What changed in this filing

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Item 1A. Risk Factors

2022-04-28 compared with 2021-04-21 · 190 added, 173 removed, 300 unchanged (55% of the section changed)

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Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations.

Risk Related to Our Lessees

Risks Related to Our Lessees

Risks affecting the airline industry may materially adversely affect our customers.

We operate as a supplier to airlines and are indirectly impacted by all the risks facing airlines today.

The ability of lessees to perform their obligations under the relevant lease depends on the financial condition, which may be affected by factors beyond our control, including:

The ability of lessees to perform their obligations under the relevant lease depends on their financial condition, which may be affected by factors beyond our control, including:

• passenger and air cargo demand, fare levels and air cargo rates;

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• availability of financing, including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in hedging contracts and the ability of airlines to make or refinance principal payments;

• operating costs, including the price and availability of jet fuel, labor costs and insurance costs and coverages;

• restrictions in labor contracts and labor difficulties, including pilot shortages;

• economic conditions, including recession, financial system distress and currency fluctuations;

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• governmental regulation of, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations.

These factors, and others, may lead to defaults by our customers, or may delay or prevent aircraft deliveries or transitions, result in payment restructurings or other lease term restructurings, and may increase our costs from repossessions and reduce our revenues due to downtime or lower re-lease rates.

Adverse currency movements could negatively affect our lessees’ ability to honor the terms of their leases.

These factors, and others, may lead to defaults by our customers, or may delay or prevent aircraft deliveries or transitions, result in payment or other lease term restructurings, may increase our costs from repossessions and reduce our revenues due to downtime or lower re-lease rates.

The Russian invasion of Ukraine and resulting sanctions by various countries, including the United States, the European Union, and the United Kingdom, has significantly impacted our financial condition, results of operations and cash flows and will continue to have an adverse impact on our business.

On February 24, 2022, the Russian Federation invaded Ukraine.

This has resulted in the closing of airspace in several countries as well as the placement of sanctions on a variety of Russian entities and certain activities involving Russia or Russian entities, such as the leasing of aircraft.

We have and will continue to fully comply with all applicable sanctions.

As of February 24, 2022, we had twelve aircraft on lease with six Russian airlines and one aircraft with a Ukrainian airline.

We have since terminated the leasing activities for all our Russian aircraft and have sought to repossess the aircraft and remove them from Russia.

We have successfully repossessed two of the twelve Russian aircraft.

Nine aircraft remain in Russia and one aircraft was undergoing maintenance outside of Russia and is not operational.

Our aircraft with a Ukrainian airline is in temporary storage outside of Ukraine.

It is unclear whether we will be able to recover the remaining aircraft from our former Russian airline customers or what the condition of the aircraft will be at the time of repossession if we do so or whether we will be able to recover the related technical records and documentation.

Failure to repossess any of our aircraft could adversely affect our business and financial results.

Many of these Russian airlines have continued to fly our aircraft notwithstanding the leasing terminations and our repeated demands for the return of our assets.

Our aircraft that remain in Russia may suffer damage or deterioration due to inadequate maintenance and lack of spare parts.

During the fourth quarter of 2021, we recorded net non-cash impairment charges of $251.9 million related to our Russian and Ukrainian aircraft – see Note 3 in the Notes to the Consolidated Financial Statements.

These thirteen aircraft comprised 6% of our Net Book Value before impairment and 1% of our Net Book Value after impairment.

Excluding lease rentals received in advance recognized into revenue, they represented 7% of our lease rental and direct financing and sales-type lease revenue for the year ended February 28, 2022.

Basic lease rentals were approximately $3.5 million for the month of February 2022.

The termination of our Russian leases will result in reduced revenues and operating cash flows.

We had letters of credit of $49.5 million as of February 28, 2022 related to our aircraft leased to Russian airlines.

We have presented requests for payment to the various financial institutions and have received about half of the proceeds.

We are pursuing collection on remaining letters of credit, but the timing and amount of any further recovery are uncertain.

We have insurance, through the airlines’ insurance and our own policies, and have filed claims against the relevant policies seeking an indemnity of approximately $350 million.

The ten aircraft that are not in our possession had a pre-impairment book value of $314.1 million.

Our claims are subject to the terms of the applicable policies, and given the unprecedented scenario and the magnitude of potential claims, insurers and reinsurers may raise various defenses.

Accordingly, at this stage we can give no assurance as to when or what amounts we may ultimately collect.

Insurance recoveries are generally recognized when they are realized or realizable, which typically occurs at the time cash proceeds are received or a claim agreement is executed, and also considers the counterparty’s ability to pay the claim amount.

It is not possible to predict the broader or longer-term consequences of the Russian invasion of Ukraine, which could include new or additional sanctions (including counter responses by the Russian government or other jurisdictions), embargoes, further escalation or regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, availability and cost of insurance, security conditions, fuel prices, currency exchange rates and financial markets.

Such geopolitical instability and uncertainty could have a negative impact on our ability to lease aircraft, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions, and logistics restrictions including closures of air space, and could materially and adversely affect our business.

The effects of terrorist attacks and geopolitical conditions might adversely impact the financial condition of the airlines and our lessees might not be able to meet their lease payment obligations.

War, armed hostilities or terrorist attacks, or the fear of such events, could decrease demand for air travel or increase the operating costs of our customers.

They may lead to:

(i) decreased passenger demand and revenue due to safety concerns or the inconvenience of additional security measures;

(ii) higher price of jet fuel;

(iii) higher financing costs and difficulty in raising funds on favorable terms, or at all;

(iv) higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance has been or will continue to be available;

(v) higher costs due to the increased security measures;

and (vi) special charges, such as those related to the impairment of aircraft and other long lived assets stemming from the above conditions.

War, armed hostilities, terrorist attacks, large protests or government instability, or the fear of such events, could negatively impact the airline industry and may have an adverse effect on the financial condition and liquidity of our lessees, aircraft values and rental rates and may lead to lease restructurings or aircraft repossessions.

Adverse currency movements could negatively impact the profitability of our lessees.

Many of our lessees are exposed to currency risk as they earn revenues in local currencies while a significant portion of their liabilities and expenses, including fuel, debt service, and lease payments are denominated in U.S.

