What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-04-28 compared with 2021-04-21 · 171 added, 178 removed, 338 unchanged (51% of the section changed)

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Please see “Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995” for a discussion of the uncertainties, risks and assumptions associated with these statements.

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

Our consolidated financial statements are prepared in accordance with U.S.

GAAP and, unless otherwise indicated, the other financial information contained in this Annual Report has also been prepared in accordance with U.S.

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However, in many cases we are obligated to pay a specified portion of maintenance or modification costs.

As of February 28, 2021, the net book value of our flight equipment (including flight equipment held for lease and net investment in direct financing and sales-type leases, or “net book value”) was $6.69 billion compared to $7.79 billion for the year ended December 31, 2019.

Our revenues, net income (loss) and Adjusted EBITDA were $832.3 million, $(333.2) million, and $774.4 million for the year ended February 28, 2021, and were $917.9 million, $156.6 million and $862.2 million for the year ended December 31, 2019.

Merger with MM Air Limited

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

The Merger has not resulted in any change of the Company’s business strategy, and we believe the Company will benefit by having stable investors with a long-term investment horizon.

We also may benefit by being affiliated with Mizuho Leasing, part of the Mizuho Financial Group, one of the largest Japanese financial institutions.

As previously disclosed, on September 30, 2020, the Company’s Board of Directors unanimously agreed to change the Company’s fiscal year end to the twelve-month period ended the last day in February.

This change better aligns the Company’s financial reporting period with the financial reporting cycle of its shareholders, Marubeni Corporation and Mizuho Leasing.

As of February 28, 2022, the Net Book Value of our flight equipment was $6.5 billion.

Our revenues, net loss and Adjusted EBITDA were $769.8 million, $278.2 million, and $752.3 million for the year ended February 28, 2022, and $832.3 million, $333.2 million and $774.4 million for the year ended February 28, 2021.

Acquisitions and Sales

During the year ended February 28, 2021, we acquired five aircraft for $154.3 million.

As of April 15, 2021, we have acquired no additional aircraft.

At February 28, 2021, we had commitments to acquire 25 new E-Jet E2 aircraft from Embraer S.A.

for $825.1 million, with delivery beginning in March 2021.

These amounts include estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments.

As of April 15, 2021, we have commitments to acquire 25 aircraft for $825.1 million.

During the year ended February 28, 2021, we sold twelve aircraft and other flight equipment for $180.3 million, which resulted in a net gain of $33.5 million.

During the year ended February 28, 2022, we acquired eighteen aircraft for $763.3 million.

As of February 28, 2022, we had commitments to acquire 23 aircraft for $819.3 million, with delivery between the first quarter of 2022 and the fourth quarter of 2024, which include estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments.

As of April 25, 2022, we have acquired one additional aircraft and have commitments to acquire 23 aircraft for $842.3 million.

During the year ended February 28, 2022, we sold fifteen aircraft and other flight equipment for net proceeds of $210.7 million and recognized a net gain on sale of $26.0 million.

As of April 25, 2022, we have sold two additional aircraft.

The following table sets forth certain information with respect to the aircraft owned and managed on behalf of our joint ventures by us as of February 28, 2021, February 29, 2020 and December 31, 2019:

The following table sets forth certain information with respect to the aircraft owned and managed on behalf of our joint ventures by us as of February 28, 2022 and 2021, and February 29, 2020:

AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)

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February 28, 2021 (1)

December 31, 2019 (1)

Net Book Value of Flight Equipment $ 6,464 $ 6,688

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Weighted Average Age (years) (2)

10.6 10.0 9.9

Weighted Average Remaining Lease Term (years) (2)

Weighted Average Fleet Utilization during the Fourth Quarter (3)

93.7 % N/A 99.2 %

95.6 % 93.7 %

Weighted Average Fleet Utilization for the Year Ended (3)

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Portfolio Yield for the Fourth Quarter (4)

8.5 % 11.1 % 11.2 %

Portfolio Yield for the Year Ended (4)

9.2 % 11.0 % 10.9 %

Managed Aircraft on behalf of Joint Ventures

Managed Aircraft on behalf of Joint Venture

Flight Equipment $ 298 $ 312

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(2) Weighted by Net Book Value.

(3) Aircraft on-lease days as a percent of total days in period weighted by net book value.

The decrease from our historical utilization rate was primarily due to early terminations.

Weighted Average Fleet Utilization for the Year Ended February 29, 2020 of 99.1% represents utilization for the two months ended February 29, 2020.

(3) Aircraft on lease as a percentage of total days in period weighted by net book value.

(4) Lease rental revenue, interest income and cash collections on our net investment in direct financing and sales-type leases for the period as a percent of the average Net Book Value for the period;

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The calculation of portfolio yield includes our net investment in direct financing and sales-type leases in the average Net Book Value, and the interest income and cash collections from our net investment in direct financing and sales-type leases in lease rentals.

(5) N/A - not applicable.

PORTFOLIO DIVERSIFICATION

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February 28, 2022 Owned Aircraft as of

February 29, 2020 Owned Aircraft as of

December 31, 2019

Aircraft % of Net

Book Value (1)

February 28, 2021

Aircraft % of Net

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Aircraft Type

Narrow-body 226 78 % 244 75 % 250 75 %

Narrow-body - new technology (2)

27 19 % 13 9 %

Narrow-body - current technology 198 63 % 213 69 %

Wide-body 22 16 % 22 18 %

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(1) Calculated using Net Book Value at year end.

