-pandemic levels is not expected for several years.

Substantially all the world’s airlines have experienced financial difficulties and liquidity challenges, including many of our customers.

1 unchanged sentence

the extent and duration of those impacts cannot currently be determined.

As the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection.

As of July 9, 2021, we have agreed to $ 111,720 in total deferrals of lease payments with twenty-two customers.

These deferrals have been granted for an average of six to nine months of lease rentals and represent 19 % of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended May 31, 2021.

Of the total deferrals, $ 89,400 is included in Accounts receivable or Other assets as of May 31, 2021, with the balance representing future lease payments.

Approximately 76 % of our total deferrals as of July 9, 2021, have been agreed to as part of broader lease restructurings.

Even as the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection.

As of October 8, 2021, our total deferrals, net of repayments, were $ 101,844 .

These deferrals have been granted to twenty customers for an average of six to nine months of lease rentals and represent 18 % of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended August 31, 2021.

Of the total deferrals, $ 89,777 is included in Accounts receivable or Other assets as of August 31, 2021, with the balance representing future lease payments.

Approximately 77 % of our total deferrals as of October 8, 2021, have been agreed to as part of broader lease restructurings.

These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions.

Some have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.

If air traffic remains depressed and if our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to some of our customers or extend the period of repayment for deferrals we have already made.

If air traffic remains depressed and our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to certain customers or extend the period of repayment for deferrals we have already made.

We may ultimately not be able to collect all the amounts we have deferred.

As of July 9, 2021, six of our customers are subject to judicial insolvency proceedings or similar protection.

These customers lease 22 aircraft, which represent 13 % of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and 11 % of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended May 31, 2021.

LATAM, our second largest customer, is included in this group and represents 8 % of our net book value of flight equipment and 7 % of our Lease rental revenue as of and for the twelve months ended May 31, 2021.

As of October 8, 2021, six of our customers are subject to judicial insolvency proceedings or similar protection.

These customers lease 22 aircraft, which represent 13 % of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and 10 % of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended August 31, 2021.

We are actively engaged in these judicial proceedings to protect our economic interests.

2 unchanged sentences

As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.

LATAM, our second largest customer, is included in the above group and represents 7 % of our net book value of flight equipment and 6 % of our Lease rental revenue as of and for the twelve months ended August 31, 2021.

We have signed restructured leases for all thirteen of the LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process.

During the three months ended August 31, 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A.

and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No.

20-11254 (JLG) (Jointly Administered) (the “LATAM Bankruptcy”).

The allowed amount of our unsecured claims was approved by the Bankruptcy Court and proceeds from the sales of these claims in the amount of $ 55,213 were received during the three and six months ended August 31, 2021 and recognized in Other income (expense).

Lease Revenue Recognition

2 unchanged sentences

Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

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

2 unchanged sentences

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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.

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.

Impairment of Flight Equipment

1 unchanged sentence

A recoverability assessment is also performed whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable.

Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued.

Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in an aircraft type’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued.

When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value.

12 unchanged sentences

Reference rate reform will primarily impact our lease and debt arrangements for which floating-rate lease rentals and interest expense are based on LIBOR.

As of May 31, 2021, less than 1 % of our fleet have floating-rate lease rentals and, for the three months ended May 31, 2021, 5 % of our interest expense was derived from floating-rate debt which is referenced to LIBOR.

As of August 31, 2021, less than 1 % of our fleet have floating-rate lease rentals and, for the three and six months ended August 31, 2021, 4 % of our interest expense was derived from floating-rate debt which is referenced to LIBOR.

We have not adopted ASC 848 and are currently evaluating the election available to us under the standard.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Effective, March 1, 2021, the Company adopted FASB ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes.

2 unchanged sentences

This adoption did not have a material impact on our consolidated financial statements.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Fair Value Measurements

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

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

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

Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

Fair Value Measurements at May 31, 2021

Fair Value Measurements at August 31, 2021

Using Fair Value Hierarchy

Fair Value as of May 31, 2021 Quoted Prices

Fair Value as of August 31,

2021 Quoted Prices

(Level 1) Significant

15 unchanged sentences

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

For the three months ended May 31, 2021, we had no transfers into or out of Level 3.

For the three and six months ended August 31, 2021, 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.

3 unchanged sentences

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.

We account for our investment in unconsolidated joint ventures under the equity method of accounting.

Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital.

These investments are also reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

August 31, 2021

We account for our investment in unconsolidated joint ventures under the equity method of accounting.

Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital.