If the local currency is devalued, our lessees may not be able to increase revenue sufficiently to offset the impact of exchange rates on these expenses.

Currency volatility, particularly in emerging markets, could impact the ability of customers to meet their contractual obligations in a timely manner.

Currency depreciation could impact the ability of customers to meet their contractual obligations in a timely manner.

Shifts in foreign exchange rates can be significant, are difficult to predict, and can occur quickly.

Fuel prices significantly impact the profitability of the airline industry.

If fuel prices rise in the future, our lessees might not be able to meet their lease payment obligations, which would have an adverse effect on our financial results.

Increases in fuel prices could negatively impact the profitability of our lessees.

Fuel costs represent a major expense to airlines and fluctuate widely.

Airlines may not be able to successfully manage their exposure to fuel price fluctuations and significant changes would materially affect their operating results.

Due to the competitive nature of the airline industry, airlines may not be able to pass on increases in fuel prices to their customers by increasing fares.

Higher and more volatile fuel prices may also have an impact on consumer confidence and spending, and thus may adversely impact demand for air transportation.

Fuel cost volatility may result in airlines being reluctant to make future commitments to leased aircraft and reduce the demand for lease aircraft.

The effects of terrorist attacks and geopolitical conditions might adversely impact the financial condition of the airlines and our lessees might not be able to meet their lease payment obligations.

War, armed hostilities or terrorist attacks, or the fear of such events, could decrease demand for air travel or increase the operating costs of our customers.

Terrorist incidents and other international tensions may lead to:

(i) higher costs due to the increased security measures;

(ii) decreased passenger demand and revenue due to safety concerns or the inconvenience of additional security measures;

(iii) higher price of jet fuel;

(iv) higher financing costs and difficulty in raising the desired amount of proceeds on favorable terms, or at all;

(v) higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and the extent to which such insurance has been or will continue to be available;

and (vi) special charges recognized by some airlines, such as those related to the impairment of aircraft and other long lived assets stemming from the above conditions.

Terrorist attacks, war or armed hostilities, large protests or government instability, or the fear of such events, could negatively impact the airline industry and may have an adverse effect on the financial condition and liquidity of our lessees, aircraft values and rental rates and may lead to lease restructurings or aircraft repossessions, all of which could adversely affect our financial results.

Severe weather conditions, natural disasters or their perceived effects may negatively impact the airline industry and our lessees’ ability to meet their lease payment obligations to us.

Demand for air travel or the inability of airlines to operate to or from certain regions due to severe weather conditions or natural disasters, such as floods, earthquakes or volcanic eruptions, could have an adverse effect on our lessees’ ability to their lease payment obligations to us, which could negatively impact our financial results.

Airlines may not be able to successfully manage their exposure to fuel prices and significant changes could materially affect their operating results.

Airlines may not be able to pass on increases in fuel prices to their customers by increasing fares.

High fuel prices may also have an impact on consumer spending and adversely impact demand for air transportation.

Severe weather conditions, natural disasters or their perceived effects may negatively impact the airline industry.

Lessee defaults could materially adversely affect our business, financial condition and results of operations.

Investors should expect a varying number of lessees to experience payment difficulties, particularly in difficult economic or operating environments.

Investors should expect some lessees to experience payment difficulties, particularly in difficult economic or operating environments.

As a result of their financial condition and lack of liquidity, lessees may be significantly in arrears in their rental or maintenance payments.

Liquidity issues are more likely to lead to airline failures in the periods of large air traffic declines, financial system distress, volatile fuel prices, and economic slowdown, with additional liquidity being more difficult and expensive to source.

Given the size of our aircraft portfolio, we expect that from time to time some lessees will be slow in making, or will fail to make, their payments in full under their leases.

Liquidity issues are more likely to lead to airline failures in the periods of large air traffic declines, financial system distress, volatile fuel prices, and economic slowdown.

Given the size of our aircraft portfolio, we expect that from time to time some lessees will be slow or will fail to make their payments in full under their leases.

We may not correctly assess the credit risk of a lessee or that risk could change over time.

We may not be able to charge risk-adjusted lease rates, and lessees may not be able to continue to perform their financial and other obligations under our leases in the future.

A default, delay or deferral of payments from a lessee where we have a significant exposure could have a materially adverse impact on our ability to make payments on our indebtedness or to comply with debt service coverage or interest coverage ratios.

We may experience some level of delinquency under our leases and default levels may increase over time.

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In the event that a lessee defaults under a lease, any security deposit paid or letter of credit provided by the lessee may not be sufficient to cover the lessee’s outstanding or unpaid lease obligations and required maintenance and transition expenses.

Airline reorganizations could have an adverse effect on our financial results.

As a result of economic conditions, airlines may be forced to reorganize.

Bankruptcies and reduced demand may lead to the grounding of significant numbers of aircraft and negotiated reductions in aircraft lease rental rates, with the effect of depressing aircraft market values.

Additional grounded aircraft and lower market values would adversely affect our ability to sell certain of our aircraft on favorable terms, or at all, or re-lease other aircraft at favorable rates comparable to the then current market conditions, which collectively would have an adverse effect on our financial results.

We may not recover any of our claims or damages against an airline under bankruptcy or insolvency protection.

If our lessees encounter financial difficulties and we decide to restructure our leases with those lessees, this could result in less favorable leases and in significant reductions in our cash flow.

When a lessee is late in making payments, fails to make payments in full or in part or has otherwise advised us that it will in the future fail to make payments in full or in part, we may elect to or be required to restructure the lease.

Restructuring may involve anything from a simple rescheduling of payments to the termination of a lease without receiving all of the past due amounts.

If requests for payment restructuring or rescheduling are granted, reduced or deferred rental payments may be payable over all or some part of the remaining term of the lease, and the terms of any revised payment schedules may be unfavorable or such payments may not be made.

We may be unable to agree upon acceptable terms for any requested restructurings and as a result may be forced to exercise our remedies under those leases and we may be unable to repossess our aircraft on a timely basis.

If we, in the exercise of our remedies, repossess the aircraft, we may not be able to re-lease the aircraft promptly at favorable rates, or at all.