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

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

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

Our largest customer represents approximately 8% of the net book value at February 28, 2021.

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

(3) Of the eleven off-lease aircraft at February 28, 2022, we have three wide-body aircraft that we are currently marketing for lease or sale.

(4) Of the sixteen off-lease aircraft at February 28, 2021, we have one wide-body aircraft that we are currently marketing for lease or sale

The top ten customers for aircraft we owned at February 28, 2022 are as follows:

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7.6% Chile 13

easyJet 4.6% United Kingdom 25

Iberia 3.9% Spain 15

Air Canada 3.7% Canada 5

3.7% Indonesia 8

Air Canada 3.6% Canada 5

Iberia 3.5% Spain 14

American Airlines 3.5% United States 8

Frontier Airlines

3.1% United States 4

Aerolineas Argentinas

2.9% Argentina 5

American Airlines

2.8% United States 7

AirBridge Cargo (2)

2.6% Russia 2

2.5% South Korea 7

2.9% United Kingdom 12

2.6% Mexico 5

Total top ten customers 41.1% 85

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(1) LATAM filed for Chapter 11 in May 2020.

(2) Guaranteed by Volga-Dnepr Airlines.

We have one additional aircraft on lease with an affiliate.

We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital over the last sixteen years.

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

We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital from debt and equity investors.

Since our inception in late 2004, we raised $2.1 billion in equity capital from private and public investors.

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Therefore, our ability to execute our business strategy, particularly the acquisition of additional commercial jet aircraft or other aviation assets, depends to a significant degree on our ability to obtain additional debt and equity capital on terms we deem attractive.

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

Comparison of the year ended February 28, 2021 to the year ended December 31, 2019:

February 28, December 31,

See “Liquidity and Capital Resources” below.

Comparison of the year ended February 28, 2022 to the year ended February 28, 2021:

Year Ended February 28,

(Dollars in thousands)

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Selling, general and administrative 66,338 88,413

Provision for credit losses 930 5,258

Impairment of flight equipment 452,250 425,579

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Total operating expenses 1,102,564 1,122,110

Other expense

Other income (expense):

Loss on extinguishment of debt (14,156) (2,640)

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Other 57,682 (191)

Total other expense (35,436) (19,441)

Income (loss) from continuing operations before income taxes (325,258) 175,140

Income tax provision 10,236 22,667

Total other income (expense):

43,526 (35,436)

Loss from continuing operations before income taxes (289,251) (325,258)

Income tax provision (benefit) (7,998) 10,236

Earnings of unconsolidated equity method investment, net of tax 3,044 2,326

Net income (loss) $ (333,168) $ 156,575

Total revenues decreased by $85.7 million, for the year ended February 28, 2021 as compared to the year ended December 31, 2019:

Lease rental revenue decreased by $166.0 million for the year ended February 28, 2021, as a result of:

• a $121.6 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 regarding our lease revenue recognition policy ;

• a $58.2 million decrease due to the sale of 32 aircraft since January 1, 2019;

Net loss $ (278,209) $ (333,168)

Total revenues decreased $62.5 million for the year ended February 28, 2022 as compared to the year ended February 28, 2021.

Lease rental revenue decreased $16.2 million as a result of:

• a $26.7 million decrease related to the sale of eighteen aircraft since March 1, 2020;

• a $22.0 million decrease due to early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method – see Note 1 in the Notes to the Consolidated Financial Statements regarding our lease revenue recognition policy;

• a $14.6 million decrease due to lease extensions, amendments, transitions, and other changes.

This was partially offset by a $52.2 million increase in revenue reflecting the impact of 48 aircraft purchased since January 1, 2019.

Direct financing and sales-type lease revenue decreased $14.1 million, primarily attributable to the early lease terminations of eight aircraft during the year ended February 28, 2021 and the sales of three aircraft subject to direct financing and sales-type leases.

These decreases were partially offset by the following:

• a $29.0 million increase in revenue related to 23 aircraft purchased since March 1, 2020;

• an $18.1 million increase related to lease rentals received in advance that were recognized into revenue for our Russian lessees resulting from sanctions requiring the termination of leasing activities in Russia – see Note 2 in the Notes to the Consolidated Financial Statements.

Direct financing and sales-type lease revenue decreased $7.5 million as a result of:

• $4.0 million related to the reclassification of seven aircraft to operating leases;

• $3.3 million related to the early lease terminations of eight aircraft and sales of six aircraft since March 1, 2020.

Amortization of lease premiums, discounts and incentives.

February 28, December 31,

Year Ended February 28,

(Dollars in thousands)

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Amortization of lease premiums, discounts and incentives $ (20,190) $ (22,842)

The decrease in amortization of lease discounts of $3.3 million for the year ended February 28, 2021, as compared to the year ended December 31, 2019, was due to fully amortized lease discounts for aircraft that transitioned to new lessees or extended.

The decrease in amortization of lease incentives of $2.1 million for the year ended February 28, 2021, as compared to the year ended December 31, 2019, was primarily due to scheduled lease expirations and early lease terminations, as well as the sales of six aircraft.

The amortization of lease incentives decreased $2.0 million for the year ended February 28, 2022 primarily attributable to a $5.7 million write-off of lease incentive liabilities for our Russian lessees resulting from sanctions requiring the termination of leasing activities in Russia – see Note 2 in the Notes to the Consolidated Financial Statements.