These investments are also reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

Aircraft Valuation

Impairment of Flight Equipment

During the three months ended May 31, 2021, the Company recorded transactional impairment charges totaling $ 20,583 which related to two narrow-body aircraft and were the result of an early lease termination and a scheduled lease expiration.

During the three months ended August 31, 2021, the Company recorded impairment charges totaling $ 21,232 , of which $ 18,012 were transactional impairments primarily related to two narrow-body aircraft resulting from early lease terminations.

The Company recognized $ 16,085 of maintenance revenue for these two aircraft.

During the three months ended May 31, 2020, the Company recorded transactional impairment charges totaling $ 77,298 , which related to ten narrow-body and one wide-body aircraft.

The Company recognized $ 83,342 of maintenance and security deposits into revenue for these eleven aircraft.

The impairment charges and revenue were recognized as a result of the early lease terminations of nine aircraft and scheduled lease expirations of two aircraft.

During the six months ended August 31, 2021, the Company recorded impairment charges totaling $ 41,815 , of which $ 38,594 were transactional impairments, primarily related to four narrow-body aircraft resulting from three early lease terminations and one scheduled lease expiration.

The Company recognized $ 37,146 of maintenance revenue for these four aircraft.

During the three months ended August 31, 2020, the Company recorded impairment charges totaling $ 212,387 , of which $ 169,346 were transactional impairments, primarily related to four wide-body aircraft and two narrow-body aircraft.

The Company recognized $ 9,267 of maintenance revenue for these six aircraft.

The impairment charges were attributable to early lease terminations, judicial insolvency proceedings, or as a result of our annual recoverability assessment.

During the six months ended August 31, 2020, the Company recorded impairment charges totaling $ 289,685 , of which $ 246,644 were transactional impairments primarily related to twelve narrow-body and five wide-body aircraft.

The Company recognized $ 92,193 of maintenance and security deposits into revenue for these seventeen aircraft.

The impairment charges were attributable to early lease terminations, scheduled lease expirations, lessee defaults, judicial insolvency proceedings, or as a result of our annual recoverability assessment.

Annual Recoverability Assessment

We plan to perform our annual recoverability assessment of all our aircraft during the fiscal third quarter for the nine months ended November 30, 2021.

6 unchanged sentences

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

Financial Instruments

3 unchanged sentences

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

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

May 31, 2021 February 28, 2021

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

August 31, 2021 February 28, 2021

Carrying Amount

8 unchanged sentences

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Lease Rental Revenues and Flight Equipment Held for Lease

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at May 31, 2021 were as follows:

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at August 31, 2021 were as follows:

Year Ending February 28/29, Amount (1)

4 unchanged sentences

(1) Reflects impact of lessee lease rental deferrals.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

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

Three Months Ended May 31,

Three Months Ended August 31, Six Months Ended August 31,

Region 2021 2020 2021 2020

7 unchanged sentences

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

Three Months Ended May 31,

Three Months Ended August 31, Six Months Ended August 31,

2021 2020 2021 2020

Number of Lessees Combined % of Lease

Rental Revenue Number of Lessees Combined % of Lease

Rental Revenue

Largest lessees by lease rental revenue 4 30 % 4 36 % 5 34 % 4 30 %

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

Three Months Ended May 31,

Country Revenue % of Total Revenue Revenue % of Total Revenue

Three Months Ended August 31, Six Months Ended August 31,

2021 2020 2021 2020

Country Revenue % of Total Revenue Revenue % of Total Revenue Revenue % of Total Revenue Revenue % of Total Revenue

$ 20,316 13 % $ 28,876 17 % $ 40,518 13 % $ 53,496 12 %

South Korea (3)

— — % — — % — — % 80,745 18 %

Chile — — % 17,102 10 % — — % — — %

_______________

(1) For the three months ended May 31, 2021, total revenue attributable to India included maintenance revenue totaling $ 654 .

Total revenue attributable to India was less than 10% for the three months ended May 31, 2020.

(2) For the three months ended May 31, 2020, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $ 67,265 .

Total revenue attributable to Mexico was less than 10% for the three months ended May 31, 2021.

(3) For the three months ended May 31, 2021, total revenue attributable to South Korea included maintenance revenue totaling $ 13,253 .

Total revenue attributable to South Korea was less than 10% for the three months ended May 31, 2020.

(1) For the three and six months ended August 31, 2021, total revenue attributable to India included maintenance revenue totaling $ 1,346 and $ 2,000 .

For the three and six months ended August 31, 2020, total revenue attributable to India included maintenance, gain on the sale of flight equipment and other revenue totaling $ 10,171 and $ 10,402 .