The terms and conditions of payment restructurings or reschedulings, particularly involving lessees where we have significant exposure, may result in significant reductions of rental payments, which may adversely affect our cash flows or our financial results.

Significant costs resulting from lease defaults could have a material adverse effect on our business.

While we have the right to repossess the aircraft and to exercise other remedies upon a lessee default, repossession of an aircraft after a lessee default could lead to significant costs for us.

Those costs include legal and other expenses of court or other governmental proceedings, particularly if the lessee is contesting the proceedings, and costs to obtain possession and/or deregistration of the aircraft and flight and export permissions.

While we have the right to repossess the aircraft and to exercise other remedies upon a lessee default, repossession of an aircraft could lead to significant costs for us.

Those costs include legal and other expenses of court or other governmental proceedings, particularly if the lessee is contesting the proceedings, and costs to obtain possession and/or

deregistration of the aircraft and flight and export permissions.

Delays resulting from these proceedings would increase the period of time during which the aircraft is not generating revenue.

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We may suffer other adverse consequences due to a lessee default and the repossession of the aircraft.

Our rights upon a lessee default vary significantly depending upon the jurisdiction, including the need to obtain a court order for repossession of the aircraft and/or consents for deregistration or re-export of the aircraft.

Our rights upon a lessee default vary significantly depending upon the jurisdiction and may include the need to obtain a court order for repossession of the aircraft and/or consents for deregistration or re-export of the aircraft.

When a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply.

Certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third party to retain possession of the aircraft without paying lease rentals or without performing all of the obligations under the lease.

There can be no assurance that jurisdictions that have adopted

the Cape Town Convention, which provides for uniformity and certainty for repossession of aircraft, will enforce it as written.

There can be no assurance that jurisdictions that have adopted the Cape Town Convention will enforce it as written.

Certain of our lessees are owned in whole or in part by government-related entities, which could complicate our efforts to repossess the relevant aircraft.

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If we repossess an aircraft, we may not necessarily be able to export or deregister and redeploy the aircraft.

When a lessee or other operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist deregistration.

When a lessee or other operator flies only domestic routes, repossession may be more difficult, especially if the jurisdiction permits the lessee or the other operator to resist deregistration.

Significant costs may also be incurred in retrieving or recreating aircraft records required for registration of the aircraft and obtaining a certificate of airworthiness.

A default and exercise of remedies involving a lessee where we have a significant exposure or concentration risk could have a materially adverse impact on our future revenue and cash flows.

If our lessees encounter financial difficulties and we decide to restructure our leases with those lessees, this could result in less favorable leases and in significant reductions in our cash flow.

When a lessee is late in making payments or fails to make payments in full, we may elect to or be required to restructure the lease.

Restructuring may involve anything from a simple rescheduling of payments to the termination of a lease without receiving all the past due amounts.

If we, in the exercise of our remedies, repossess the aircraft, we may not be able to re-lease the aircraft promptly at favorable rates, or at all.

The terms and conditions of payment restructurings or reschedulings, particularly involving lessees where we have significant exposure, may adversely affect our cash flows.

Airline reorganizations could have an adverse effect on our financial results.

As a result of economic conditions, airlines may be forced to reorganize.

We may not recover any of our claims or damages against an airline under bankruptcy or insolvency protection.

If our lessees fail to appropriately discharge aircraft liens, we might find it necessary to pay such claims.

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Risks associated with the concentration of our lessees in certain geographical regions could harm our business or financial results.

Our business is sensitive to local economic and political conditions that can influence the performance of lessees located in a particular region.

European Concentration

Thirty-one lessees in Europe accounted for 92 aircraft, totaling 27% of the net book value of our aircraft at February 28, 2021.

Five lessees, accounting for 37 aircraft, are based in the U.K.

left the E.U.

on January 31, 2020.

The U.K.’s future relations with the E.U.

are still evolving and could potentially negatively impact carriers based in the U.K.

and to a lesser extent elsewhere in the E.U.

Asian Concentration

Twenty-three lessees in Asia accounted for 79 aircraft, totaling 37% of the net book value of our aircraft at February 28, 2021.

Growth in Asia has been strong, driven in large part by Southeast Asia and India.

Twelve lessees accounting for 36 aircraft are based in Southeast Asia and three lessees accounting for 22 aircraft are based in India.

There is risk of oversupply in the future driven by large outstanding order books of certain Southeast Asian and Indian carriers as well as infrastructure constraints.

North American Concentration

Eight lessees in North America accounted for 28 aircraft, totaling 12% of the net book value of our aircraft at February 28, 2021.

Consolidation in the U.S.

has helped drive capacity discipline and increased pricing power.

South American Concentration

Seven lessees in South America accounted for 26 aircraft, totaling 13% of the net book value of our aircraft at February 28, 2021.

One lessee in Chile accounted for thirteen aircraft, totaling 8% of the net book value of our aircraft at February 28, 2021.

Middle East and African Concentration

Seven lessees in the Middle East and Africa accounted for eleven aircraft, totaling 4% of the net book value of our aircraft at February 28, 2021.

Through our lessees and the countries in which they operate, we are exposed to the specific conditions and associated risks of those particular jurisdictions.

An adverse economic or political event in any region or country in which our lessees or our aircraft are concentrated could affect the ability of our lessees to meet their obligations to us or expose us to various legal or political risks associated with the affected jurisdictions, all of which could have a material and adverse effect on our financial results.

Many of our lessees operate in emerging markets and we are indirectly subject to the economic and political risks associated with such markets.

Emerging markets may be more vulnerable to economic and political problems, such as significant fluctuations in gross domestic product, interest and currency exchange rates, government instability, nationalization and expropriation of private assets, unfavorable legal systems, change in law regarding recognition of contracts or ownership rights, changes in governments or government policy and the imposition of taxes or other charges by governments.

The occurrence of these events may adversely affect our ownership interest in an aircraft or the ability of our lessees to meet their lease obligations.

For the year ended February 28, 2022, 49 of our lessees, which operated 121 aircraft and generated 60% of our lease rental revenue, are domiciled or habitually based in emerging markets.