This was partially offset by an increase of amortization due to the transition of aircraft to new lessees.

Maintenance revenue.

For the year ended February 28, 2022, we recorded $152.0 million of maintenance revenue, partially comprised of $59.9 million related to the early lease terminations of seven narrow-body and two wide-body aircraft and $28.6 million related to the scheduled lease expirations of eight narrow-body aircraft.

In addition, we recorded $61.6 million of maintenance revenue related to nine narrow-body and one wide-body aircraft with Russian lessees, resulting from sanctions requiring the termination of leasing activities in Russia.

For the year ended February 28, 2021, we recorded $172.7 million of maintenance revenue, comprised primarily of $95.0 million related to the early lease terminations of seventeen narrow-body and one wide-body aircraft, as well as $57.3 million related to the scheduled lease expirations of ten narrow-body and one wide-body aircraft.

In addition, we recorded $16.3 million of maintenance revenue related to three wide-body aircraft for which the customers are subject to judicial insolvency proceedings or similar protection.

For the year ended December 31, 2019, we recorded $75.0 million of maintenance revenue, comprised of $45.8 million related to the scheduled lease expirations of nine narrow-body and four wide-body aircraft and $29.1 million related to the early lease terminations of nineteen narrow-body and one wide-body aircraft.

Gain on sale of flight equipment decreased by $12.0 million to $33.5 million for the year ended February 28, 2021, as compared to gains of $45.5 million for the year ended December 31, 2019.

During the year ended February 28, 2021, we sold twelve aircraft as compared to the sale of twenty aircraft during the year ended December 31, 2019.

Gain on sale for each of these periods includes the receipt of insurance proceeds for one aircraft which was disposed.

Other revenue increased $8.9 million to $19.3 million during the year ended February 28, 2021, as compared to $10.4 million for the year ended December 31, 2019, due to $18.7 million of security deposits and early lease termination fees recognized into revenue primarily related to ten narrow-body and one wide-body aircraft.

This was partially offset by lower service fees of $8.8 million related to the liquidation of our joint venture with an affiliate of the Ontario Teachers’ Pension Plan.

Gain on sale of flight equipment decreased $7.5 million to $26.0 million for the year ended February 28, 2022 as compared to $33.5 million for the year ended February 28, 2021.

During the year ended February 28, 2022, we sold fifteen aircraft as compared to the sale of twelve aircraft during the year ended February 28, 2021.

Gain on sale for the year ended February 28, 2021, included the receipt of insurance proceeds for one aircraft that was disposed.

Other revenue was $6.0 million and $19.3 million for the years ended February 28, 2022 and 2021, respectively, which primarily comprised of lease termination fees and security deposits recognized into revenue related to early lease terminations.

Operating Expenses:

Total operating expenses increased by $398.8 million, for the year ended February 28, 2021 as compared to the year ended December 31, 2019:

Depreciation expense decreased by $8.5 million for the year ended February 28, 2021 as compared to the year ended December 31, 2019.

The decrease is primarily comprised of $40.0 million resulting from 33 aircraft sold since January 1, 2019 and lower depreciation for thirteen aircraft subject to impairments.

This was partially offset by a $26.6 million increase in depreciation due to 53 aircraft acquired since January 1, 2019.

Total operating expenses increased $19.5 million for the year ended February 28, 2022 as compared to the year ended February 28, 2021:

Depreciation expense decreased $10.0 million primarily attributable to $23.1 million resulting from nineteen aircraft sold since March 1, 2020 and lower depreciation related to aircraft subject to aircraft impairments.

This was partially offset by an increase of $13.2 million related to 21 aircraft purchased since March 1, 2020.

Interest, net consisted of the following:

February 28, December 31,

Year Ended February 28,

(Dollars in thousands)

Interest on borrowings, net settlements on interest rate derivatives, and other liabilities $ 221,246 $ 245,673

Amortization of deferred losses related to interest rate derivatives — 184

Interest on borrowings and other liabilities $ 200,220 $ 221,246

Amortization of deferred financing fees and debt discount 16,267 14,791

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Interest, net $ 214,352 $ 235,338

Interest, net decreased by $22.7 million as compared to the year ended December 31, 2019, primarily due to lower weighted average interest rates, partially offset by higher weighted average debt outstanding.

Selling, general and administrative expense s for year ended February 28, 2021 increased $16.6 million as compared to the year ended December 31, 2019, primarily attributable to an increase in share-based compensation expense of $12.2 million as a result of the Merger and a provision for credit losses of $5.3 million related to the change in our allowance for credit losses.

Interest, net decreased $21.0 million due to lower weighted average debt outstanding by $383.2 million and a lower average cost of borrowing.

Selling, general and administrative expense s decreased $22.1 million primarily attributable to a decrease in share-based compensation expense of $28.0 million as a result of the completion of the Merger, partially offset by an increase in personnel costs.

Provision for credit losses decreased $4.3 million for the year ended February 28, 2022, as compared to the year ended February 28, 2021.

The year ended February 28, 2021 included a higher provision for credit losses resulting from changes in estimates of lessee default probabilities and loss given default percentages for certain customers.

Impairment of aircraft.

We recorded impairment charges of $425.6 million for the year ended February 28, 2021, which primarily related to seventeen narrow-body and nine wide-body aircraft.

The Company recognized $157.0 million of maintenance revenue and security deposits into revenue related to these 26 aircraft during the year ended February 28, 2021.