(2) For the six months ended August 31, 2020, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $ 76,637 .

Total revenue attributable to Mexico was less than 10% for the three and six months ended August 31, 2021 and for the three months ended August 31, 2020.

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

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

May 31, 2021 February 28, 2021

August 31, 2021 February 28, 2021

Region Number

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_______________

(1) Consisted of one Airbus A320-200 aircraft, one Airbus A330-200 aircraft, and one Boeing 737-800 aircraft, all of which were delivered to lessees in Europe during the second quarter of 2021, one Airbus A321-200 aircraft which was delivered to a lessee in North America during the second quarter of 2021, four Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, one Boeing 737-800 aircraft which is subject to an executed lease with a lessee in Europe, and one Airbus A320-200 aircraft, three Airbus A330-200 aircraft, and four Boeing 737-800 aircraft, which we are marketing for lease or sale.

(2) Consisted of one Airbus A320-200 aircraft, one Airbus A330-200 aircraft and one Boeing 737-800 aircraft, each of which was delivered to a lessee in Europe during the first half of 2021, three Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, and one Boeing 737-800 aircraft which is subject to a lease commitment with a customer in Europe, and one Airbus A320-200 aircraft, three Airbus A330-200 aircraft, and five Boeing 737-800 aircraft, which we are marketing for lease or sale.

(1) Of the seventeen off-lease aircraft at August 31, 2021, we have two narrow-body aircraft and three wide-body aircraft which we are currently marketing for lease or sale.

(2) Of the sixteen off-lease aircraft at February 28, 2021, we have three wide-body aircraft which we are currently marketing for lease or sale.

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

May 31, 2021 February 28, 2021

August 31, 2021 February 28, 2021

Country Net Book

5 unchanged sentences

India $ 704,238 11 % 3 $ 756,514 11 % 3

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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

Net Investment in Leases

At May 31, 2021 and February 28, 2021, our net investment in leases consisted of 15 and 15 aircraft, respectively.

The components of our net investment in leases at May 31, 2021 and February 28, 2021, were as follows:

May 31, 2021 February 28, 2021

At August 31, 2021 and February 28, 2021, our net investment in leases consisted of fifteen and fifteen aircraft, respectively.

The components of our net investment in leases at August 31, 2021 and February 28, 2021, were as follows:

August 31, 2021 February 28, 2021

Lease receivable $ 55,232 $ 67,075

3 unchanged sentences

Net investment in leases, net of allowance $ 187,299 $ 195,376

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

Aircastle Limited and Subsidiaries

Notes to Unaudited Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

August 31, 2021

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

Balance at February 28, 2021 $ 864

Provision for credit losses 12

Balance at May 31, 2021 $ 870

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

Balance at August 31, 2021 $ 876

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

Year Ending February 28/29, Amount

5 unchanged sentences

Unconsolidated Equity Method Investments

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

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

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

Earnings from joint venture, net of tax 745

Investment in joint ventures at May 31, 2021 $ 35,664

Investment in joint ventures at August 31, 2021 $ 36,122

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

August 31, 2021

Secured and Unsecured Debt Financings

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

At May 31, 2021 At

At August 31, 2021 At

Debt Obligation Outstanding

16 unchanged sentences

Unsecured Term Loans 215,000 1.59 % 02/27/22 to 02/27/24 215,000

Revolving Credit Facilities — 1.575% to 2.00% 12/27/21 to 04/26/25 —

Revolving Credit Facilities — N/A 12/27/21 to 04/26/25 —

Debt issuance costs and discounts ( 45,426 ) ( 48,739 )

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

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

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

Unsecured Debt Financings:

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(Dollars in thousands, except per share amounts)

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

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

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

August 31, 2021

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

Senior Notes due 2022

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

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

Shareholders' Equity

On June 8, 2021, the Company issued 400,000 depositary shares (the “Depositary Shares”), each representing a 0.001 interest in a share of 5.250 % Series A Cumulative Redeemable Perpetual Preference Shares par value $ 0.01 per share with a $ 1,000 liquidation preference per share (equivalent to $ 1,000 per Depositary Share) (the “Preference Shares”).

On June 8, 2021, the Company issued 400 shares of 5.250 % Series A Cumulative Redeemable Perpetual Preference Shares, $ 0.01 par value, with a liquidation preference of $ 1,000 per share (the “Preference Shares”).

The Preference Shares are perpetual and have no maturity date.

Dividends on the Preference Shares, when, as and if declared by the Company’s board of directors or any duly authorized committee thereof, will be payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.