Risks Related to Our Aviation Assets

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• geopolitical events, including war, prolonged armed conflict and acts of terrorism;

• governmental regulation, tariffs and other restrictions on trade;

• governmental regulation, tariffs and other restrictions, such as sanctions, on trade or the leasing of aircraft;

• climate change initiatives, technological change, aircraft noise and emissions regulations, aircraft age limits and other factors leading to reduced demand for, early retirement or obsolescence of aircraft models;

• outbreaks of communicable diseases and natural disasters;

• reintroduction into service of aircraft previously in storage;

• reintroduction into service of aircraft previously grounded or in storage;

• airport and air traffic control infrastructure constraints.

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Any decrease in the values of and lease rates for commercial aircraft which may result from the above factors or other unanticipated factors may have a material adverse effect on our financial results.

Climate change may have a long-term impact on our business.

There are inherent climate-related risks wherever our business is conducted.

Changes in market dynamics, stakeholder expectations, local, national and international climate change policies, all have the potential to disrupt our business and operations.

Various countries, including the United States and the European Union, have announced sustainability initiatives that, among other things, aim to reduce carbon emissions, explore sustainable aviation fuels and establish sustainability measures and targets.

Climate and environmental objectives may impact the types of aircraft we target for investment and the demand for certain aircraft and engine types, and could result in a significant increase in our costs and expenses and adversely affect future revenue, cash flows and financial performance.

Failure to address climate change could result in greater exposure to economic and other risks and impact our ability to adhere to developing climate goals.

The advent of superior aircraft technology and higher production levels could cause our existing aircraft portfolio to become outdated and therefore less desirable.

As manufacturers introduce technological innovations and new types of aircraft, including the Boeing 787, the Airbus A350, the Airbus A220 and re-engined models of the Boeing 737, Boeing 777, Airbus A320, Airbus A330 and Embraer E-Jet families of aircraft, certain aircraft in our existing aircraft portfolio may become less desirable to potential lessees or purchasers.

This next generation of aircraft generally delivers improved fuel consumption and reduced noise and emissions with lower operating costs compared to current-technology aircraft.

The Boeing 787 and 737 MAX and the

Airbus A350, A320neo and A220 are all currently in production.

This next generation of aircraft generally delivers improved fuel consumption and reduced noise and emissions with lower operating costs compared to prior-technology aircraft.

The Boeing 787 and 737 MAX and the Airbus A350, A320neo and A220 are all currently in production.

The Boeing 777X is expected to enter service in 2023.

The Commercial Aircraft Corporation of China Ltd., and Russia’s United Aircraft Corporation are developing aircraft models that will compete with the Airbus A320 family aircraft, the Boeing 737 and the Embraer E-Jet.

The Commercial Aircraft Corporation of China Ltd.

is developing aircraft models that will compete with the Airbus A320 family aircraft, the Boeing 737 and the Embraer E-Jet.

The introduction of these new models and the potential resulting overcapacity in aircraft supply, could adversely affect the residual values and the lease rates for our aircraft, our ability to lease or sell our aircraft on favorable terms, or at all.

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The agreement does not expressly reference aviation, but if the agreement is implemented in the United States and other countries there could be an adverse effect on the aviation industry.

Recent actions taken by various organizations continue to prioritize the UNFCCC’s overall initiatives.

In October 2021, IATA announced its Fly Net Zero commitment to achieve net zero carbon by 2050.

This commitment was echoed by the U.S.

Aviation Climate Action Plan, released November 2021.

In February 2022, a collective of airlines, airports, and aviation manufacturers operating in the E.U., U.K., and EFTA unveiled the flagship sustainability measure, Destination 2050 .

Taxonomy is a green classification system that translates the E.U.’s climate and environmental objectives into criteria for specific economic activities for investment purposes.

In addition, the E.U.

Taxonomy can be used by organizations to plan their climate and environmental transition and raise finance for this transition.

While the E.U.

Taxonomy is not a mandatory list of economic activities for investors to invest in, it is expected to act as an enabler of change and encourage a transition towards the E.U.’s climate and environmental objectives.

European countries have relatively strict environmental regulations that can restrict operational flexibility and decrease aircraft productivity.

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From 2030 onwards, this sectoral approach will transition to an approach based on each airline’s individual rate of growth.

Governmental regulations apply based on where the aircraft is registered and operated.

Various jurisdictions have adopted noise regulations which require all aircraft to comply with noise level standards.

and ICAO have adopted a more stringent set of standards for noise levels which applies to engines manufactured or certified after January 1, 2006.

regulations do not require the phase-out of aircraft that qualified with the older standards applicable prior to 2006.

has established a framework for the imposition of operating limitations on aircraft that do not comply with the new standards.

These regulations could limit the economic life of the aircraft and engines, reduce their value, limit our ability to lease or sell these non-compliant aircraft and engines or, if engine modifications are permitted, require us to make investments in the aircraft and engines to make them compliant.

Over time, it is possible that governments will adopt additional regulatory requirements and/or market-based policies to reduce emissions and noise levels from aircraft.

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We may also incur some of these increased maintenance expenses and regulatory costs upon acquisition or re-leasing of our aircraft.

larger wide-body aircraft may result in higher reinvestment and maintenance expenditures than re-leasing narrow-body aircraft.

Re-leasing larger wide-body aircraft may result in higher reinvestment and maintenance expenditures than re-leasing narrow-body aircraft.

The concentration of aircraft types in our aircraft portfolio could lead to adverse effects on our business should any difficulties specific to a particular type of aircraft occur.

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As a result of competitive pressures, we may not be able to take advantage of attractive investment opportunities, and we may not be able to identify and make investments that are consistent with our investment objectives.

Additionally, the barriers to entry in the aircraft acquisition and leasing market are comparatively low, and new entrants appear from time to time.

Additionally, the barriers to entry in the aircraft acquisition and

leasing market are comparatively low, and new entrants appear from time to time.

We may not be able to compete effectively against present and future competitors in the aircraft acquisition, leasing or sales market.

Our ability to lease our new Embraer E-Jet E2 aircraft on favorable terms, if at all, may be adversely affected by desirability of this aircraft type and risks to the commercial airline industry generally.

We have lease commitments for eighteen of the 25 Embraer E-Jet E2 aircraft that we contracted to purchase from Embraer and are scheduled for delivery between the first quarter of 2021 and the fourth quarter of 2025.