During the year ended December 31, 2019, we recorded impairment charges of $7.4 million related to two narrow-body aircraft.

See “Summary of Recoverability Assessment and Other Impairments” below for a detailed discussion of impairment charges related to certain aircraft.

Maintenance and other costs were $20.0 million for the twelve months ended February 28, 2021, a decrease of $4.8 million as compared to the year ended December 31, 2019.

The year ended December 31, 2019 included higher than projected lessor contributions towards the cost of maintenance events for aircraft acquired with attached leases, as well as higher costs for unscheduled transitions.

Other Expense :

Total other expense increased by $16.0 million to $35.4 million for the year ended February 28, 2021, as compared to $19.4 million for the year ended December 31, 2019.

During the year ended February 28, 2021, we incurred $32.6 million of legal and banking expenses related to the Merger.

In addition, we recorded losses on extinguishment of debt totaling $2.6 million related to the early repayments of our Senior Notes due 2021 and secured debt obligations for three wide-body aircraft.

During the year ended December 31, 2019, we incurred a loss on extinguishment of debt of $7.6 million due to the early repayment of our Senior Notes due 2019, $7.4 million of legal and banking expenses related to the Merger, and unfavorable mark-to-market adjustments on our interest rate caps of $4.8 million.

Income Tax Provision :

Our provision for income taxes for the years ended February 28, 2021 and December 31, 2019, was $10.2 million and $22.7 million, respectively.

Income taxes have been provided based on the applicable tax laws and rates of those countries in which operations are conducted and income is earned, primarily Ireland and the United States.

The decrease in our income tax provision of $12.5 million for the year ended February 28, 2021, as compared to the year ended December 31, 2019, was primarily attributable to changes in operating income subject to tax in Ireland, the United States and other jurisdictions.

The year ended February 28, 2021, includes a reversal of prior period tax charges of $2.7 million related to the limitation in deductible compensation.

The year ended December 31, 2019, included tax charges of $4.1 million related to the limitation in deductible compensation and $0.4 million related to the vesting of stock.

Earnings (Loss) of Unconsolidated Equity Method Investment, net of Tax:

Earnings from unconsolidated equity method investment, net of tax, was $2.3 million during the twelve months ended February 28, 2021, as compared to $4.1 million in December 31, 2019.

See Note 5 “Unconsolidated Equity Method Investment.”

Summary of Recoverability Assessment and Other Impairments

We recorded impairment charges of $452.3 million for the year ended February 28, 2022, of which $449.0 million were transactional impairments, primarily related to sixteen narrow-body, two wide-body and two freighter aircraft.

The Company recognized $147.8 million of lease rentals received in advance, maintenance, and security deposits into revenue for these twenty aircraft during the year ended February 28, 2022.

The impairment charges, in part, resulted from early lease terminations, scheduled lease expirations and lessee defaults.

Of the total impairment charges, $341.3 million related to thirteen aircraft that were with Russian and Ukrainian lessees, resulting from the Russian invasion of Ukraine and related sanctions placed on Russia during the fourth quarter of 2021.

The Company recognized $89.4 million of lease rentals received in advance, maintenance, security deposits and other revenue for these thirteen aircraft During the year ended February 28, 2021, we recorded impairment charges of $425.6 million, which primarily related to seventeen narrow-body and eight wide-body aircraft.

The Company recognized $157.0 million of maintenance and security deposits into revenue related to these 25 aircraft during the year ended February 28, 2021.

See “Aircraft Valuation” below for a detailed discussion of impairment charges related to certain aircraft.

Maintenance and other costs were $31.2 million for the year ended February 28, 2022, an increase of $11.2 million as compared to the year ended February 28, 2021.

The increase is primarily attributable to aircraft that have transitioned or will transition to new lessees as a result of lease terminations or scheduled lease expirations.

Other Income (Expense) :

Total other income (expense) increased by $79.0 million for the year ended February 28, 2022 as compared to the year ended February 28, 2021.

During the year ended February 28, 2022, the Company recognized $55.2 million of proceeds from the sales of unsecured claims related to the LATAM Bankruptcy into Other income (expense).

This was partially offset by a $14.2 million loss on extinguishment of debt related to the early redemption in full of $500.0 million outstanding aggregate principal amount of our 5.5% Senior Notes due 2022.

The year ended February 28, 2021 included $32.6 million of legal and banking costs related to the Merger.

Additionally, we recognized loss on extinguishment of debt of $2.6 million related to the early redemption in full of $500.0 million outstanding aggregate principal amount of our 5.125% Senior Notes due 2021 and early repayment of secured debt obligations for three wide-body aircraft.

Income Tax Provision (Benefit) :

Our income tax benefit was $8.0 million for the year ended February 28, 2022 as compared to an income tax provision of $10.2 million for the year ended February 28, 2021.

The decrease in our income tax provision of $18.2 million was primarily attributable to changes in the mix of pre-tax book loss in Bermuda, Ireland, and the United States.

The year ended February 28, 2022 included certain net non-cash impairment charges of $158.4 million that were recorded in Ireland, resulting in a $19.8 million decrease in our tax provision.

The year ended February 28, 2021 included discrete items related to stock compensation and the impact of the CARES Act.

Aircraft Valuation

Impairment of Flight Equipment

Excluding impairment charges resulting from the Russian invasion of Ukraine, during the year ended February 28, 2022, the Company recorded impairment charges totaling $110.9 million, of which $107.7 million were transactional impairments.