Dividends on the Preference Shares, when, as and if declared by the Company’s board of directors are payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.

Dividends will be payable:

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The Company may not redeem the Preference Shares before the date that is 90 -days prior to the original reset date.

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

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

In addition, the Company may redeem the Preference Shares, in whole but not in part, at the Company’s option under certain other limited conditions.

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

The Company intends to use the net proceeds from the Offering for general corporate purposes, which may include the repayment, refinancing or redemption of its existing indebtedness.

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

Related Party Transactions

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

During the three months ended May 31, 2021, the Company incurred $ 980 in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides company-sponsored benefits, management services, strategy consultancy, and general administrative support to the Company.

During the three and six months ended August 31, 2021, the Company incurred $ 935 and $ 1,915 , respectively, in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides certain management and administrative services to the Company.

The Company also entered into a parts management services and supply agreement with an affiliate of Marubeni under which we purchased parts totaling $ 1,441 and $ 1,958 during the three and six months ended August 31, 2021, respectively.

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

August 31, 2021

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.

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Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

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

Three Months Ended May 31,

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

Three Months Ended August 31, Six Months Ended August 31,

2021 2020 2021 2020

operations $ 4,479 $ 8,851 $ 8,190 $ 12,897

operations 12,531 ( 210,018 ) ( 9,512 ) ( 241,885 )

Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments $ ( 18,332 ) $ ( 27,821 )

Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments $ 17,010 $ ( 201,167 ) $ ( 1,322 ) $ ( 228,988 )

Our aircraft-owning subsidiaries generally earn income from sources outside the U.S.

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federal, state or local income taxes.

The aircraft owning subsidiaries resident in Ireland, Mauritius and the U.S.

The aircraft owning subsidiaries resident in Ireland and the U.S.

are subject to tax in those respective jurisdictions.

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The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation and technical correction to the tax depreciation methods for qualified improvement property.

The CARES Act did not materially impact the Company’s effective tax rate for the three months ended May 31, 2021.

The Company’s effective tax rates (“ETRs”) for the three months ended May 31, 2021 and 2020 were 45.2 %, and 2.0 %, respectively.

The CARES Act did not materially impact the Company’s effective tax rate for the six months ended August 31, 2021.

The Company’s effective tax rates (“ETRs”) for the three and six months ended August 31, 2021 and 2020 were 45.1 % and ( 6.5 )%, and 47.4 %, and ( 5.4 )%, respectively.

The movement in the ETR is primarily caused by changes in the mix of the Company’s pre-tax earnings/(losses) in its taxable and non-tax jurisdictions.

Further, the three-month period ended May 31, 2020 included discrete items related to stock compensation and the impact of the CARES act.

The six months ended August 31, 2021 included income from the sale of unsecured claims related to the LATAM Bankruptcy, which was recorded in a low tax jurisdiction.

Further, the six months ended August 31, 2020 included discrete items related to stock compensation and the impact of the CARES act.

Interest, Net

The following table shows the components of interest, net:

Three Months Ended May 31,

Three Months Ended August 31, Six Months Ended August 31,

2021 2020 2021 2020

Interest on borrowings and other liabilities $ 51,807 $ 52,638 $ 106,135 $ 108,483

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(Dollars in thousands, except per share amounts)

August 31, 2021

Commitments and Contingencies

Rent expense, primarily for the corporate offices and sales and marketing offices, was $ 413 and $ 411 for the three months ended May 31, 2021 and 2020, respectively.

As of May 31, 2021, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut;

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

As of August 31, 2021, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut;

Dublin, Ireland;

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Total $ 12,366

At May 31, 2021, we had commitments to acquire 23 aircraft for $ 779,372 .

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

At August 31, 2021, we had commitments to acquire 24 aircraft for $ 801,841 .

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

Year Ending February 28/29, Amount

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(Dollars in thousands, except per share amounts)

August 31, 2021

Accounts Payable, Accrued Expenses and Other Liabilities

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Subsequent Event

During the fiscal second quarter of 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A.

and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No.

20-11254 (JLG) (Jointly Administered) (the “Bankruptcy Case”).

Proceeds from the sales of these claims were received during the fiscal second quarter of 2021.

The allowed amount of our unsecured claims has been approved by the Bankruptcy Court so that such claims are now approved claims in the Bankruptcy Case subject to customary conditions.

During the fiscal third quarter of 2021, the Company will record impairment charges, net of maintenance and other revenue, approximating $ 48,000 related to three aircraft as a result of a lessee default.

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-Q

Item 1. Financial Statements