We have not put financing in place for any of the Embraer E-Jet E2 aircraft deliveries.

Our ability to lease these aircraft on favorable terms, if at all, may be adversely affected by desirability of this aircraft type.

If we are unable to obtain commitments for the remaining deliveries or the necessary financing, if needed, or otherwise satisfy our contractual obligations to Embraer, we may be subject to several potential risks, including:

• forfeiting advance deposits and progress payments to Embraer, as well as incurring certain significant costs related to these commitments such as contractual damages and legal, accounting and financial advisory expenses;

• defaulting on any future lease commitments we may have entered into with respect to these aircraft, which could result in monetary damages and strained relationships with lessees;

• failing to realize the benefits of purchasing and leasing such aircraft.

The Embraer E-Jet E2 is a new aircraft variant which first entered service in April 2018.

Our purchase agreement with Embraer and the anticipated future leases for these aircraft contain certain cancellation rights related to delays in delivery.

We rely on Embraer to return any advance deposits and progress payments if they are unable to meet their obligations to us, and we may not be able to recover such amounts if Embraer defaults or becomes insolvent.

In April 2020, Boeing announced the termination of the previously announced strategic partnership with Embraer and said that it will no longer be proceeding with a transaction to acquire Embraer’s commercial operations, including the E-Jet E2 aircraft line.

Embraer remaining a stand-alone regional jet manufacturer may negatively impact the E-Jet E2 program.

The uncertainty relating to the Boeing 737 MAX groundings and the rate of Boeing’s continued production could negatively impact our lessees’ financial condition, lease rates, demand for other aircraft types and the value of the aircraft in our fleet.

In March 2019, as a result of two fatal accidents, airlines and regulators grounded the worldwide fleet of Boeing 737 MAX aircraft.

Starting with the FAA in November 2020, these grounding notices have been progressively lifted in the U.S., E.U., Canada, Brazil and United Kingdom.

Boeing has restarted production and begun to deliver aircraft previously produced but not delivered.

The uncertainty surrounding the duration of the grounding in other jurisdictions such as China where it has not yet been lifted, and the rate of Boeing’s continued production could negatively impact our lessees’ financial condition, lease rates, demand for other aircraft types and the value of the aircraft in our fleet.

A similar type of grounding for other aircraft types that we have in our fleet, or have commitments to purchase, could also negatively affect our financial results.

Risks Related to Our Leases

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The standards of maintenance observed by lessees and the condition of the aircraft may affect the future values and rental rates for our aircraft.

Under our leases, the lessee is responsible for maintaining the aircraft and complying with all governmental requirements applicable to the lessee and the aircraft, including, without limitation, operational, maintenance, and registration requirements and airworthiness directives, although in certain cases we may agree to share certain of these costs.

Under our leases, the lessee is responsible for maintaining the aircraft and complying with all governmental requirements applicable to the lessee and the aircraft, including, operational, maintenance, and registration requirements and airworthiness directives, although in certain cases we may agree to share certain of these costs.

Failure of a lessee to perform required aircraft maintenance or required airworthiness directives could result in a decrease in value of such aircraft, an adverse effect on our ability to lease the aircraft at favorable rates or at all, or a potential grounding of such aircraft, and will likely require us to incur increased maintenance and modification costs upon the expiration or earlier termination of the applicable lease, which could be substantial, to restore such aircraft to an acceptable condition.

If any of our aircraft are not subject to a lease, we would be required to bear the entire cost of maintaining that aircraft and performing any required airworthiness directives.

Certain of our leases provide that the lessee is required to make periodic payments to us during the lease term to provide reserves for major maintenance events.

Many of our leases provide that the lessee is required to make periodic payments to us during the lease term to provide reserves for major maintenance events.

In these leases there is an associated liability for us to reimburse the lessee after such maintenance is performed.

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Liability may be placed on an aircraft lessor in certain jurisdictions even under circumstances in which the lessor is not directly controlling the operation of the aircraft.

Lessees are required under our leases to indemnify us for, and insure against, liabilities arising out of the use and operation of the aircraft, including third-party claims for death or injury to persons and damage to property for which we may be deemed liable.

may be deemed liable.

Lessees are required to maintain public liability, property damage and hull all risk and hull war risk insurance on the aircraft at agreed upon levels.

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At the same time, they significantly increased the premiums for such third-party war risk and terrorism liability insurance and coverage in general.

Aviation insurers may take similar actions in response to the potential losses arising from aircraft not being returned from Russia as a result of sanctions.

As a result, the amount of such third-party war risk and terrorism liability insurance that is commercially available at any time may be below the amount stipulated in our leases.

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Any of these events could adversely affect our ability to re-lease or sell aircraft.

As many of our lessees operate in emerging markets, we are indirectly subject to the economic and political risks associated with such markets.

The occurrence of these events may adversely affect our ownership interest in an aircraft or the ability of our lessees to meet their lease obligations.

For the year ended February 28, 2021, 57 of our lessees, which operated 148 aircraft and generated 61% of our lease rental revenue, are domiciled or habitually based in emerging markets.

Risks Related to Our Operations

The global impact of COVID-19 has significantly impacted, and could continue to significantly and adversely affect, our business, financial condition and results of operations.

The COVID-19 crisis has had an unprecedented negative impact on the global economy, and in particular on the aviation sector.

There has been a dramatic slowdown in air traffic, with many markets in near complete shutdown.

While recently there have been some limited improvements in certain markets, according to International Air Transport Association (the “IATA”), as of February 2021, air travel is still down to approximately 30% of normal levels and a full

recovery to pre-pandemic levels is not expected for several years.

IATA estimates this situation will cost the airline industry over $510 billion of lost revenue, a number which may be revised upwards.

Substantially all of the world’s airlines are experiencing financial difficulties and liquidity challenges, including many of our customers, and this could adversely affect our lessees’ ability to fulfill their lease payment obligations to us.

While we believe the long-term demand for air travel will return to historical trends over time, the near-term impacts of the COVID-19 economic shock are material;

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

Airlines have been seeking to preserve liquidity by obtaining support from their respective governments, raising debt and equity, delaying or canceling new aircraft orders, furloughing employees, and requesting concessions from lessors.