These impairments primarily related to six narrow-body and one wide-body aircraft, and resulted from early lease terminations, a scheduled lease expiration, and a lessee default.

The Company recognized $61.4 million of maintenance revenue for these seven aircraft.

During the year ended February 28, 2022, the Company recorded impairment charges totaling $341.3 million related to ten narrow-body, one wide-body, and two freighter aircraft that were leased to Russian and Ukrainian airlines.

The Company recognized $89.4 million of lease rentals received in advance, maintenance, security deposits and other revenue for these thirteen aircraft.

These impairment charges resulted from the Russian invasion of Ukraine and related sanctions placed on Russia during the fourth quarter of 2021, which required the termination of aircraft leasing activities in Russia, as well as our consideration of the likelihood of successfully repossessing our aircraft including the related technical records and documentation.

During the year ended February 28, 2021, the Company recorded impairment charges totaling $425.6 million, of which $378.2 million were transactional impairments, which primarily related to seventeen narrow-body and eight wide-body aircraft.

The Company recognized $157.0 million of maintenance revenue and security deposits into revenue related to these 25 aircraft during the year ended February 28, 2021.

The impairment charges were attributable to early lease terminations, scheduled lease expirations, lessee defaults and/or judicial insolvency proceedings, or as a result of our annual recoverability assessment – refer to the section below for additional details.

During the year ended December 31, 2019, the Company recognized net maintenance revenue of $17.6 million related to the early lease terminations of seven narrow-body aircraft due to lessee default.

We recorded impairment charges of $7.4 million related to two of these seven narrow-body aircraft.

Annual Recoverability Assessment

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

Of the $425.6 million impairment charges recorded for the year ended February 28, 2021, we recorded $43.0 million related to one narrow-body and one wide-body aircraft as a result our annual recoverability assessment.

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

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

We performed our annual recoverability assessment of all our aircraft during the third quarter of 2021.

No impairments were recorded as a result of our annual recoverability assessment.

Although we have completed our annual recoverability assessment, we will continue to closely monitor the impacts of COVID-19 and the Russian invasion of Ukraine on our customers, air traffic, lease rental rates, and aircraft valuations, and have performed 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 have focused and will focus on our customers that have been significantly impacted by the above crises, entered judicial insolvency proceedings, and any additional customers that may become subject to similar-type proceedings, as well as aircraft with near-term lease expirations and certain aircraft variants that are more susceptible to the impact of the above crises 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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While we believe that the estimates and related assumptions used in the annual recoverability assessment, and subsequent assessments, are appropriate, actual results could differ from those estimates.

Comparison of the year ended December 31, 2019 to the year ended December 31, 2018:

We have omitted discussion of the earliest two of the four periods covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on February 13, 2020.

You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for the year ended December 31, 2019 to the year ended December 31, 2018.

Comparison of the year ended February 28, 2021, to the year ended December 31, 2019:

We have omitted discussion of the above two periods covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2021, filed with the SEC on April 21, 2021.

You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for the year ended February 28, 2021 to the year ended December 31, 2019.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Operating lease rentals that adjust based on a London Interbank Offered Rate (“LIBOR”) index are recognized on a straight-line basis over the lease term using the prevailing rate at lease commencement.

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

Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease, and the amount of the contracted rent will depend upon the type, age, specification and condition of the aircraft and market conditions at the time the lease is committed.

The amount of rent we receive will depend on a number of factors, including the creditworthiness of our lessees and the occurrence of delinquencies, restructurings and defaults.

Our lease rental revenues are also affected by the extent to which aircraft are off-lease and our ability to remarket aircraft that are nearing the end of their leases in order to minimize their off-lease time.

Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry conditions and trends.

An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.

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

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

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

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

Estimating whether collectability is probable requires some level of subjectivity and judgment.

Management determines whether customers should be placed back on accrual status when it becomes probable that payments will be received in a timely manner.

The accrual/non-accrual status of a customer is maintained at a level deemed appropriate based on factors such as the customer’s credit rating, payment performance, financial condition and requests for modifications of lease terms and conditions.

Events or circumstances outside of historical customer patterns can also result in changes to a customer’s accrual status.

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

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.

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.

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Typically, our aircraft are subject to net operating leases whereby the lessee pays lease rentals and is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs, although in a majority of cases, we are obligated to pay a portion of specified maintenance or modification costs.

The amount of rent we receive will depend on a number of factors, including the creditworthiness of our lessees and the occurrence of delinquencies, restructurings and defaults.

Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry conditions and trends.

An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.

Under an operating lease, the lessee will be responsible for performing maintenance on the relevant aircraft and will typically be required to make payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft.

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For maintenance payments made monthly in arrears during a lease term, we will typically be required to reimburse all or a portion of these payments to the lessee upon completion of the relevant heavy maintenance, overhaul or parts replacement.

We record maintenance payments paid by the lessee during a lease as accrued maintenance liabilities in recognition of our obligation in the lease to refund such payments, and therefore we typically do not recognize maintenance revenue during the lease.

maintenance revenue during the lease.

Maintenance revenue recognition would occur at or near the end of a lease, when we are able to determine the amount, if any, by which reserve payments received exceed the amount we are required under the lease to reimburse to the lessee for heavy maintenance, overhaul or parts replacement.

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Lease Incentives and Amortization

Many of our leases contain provisions which may require us to pay a portion of the lessee’s costs for heavy maintenance, overhaul or replacement of certain high-value components.