Some have sought judicial protection.

We have agreed to defer lease payments with numerous airline customers, which they are obligated to repay over time.

As of April 15, 2021, we have agreed to defer $108.4 million in near-term lease payments of which $87.4 million 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 customers, for an average deferral of five months of lease rentals.

In a limited number of situations, we have agreed to broader restructurings of contractual terms, for example obtaining better security packages, term extensions, or other valuable considerations in exchange for short-term economic concessions.

If air traffic continues to remain 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 some of our customers or extend the period of repayment for deferrals we have already made.

The COVID-19 pandemic has significantly impacted our results of operations and may continue to have an adverse impact on our business.

The COVID-19 pandemic and related mitigation efforts have had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic.

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

While there have been improvements in many markets, particularly in terms of domestic travel, according to IATA, as of February 2022, air travel was still down to approximately 55% compared to normal levels.

A full recovery to pre-pandemic levels is not expected for several years and will depend on the effectiveness of vaccinations efforts and the continued easing of travel restrictions, among other things.

While the extent and duration of the impact of the COVID-19 pandemic remain unknown, we continue to believe long-term demand for air travel will return to historical trends over time.

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, and request concessions from lessors, and in certain cases, seek judicial protection.

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 April 15, 2021, seven of our customers are subject to judicial insolvency proceedings.

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, or “net book value”) and 12% of our lease rental 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 up to twelve to eighteen months to be resolved.

While we continued to receive requests from our customers for lease concessions, such as deferrals of lease payments or broader lease restructurings, the number of requests for such concessions during the year ended February 28, 2022 has declined compared to 2021.

As of February 28, 2022, we had deferred rent receivables of $55,478 related to nine customers that were included in other assets.

Approximately 93% of these deferrals have been agreed to as part of broader lease restructurings, which generally include term extensions, better security packages, or other valuable considerations in exchange for short-term economic concessions.

The outstanding deferred rent receivables are scheduled to be repaid, on average, within the next seven years.

As of April 25, 2022, four of our customers are subject to judicial insolvency proceedings or similar protection.

These customers lease eighteen aircraft, which comprise 12% of Net Book Value and 9% of our lease rental revenue as of and for the year ended February 28, 2022.

One of these customers is LATAM, our second largest customer, which represents 7% of our Net Book Value and 8% of our lease rental revenue as of and for the year ended February 28, 2022.

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

However, the outcome of these proceedings is uncertain and could result in these customers grounding our aircraft, negotiating reductions in aircraft lease rentals, rejecting the leases or taking other actions that could adversely impact us or the value of our aircraft.

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.

We believe we have sufficient liquidity to meet our contractual obligations over the next twelve months.

as of April 1, 2021, total liquidity of $2.32 billion includes $1.25 billion of undrawn credit facilities, $609 million of unrestricted cash, $123 million of contracted asset sales and $340 million of projected operating cash flows through April 1, 2022.

See “Capitalization.” As of February 28, 2021, we have commitments to acquire 25 aircraft for $825.1 million, excluding manufacturer credits, between 2022-2026.

We believe that our long-standing business strategy of maintaining conservative leverage, limiting long-term financial commitments and focusing our portfolio on more liquid narrow-body aircraft will enable us to manage through the COVID-19 crisis.

Our portfolio of mainly mid-life, narrow-body aircraft should remain attractive relative to new technology aircraft due to their lower capital costs in an environment of tight airline margins and low fuel prices.

We also believe our platform and personnel position us to effectively manage through the COVID-19 crisis and will enable us to take advantage of new investment opportunities when they arise.

We employ a team of experienced senior professionals with extensive industry and financial experience.

Our leadership team members have an average of more than twenty years of relevant industry experience, including managing through prior downturns in the aviation industry, like the 2008 global financial crisis and the September 11, 2001 terror attacks.

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.

We believe that our platform, personnel, and long-standing business strategy of maintaining conservative leverage, limiting long-term financial commitments, and focusing our portfolio on more liquid narrow-body aircraft have enabled and will enable us to manage through the COVID-19 crisis.

While we cannot currently reasonably estimate the extent to which the COVID-19 pandemic will impact our business, we expect our business, results of operations and financial condition will continue to be negatively impacted in the near term.

Volatile financial market conditions may adversely impact our liquidity, our access to capital and our cost of capital and may adversely impact the airline industry and the financial condition of our lessees.

The availability and pricing of capital in the commercial bank market and in the unsecured bond market remain susceptible to global events, including political changes, rising interest rates, currency fluctuations, the rate of international economic growth and implications from changes in oil prices.

If we need, but cannot obtain, adequate

capital on satisfactory terms, or at all, as a result of negative conditions in the capital markets or otherwise, our business, financial condition, results of operations could be materially adversely affected.

If we need, but cannot obtain, adequate capital on satisfactory terms, or at all, as a result of negative conditions in the capital markets or otherwise, our business, financial condition, results of operations could be materially adversely affected.

We bear the risk of re-leasing and selling our aircraft.

We bear the risk of re-leasing or selling our aircraft in order to continue to generate cash flows.

As only a portion of an aircraft’s value is covered by contractual cash flows from leases, we are exposed to the risk that the residual value will not be sufficient to permit us to fully recover our investment and that we may have to record impairment charges.

Only a portion of an aircraft’s value is covered by contractual cash flows from leases, so we are exposed to the risk that the residual value will not be sufficient to permit us to fully recover our investment and that we may have to record impairment charges.

In certain cases we commit to purchase aircraft that are not subject to lease and therefore are subject to lease placement risk.

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Possible indicators include a significant lease restructuring or early lease termination, a significant change in aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type that is no longer in production or significant airworthiness directive that is issued.

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

We will continue to focus on customers that have or may enter judicial insolvency proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of COVID-19 and value deterioration.

We continue to closely monitor the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and will 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.

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

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

Our ability to obtain debt financing and our cost of debt financing is, in part, dependent upon our credit ratings and a credit downgrade or being put on negative watch could adversely impact our financial results.

Maintaining our credit ratings depends on our financial results and on other factors, including the outlook of the ratings agencies on our sector and on the market generally.