Many of our leases contain provisions that may require us to pay a portion of the lessee’s costs for heavy maintenance, overhaul or replacement of certain high-value components.

We account for these expected payments as lease incentives, which are amortized as a reduction of revenue over the life of the lease.

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In making these estimates, we rely upon actual industry experience with the same or similar aircraft types and our anticipated utilization of the aircraft.

As part of our due diligence review of each aircraft we purchase, we prepare an estimate of the expected

maintenance payments and any excess costs which may become payable by us, taking into consideration the then-current maintenance status of the aircraft and the relevant provisions of any existing lease.

As part of our due diligence review of each aircraft we purchase, we prepare an estimate of the expected maintenance payments and any excess costs which may become payable by us, taking into consideration the then-current maintenance status of the aircraft and the relevant provisions of any existing lease.

For planned major maintenance activities for aircraft off-lease, the Company capitalizes the actual maintenance costs by applying the deferral method.

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Impairment of Flight Equipment

We perform a recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis, at least annually.

In addition, a recoverability assessment is performed whenever events or changes in circumstances, or indicators, indicate 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 air traffic decline, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued.

We perform an annual recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis.

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

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

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

The undiscounted cash flows consist of cash flows from currently contracted leases, future projected lease rates, transition costs, estimated down time and estimated residual or scrap values for an aircraft.

The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft.

In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge.

See Note 3 in the Notes to the Consolidated Financial Statements.

Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources.

The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, residual values, economic conditions, technology, airline demand for a particular aircraft type and other risk factors discussed in Item 1A.

“Risk Factors.” See further discussion of our aircraft more susceptible to failing our recoverability assessment under “Summary of Recoverability Assessment and Other Impairments” above and “Fair Value Measurements” below.

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

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

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

Net Investment in Direct Financing and Sales-Type Leases

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

A provision for credit losses is recorded as a component of Selling, general, and

administrative expenses in our Consolidated Statements of Income (Loss) to adjust the allowance for changes to management’s estimate of expected credit losses.

A provision for credit losses is recorded as a component of operating expenses in

our Consolidated Statements of Income (Loss) to adjust the allowance for changes to management’s estimate of expected credit losses.

Fair Value Measurements

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RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Note 1 – Summary of Significant Accounting Policies - Organization and Basis of Presentation in the Notes to Consolidated Financial Statements below.

See Note 1 in the Notes to the Consolidated Financial Statements below.

RECENTLY PROPOSED ACCOUNTING PRONOUNCEMENTS

See Note 1 – Summary of Significant Accounting Policies - Proposed Accounting Pronouncements in the Notes to Consolidated Financial Statements below.

See Note 1 in the Notes to the Consolidated Financial Statements below.

LIQUIDITY AND CAPITAL RESOURCES

Our business is very capital intensive, requiring significant investments in order to expand our fleet and to maintain and improve our existing portfolio.

Our operations generate a significant amount of cash, primarily from lease rentals and maintenance collections.

Our operations have historically generated a significant amount of cash, primarily from lease rentals and maintenance collections.

We have also met our liquidity and capital resource needs by utilizing several sources over time, including:

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• asset sales;

• sales of common shares.

• sales of common and preference shares.

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

During the year ended February 28, 2021, we met our liquidity and capital resource needs with $175.0 million of cash flow from operations, $1.93 billion in gross proceeds from the issuance of our senior notes, bank debt and our revolving credit facilities and $180.3 million of cash from aircraft sales.

During the year ended February 28, 2022, we met our liquidity and capital resource needs with $372.9 million of cash flow from operations, $210.7 million of cash from the sale of aircraft and other flight equipment, and $393.0 million in net proceeds from our preference share issuance.

As of February 28, 2022, the weighted average maturity of our secured and unsecured debt financings was 3.1 years and we are in compliance with all applicable covenants in our financings.

We have also determined that as of February 28, 2022, our consolidated subsidiaries’ restricted net assets, as defined by Rule 4-08(e)(3) of Regulation S-X, are less than 25% of our consolidated net assets.

We have agreed to defer some near-term lease payments with certain of our airline customers.

As of April 15, 2021, we have agreed to defer approximately $108.4 million in near-term lease payments with 26 airlines, which these airline customers have agreed to repay over time.

If air traffic remains depressed over an extended period and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to extend further deferrals to some of our other customers or to extend the deferrals we have already made.

Even as the airline industry begins to recover from the COVID-19 pandemic, 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.

While we continued to receive requests from our customers for lease concessions, such as deferral 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 $55.5 million with nine customers that are scheduled to be repaid, on average, within the next seven years – see Note 2 in the Notes to the Consolidated Financial Statements for additional information.

If air traffic remains depressed over an extended period and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to provide further deferrals to certain customers to extend the deferrals we have previously granted.

We may ultimately be unable to collect all the amounts we have deferred.

As of February 28, 2022, we hold $69.2 million in security deposits, $459.7 million in maintenance payments and $142.4 million in letters of credit from our lessees.

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

Approximately $49.5 million of our letters of credit are with our Russian lessees, of which we have initiated draws for and received cash of $$25.4 million subsequent to February 28, 2022.

We believe we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of April 1, 2022, total liquidity of $2.1 billion includes $1.4 billion of undrawn credit facilities, $0.2 billion of unrestricted cash, $0.1 billion of contracted asset sales and $0.4 billion of projected adjusted operating cash flows through April 1, 2023.