A credit rating downgrade or being put on negative watch may make it more difficult or costly for us to raise debt financing in the unsecured bond market, or may result in higher pricing or less favorable terms under other financings.

Credit rating downgrades or being put on negative watch, may make it more difficult and/or more costly to satisfy our funding requirements.

Any future tightening or regulation of financial institutions could impact our ability to raise funds in the commercial bank loan market in the future.

An increase in our borrowing costs may adversely affect our earnings.

Some of our aircraft are financed under long-term debt financings.

As these financings mature, we will be required to either refinance these instruments by entering into new financings, which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets.

Departure of key officers could harm our business and financial results.

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We encounter intense competition for qualified employees from other companies in the aircraft leasing industry, and we believe there are only a limited number of available qualified executives in our industry.

The Company seeks to retain a pipeline of senior management personnel with superior talent to provide continuity of

succession, including for the Chief Executive Officer position and other senior positions.

The Company seeks to retain a pipeline of senior management personnel with superior talent to provide continuity of succession, including for the Chief Executive Officer position and other senior positions.

Our Board of Directors is involved in succession planning, including review of short- and long-term succession plans for senior positions.

Our future success depends, to a significant extent, upon the continued service of our senior management personnel, including the Chief Executive Officer, and if we lose one or more of these individuals, our business could be adversely affected.

future success depends, to a significant extent, upon the continued service of our senior management personnel, including the Chief Executive Officer, and if we lose one or more of these individuals, our business could be adversely affected.

We are subject to risks related to our indebtedness that may limit our operational flexibility and our ability to compete with our competitors.

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• non-compliance with covenants prohibiting certain investments and other restricted payments, raise additional capital or refinance our existing debt, may reduce our operational flexibility and limit our ability to refinance.

Maintaining our credit ratings depends on our financial results and on other factors, including the outlook of the ratings agencies on our sector and on the market generally.

Credit rating downgrades or being put on negative watch, may make it more difficult and/or more costly to satisfy our funding requirements.

Any future tightening or regulation of financial institutions could impact our ability to raise funds in the commercial bank loan market in the future.

An increase in our borrowing costs may adversely affect our earnings.

We primarily finance our business through the issuance of Senior Notes.

As our Senior Notes mature, we will be required to repay them by issuing new Senior Notes, which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets.

The provisions of our long-term financings require us to comply with financial and other covenants.

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Increasingly, similar or more restrictive foreign laws, rules and regulations, including the U.K.

Bribery Act (“UKBA”), may also apply to us.

By virtue of these laws and regulations, we may be obliged to limit our business activities, we may incur costs for compliance

programs and we may be subject to enforcement actions or penalties for noncompliance.

Bribery Act (“UKBA”), and European laws and regulations may also apply to us.

By virtue of these laws and regulations, we may be obliged to limit our business activities, we may incur costs for compliance programs and we may be subject to enforcement actions or penalties for noncompliance.

In recent years, U.S.

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Violations of FCPA, OFAC Regulations, UKBA and other laws, sanctions or regulations may result in severe criminal or civil penalties, and we may be subject to other liabilities.

The General Data Protection Regulation (“GDPR”) that took effect in May 2018, requires us to protect certain personal data of E.U.

The General Data Protection Regulation (“GDPR”) requires us to protect certain personal data of E.U.

While we have implemented processes and controls to comply with GDPR requirements, the manner in which the E.U.

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We are dependent upon information technology systems to manage, process, store and transmit information associated with our operations, which may include proprietary business information and personally identifiable information of our customers, suppliers and employees.

Our information technology systems are subject to disruption, damage or failure from a variety of sources, including computer viruses, security breaches, cyber-attacks, employee error and defects in design.

Our information technology systems are subject to disruption, damage or failure from a variety of sources, including malware, ransomware, security breaches, cyber-attacks, employee error and defects in design.

There may be an elevated risk of cyber-attacks by Russia tin response to economic sanctions imposed by the U.S., the E.U., the U.K.

and other countries resulting from the Russian invasion of Ukraine.

Damage, disruption, or failure of information technology systems may result in interruptions to our operations or may require a significant investment to fix or replace them or may result in significant damage to our reputation.

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The ESA may require in-scope Bermuda entities which are engaged in such “relevant activities” to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain adequate physical presence in Bermuda or perform core income-generating activities in Bermuda.

The list of “relevant activities” includes carrying on any one or more of:

The list of “relevant activities” includes, among other things, carrying on any one or more of:

insurance, financing and leasing (which excludes operating leases), headquarters, intellectual property and holding entities.

Entities subject to the economic substance requirements are required to evidence their compliance and file an economic substance declaration with the Registrar of Companies in Bermuda on an annual basis.

Any entity that must satisfy economic substance requirements but fails to do so could face financial penalties, a restriction of its business activities, automatic reporting by the Bermuda authorities to the competent authorities in the European Union on an entity’s non-compliance or being struck-of as a registered entity in Bermuda.

Any entity that must satisfy economic substance requirements but fails to do so could face financial penalties, a restriction of its business activities, automatic reporting by the Bermuda authorities to the competent authorities in the European Union or other jurisdiction of the entity’s beneficial owners, on an entity’s non-compliance or being struck-of as a registered entity in Bermuda.

If any one of the foregoing were to occur it may adversely affect the business operations of the Company or its Bermuda subsidiaries.

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Our Irish subsidiaries and affiliates are expected to be subject to corporation tax on their income from leasing, managing, and servicing aircraft at the 12.5% tax rate applicable to trading income.

This expectation is based on certain

assumptions, including that we will maintain at least the current level of our business operations in Ireland.

This expectation is based on certain assumptions, including that we will maintain at least the current level of our business operations in Ireland.

If we are not successful in achieving trading status in Ireland, the non-trading income activities of our Irish subsidiaries and affiliates would be subject to tax at the rate of 25% and capital gains would be taxed at the rate of 33%.

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The imposition of such taxes could adversely affect our business.

The introduction of Base Erosion and Profit Shifting by the Organization for Economic Cooperation and Development's may impact our effective tax rate in future periods.

The introduction of Base Erosion and Profit Shifting by the Organization for Economic Cooperation and Development may impact our effective tax rate in future periods.

The Organization for Economic Co-operation and Development (the “OECD”) has introduced an action plan with respect to base erosion and profit shifting (“BEPS”).

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Depending on the nature of the BEPS action plans adopted, it may result in an increase in our effective tax rate and cash taxes liabilities in future periods.

The introduction of the OECD Action Plan on BEPS to address the tax challenges of the digitalization of the economy and the impact it may have, if any, on our effective tax rate in future periods.

In January 2019, the OECD announced a new program of work (referred to as “BEPS 2.0”) with a view to creating an international consensus on new rules governing international taxation, particularly for businesses with valuable

intangible assets.

The stated aim is to move beyond the arm’s length principle and the scope of current taxing rights are limited to businesses with a physical presence in a country.

The new rules, if adopted, would readjust the balance of taxing rights and multinational companies (“MNC”) profit allocation between jurisdictions where MNC assets are owned and the markets where users and consumers are based.

BEPS 2.0 proposes to address this reform through two main pillars of work that are interlinked:

• Pillar 1 - Arriving at a new basis for taxing profits of multinational enterprises (“MNEs”) with global turnover above 20 billion euros and profitability above 10% through the allocation of an amount of taxable profits to market jurisdictions in which those MNEs operate.

• Pillar 2 - Strengthening taxing rights to preserve the tax base and counteract profit shifting to jurisdictions with nil or low effective tax rates, including through the implementation of a global minimum tax rate of 15%.

On October 12, 2020, OECD published Blueprints for Pillar 1 and Pillar 2, together with accompanying documentation including an impact assessment.

On October 7, 2021, Ireland announced it was signing on to the OECD BEPS 2.0 plan.

Under this plan, Ireland will increase its corporation tax rate to achieve a 15% effective rate for multinational groups within the scope of Pillar 2.

Ireland also agreed to Pillar 1 proposals that reallocate taxing rights to market jurisdictions for in scope multinational groups.

These changes are expected to take effect in 2023.

The timing of the implementation of the Pillar 1 and Pillar 2 rules will depend on the publication of an E.U.

Directive that will ensure consistent implementation of the rules across the E.U.

On March 12, 2022, the E.U.

released the latest draft of the E.U.

Directive to implement the OECD Pillar 2 model rules in the E.U.

This draft includes a proposal to defer the transposition deadline to December 31, 2023 with the rules to become effective for fiscal years beginning as from this same date and an option for Member States to defer the application of the Income and Inclusion Rule and the Undertaxed Profit Rule (“UTPR”) even further provided that they host fewer than ten Ultimate Parent Entities of in-scope groups.

The compromise text also proposes that the implementation of UTPR would be deferred so as to apply in respect of fiscal years beginning from December 31, 2024.

Given that the OECD and the E.U.

are still developing their plans under BEPS 2.0 and the scope of many unilateral measures remain unclear, it is unclear what impact the eventual implementation of these plans will have on our business.

Anti-tax Avoidance proposals may impact our effective rate of tax in future periods.

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has implemented the E.U.

Anti-Tax Avoidance Directives (“EU ATAD”) and the amending Directive (“EU ATAD 2”).

Anti-Tax Avoidance Directives (“E.U.

ATAD”) and the amending Directive (“E.U.

These Directives seek to oblige all E.U.

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Most of the measures were implemented with effect from January 2019, though certain measures may be deferred to 2024.

The EU ATAD contemplates the introduction of a restriction on the deductibility of interest, measures in respect of certain hybrid transactions and instruments, an exit charge, a switch over rule, controlled foreign company rules as well as a general anti-avoidance rule.

Ireland sought to defer the introduction of rules restricting the tax deductibility of interest payments until 2024.

However, it seems increasingly likely that Ireland may seek to introduce these rules from January 1, 2022.

The current proposal would restrict the tax deductibility of interest expense to 30% of EBITDA or possibly a higher threshold if the third-party group interest expense ratio to group EBITDA is higher than 30%.

This measure may impact the ability of our Irish tax resident companies to claim a tax deduction for interest payments.

ATAD contemplates the introduction of a restriction on the deductibility of interest, measures in respect of certain hybrid transactions and instruments, an exit charge, a switch over rule, controlled foreign company rules as well as a general anti-avoidance rule.

The Irish Finance Bill published on October 21, 2021 included draft legislation to enact the interest limitation measures prescribed by ATAD.

The implementation date for the new law was January 1, 2022.

Based on the final legislation in Finance Act 2021 signed into law on December 21, 2021, the interest limitation rule will apply to limit the deductibility of a company’s exceeding borrowing costs (i.e.

its interest (and equivalent) borrowing costs as reduced by its interest (and equivalent) income) to 30% of tax adjusted EBITDA.

Importantly for companies carrying on a leasing trade, a portion of their operating lease income and expense will be treated as equivalent to interest for the purposes of the test.

The legislation was finalized on December 21, 2021;

however, Irish Revenue guidance remains outstanding and may not be issued until later in 2022.

It is therefore difficult to fully and definitively conclude on the potential impact of the interest limitation rule on Aircastle and its Irish subsidiaries.

The impact of the other measures in respect of certain hybrid transactions and instruments, an exit charge, a switch over rule, controlled foreign company rules as well as a general anti-avoidance rule will depend on the exact scope of these measures.

The impact on the Company’s tax position (if any), will depend on the implementation of these measures in Ireland and other EU jurisdictions where we have operations.

The impact on the Company’s tax position (if any), will depend on the implementation of these measures in Ireland and other E.U.

jurisdictions where we have operations.

Unshell Proposal may result in additional reporting and disclosure obligations for us.

On December 22, 2021, the European Commission issued a proposal for a Council Directive to issue rules to prevent the misuse of shell entities for tax purposes within the E.U.

(the “Unshell Proposal”).

While the Unshell Proposal

is expected to be adopted and published into E.U.

Member States’ national laws by June 30, 2023, and to come into effect as of January 1, 2024, there is considerable uncertainty surrounding the development of the proposal and its implementation.

The proposal could result in additional reporting and disclosure obligations for Aircastle.

UNRESOLVED STAFF COMMENTS

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 1A. Risk Factors