In addition, we believe payments received from lessees and other funds generated from operations, unsecured bond offerings, secured borrowings for aircraft, borrowings under our revolving credit facilities and other borrowings and proceeds from future aircraft sales will be sufficient to satisfy our liquidity and capital resource needs over the next twelve months.

Our liquidity and capital resource needs include payments due under our aircraft purchase obligations, required principal and interest payments under our long-term debt facilities, expected capital expenditures, lessee maintenance payment reimbursements and lease incentive payments over the next twelve months.

February 28, December 31,

Year Ended February 28,

(Dollars in thousands)

Net cash flow provided by operating activities $ 372,865 $ 175,022

Net cash flow provided by (used in) investing activities 21,472 (784,029)

Net cash flow provided by financing activities 212,667 235,201

Net cash flow (used in) provided by investing activities (586,500) 21,472

Net cash flow (used in) provided by financing activities (196,281) 212,667

Operating Activities:

The COVID-19 pandemic has severely impacted the demand for air travel over the past twelve months, which has negatively impacted our customers’ financial performance.

The impact of the COVID-19 pandemic, together with lease concessions given to many of our airline customers in the form of lease rental deferrals, has resulted in slower cash collections during the year ended February 28, 2021.

Cash flow provided by operations was $175.0 million for the year ended February 28, 2021 compared to $536.4 million for the year ended December 31, 2019.

The decrease in cash flow provided by operations of $361.4 million was primarily a result of:

• a $121.6 million decrease in cash due to lower lease rental revenue resulting from early lease terminations and the recognition of lease rental revenue for certain customers using a cash basis of accounting rather than an accrual method;

• a $113.0 million decrease in cash resulting from an increase in accounts receivable and other assets, primarily due to deferred lease rentals;

• a $73.6 million decrease in cash resulting from advance lease rentals recognized into revenue, primarily due to lease terminations;

• a $32.6 million decrease in cash due to higher banking and legal costs resulting from the Merger.

The COVID-19 pandemic and related mitigation efforts has severely impacted the demand for air travel, which has negatively impacted our customers’ financial performance.

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.

Our cash flow from operating activities for the year ended February 28, 2022 includes the repayment of certain lease deferrals granted during 2020 at the onset of the pandemic.

Even as the airline industry begin to recover, we expect that our collections will remain under pressure due to the impact of COVID.

Cash flow provided by operating activities was $372.9 million for the year ended February 28, 2022 compared to $175.0 million for the year ended February 28, 2021.

The increase of $197.8 million was primarily attributable to:

• a $110.6 million decrease in accounts receivable and other assets, primarily due to an increase in customer collections, including the repayment of existing lease deferrals and a reduction in the requests for new deferrals as compared to the year ended February 28, 2021;

• a $55.2 million increase in cash resulting from the sale of unsecured claims related to the LATAM Bankruptcy – see Note 2 in the Notes to the Consolidated Financial Statements;

• a $32.6 million increase in cash as the year ended February 28, 2021 included banking and legal costs resulting from the Merger;

• a $30.2 million increase as the year ended February 28, 2021 included advance lease rentals recognized into revenue primarily due to lease terminations.

Investing Activities :

Cash flow provided by investing activities was $21.5 million for the year ended February 28, 2021 as compared to cash flow used in investing activities of $784.0 million for the year ended December 31, 2019.

The net decrease in cash flow provided by investing activities of $805.5 million for the year ended February 28, 2021 was primarily a result of a $1.03 billion decrease in the acquisition and improvement of flight equipment offset by a $181.4 million decrease in aircraft proceeds from the sale of flight equipment.

Cash flow used in investing activities was $586.5 million for the year ended February 28, 2022 as compared to cash flow provided by investing activities of $21.5 million for the year ended February 28, 2021.

The net increase in cash flow used in investing activities of $608.0 million for the year ended February 28, 2022 was primarily a result of a $649.8 million increase in the acquisition and improvement of flight equipment.

These outflows were partially offset by a $30.4 million increase in proceeds from the sale of flight equipment and a $12.8 million decrease in aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits.

Financing Activities :

Cash flow provided by financing activities was $212.7 million and $235.2 million for the years ended February 28, 2021 and December 31, 2019, respectively.

The decrease in cash flow provided by financing activities of $22.5 million for the year ended February 28, 2021 was primarily a result of a $183.9 million decrease in proceeds from secured and unsecured financings offset by a $119.9 million decrease in repayments of secured and unsecured financings and $11.2 million decrease in shares repurchased.

Cash flow used in financing activities was $196.3 million for the year ended February 28, 2022 as compared to cash flow provided by financing activities of $212.7 million for the year ended February 28, 2021.

The net increase in cash flow used in financing activities of $408.9 million for the year ended February 28, 2022 was primarily attributable to an $862.2 million decrease in proceeds from secured and unsecured debt financings, net of repayments.

These outflows were partially offset by a $393.0 million increase in net proceeds from the issuance of preference shares, a $46.3 million decrease in maintenance and security deposits returned, net of deposits received, and an $18.4 million decrease in dividends paid on common shares as a result of the Merger.

Debt Obligations

For complete information on our debt obligations, please refer to Note 7 – “Borrowings from Secured and Unsecured Debt” Financings in the Notes to Consolidated Financial Statements below.

For complete information on our debt obligations, please refer to Note 7.

Secured and Unsecured Debt Financings in the Notes to Consolidated Financial Statements below.

Contractual Obligations

Our contractual obligations consist of principal and interest payments on debt financings, aircraft acquisitions and rent payments pursuant to our office leases.

Total contractual obligations decreased to $6.82 billion at February 28, 2021 from $7.03 billion at December 31, 2019, due to a decrease in purchase obligations and principal payments for secured financings and borrowings under our revolving credit facilities, partially offset by an increase in principal payments for senior notes.

Total contractual obligations decreased to $6.0 billion at February 28, 2022 from $6.8 billion at February 28, 2021, primarily due to the redemption of all of the $500.0 million outstanding aggregate principal amount of our Senior Notes Due 2022.

The following table presents our actual contractual obligations and their payment due dates as of February 28, 2022.

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Revolving Credit Facilities

20,000 — 20,000 — —

ECA Financings

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Dublin, Ireland and Singapore.

(3) At February 28, 2021, we had commitments to acquire 25 new E-Jet E2 aircraft from Embraer S.A for $825.1 million.

(3) At February 28, 2022, we had signed purchase agreements to acquire 23 aircraft for $819.3 million.

These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments.

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These expenditures include the cost of major overhauls necessary to place an aircraft in service and modifications made at the request of lessees.

For the years ended February 28, 2021, and December 31, 2019 and 2018, we incurred a total of $26.6 million, $31.8 million and $9.3 million, respectively, of capital expenditures (including lease incentives) related to the acquisition and improvement of aircraft.

For the years ended February 28, 2022 and 2021, and December 31, 2019, we incurred a total of $46.6 million, $26.6 million and $31.8 million, respectively, of capital expenditures (including lease incentives) related to the acquisition and improvement of aircraft.

As of February 28, 2022, the weighted average age (by Net Book Value) of our aircraft was 10.2 years.

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

Actual maintenance payments to us by lessees in the future may be less than projected as a result of a number of factors, including defaults by the lessees.

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

Maintenance reserves may not cover the entire amount of actual maintenance expenses incurred and, where these expenses are not otherwise covered by the lessees, there can be no assurance that our operational cash flow and maintenance reserves will be sufficient to fund maintenance requirements, particularly as our aircraft age.

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The assets and liabilities of this entity are not included in our consolidated balance sheets and we record our net investment under the equity method of accounting.

See Note 5 – “Unconsolidated Equity Method Investment” in the Notes to Unaudited Consolidated Financial Statements below.

See Note 6 in the Notes to the Consolidated Financial Statements below.

We hold a 25% equity interest in our joint venture with Mizuho Leasing and as of February 28, 2022, the net book value of its nine aircraft was $298.5 million.

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dollar aggregated $17.7 million in U.S.

dollar equivalents and represented approximately 21.7% of total selling, general and administrative expenses (or 26.2% when excluding share-based compensation expense, of which a large portion relates to employees domiciled in the U.S.).

dollar equivalents and represented approximately 26.3% of total selling, general and administrative expenses.

Our international operations are a significant component of our business strategy and permit us to more effectively source new aircraft, service the aircraft we own and maintain contact with our lessees.

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Although we have not yet entered into foreign currency hedges because our exposure to date has not been significant, if our foreign currency exposure increases we may enter into hedging transactions in the future to mitigate this risk.

For the years ended February 28, 2021, and December 31, 2019 and 2018, we incurred insignificant net gains and losses on foreign currency transactions.

Inflation affects our lease rentals, asset values and costs, including SG&A expenses and other expenses.

For the years ended February 28, 2022 and 2021, and December 31, 2019, we incurred insignificant net gains and losses on foreign currency transactions.

Inflation affects our lease rentals, asset values and costs, including operating expenses and maintenance and other costs.

We do not believe that our financial results have been, or will be, adversely affected by inflation in a material way.

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Adjusted EBITDA is a material component of these covenants.

The table below shows the reconciliation of net income to EBITDA for the year ended February 28, 2021, the two months ended February 29, 2020, and for the years ended December 31, 2019 and 2018, respectively.

The table below shows the reconciliation of net income to EBITDA for the year ended February 28, 2022 and 2021, the two months ended February 29, 2020, and for the year ended December 31, 2019, respectively.

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

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Interest, net 214,352 235,338 41,038 258,070

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

Income tax provision (benefit) (7,998) 10,236 1,675 22,667

EBITDA $ 285,863 $ 282,765 $ 109,894 $ 815,969

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— 35,165 321 7,886

Loss (gain) on mark-to-market of interest rate derivative contracts 19 96 4,771 (1,632)

Loss on mark-to-market of interest rate derivative contracts — 19 96 4,771

Contract termination expense — 172 — —

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______________

(1) Includes $32.6 million in Other expense and $2.6 million in Selling, general and administrative expenses.

(1) Includes $32.6 million in Other income (expense) and $2.6 million in Selling, general and administrative expenses.

Limitations of EBITDA and Adjusted EBITDA

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

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

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

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

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GAAP financial measure.

We strongly urge you to

review the reconciliations to U.S.

GAAP net income (loss), along with our consolidated financial statements included elsewhere in this report.

We strongly urge you to review the reconciliations to U.S.

GAAP net income (loss), along with our consolidated financial statements included

elsewhere in this report.

We also strongly urge you to not rely on any single financial measure to evaluate our business.

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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 7. Management’s Discussion and Analysis