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Item 9A. Controls and Procedures

2022-04-28 compared with 2021-04-21 · 487 added, 561 removed, 1026 unchanged (51% of the section changed)

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Pursuant to Item 401(b) of Regulation S-K, the requisite information pertaining to our executive officers is reported immediately following Item 4 of Part I of this Annual Report.

The identification of our Audit Committee and our Audit Committee financial experts will be contained under the captions “CORPORATE GOVERNANCE - Committees of the Board of Directors - The Audit Committee” in our 2020 Proxy Statement to be filed in connection with our 2020 Annual Meeting (the “2020 Proxy Statement”) or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

Information regarding our Code of Business Ethics and Conduct, any material amendments thereto and any related waivers will be contained under the captions “CORPORATE GOVERNANCE - Code of Business Conduct and Ethics” in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

Any information required by Item 405 of Regulation S-K will be contained under the caption "OWNERSHIP OF THE COMPANY'S COMMON SHARES - Delinquent Section 16(a) Reports" in our 2020 Proxy Statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report.

All of the foregoing information is incorporated herein by reference.

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

The identification of our Audit Committee and our Audit Committee financial experts is posted on our website at www.aircastle.com under “ABOUT - COMMITTEE COMPOSITION” .

Information regarding our Code of Business Ethics and Conduct, any material amendments thereto and any related waivers is posted on our website at www.aircastle.com under “CORPORATE GOVERNANCE - GOVERNANCE DOCUMENTS”.

Information about our Directors .

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

The members of the board of directors of the Company (the “Board”) are Douglas A.

Hacker, Michael J.

Inglese, Takashi Kurihara, Charles W.

Pollard, Taro Kawabe, Takayuki Sakakida and Noriyuki Yukawa.

Inglese, Taro Kawabe, Takashi Kurihara, Charles W.

Pollard, Takayuki Sakakida and Noriyuki Yukawa.

Takashi Kurihara

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

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

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

Hacker to serve as the Chairman of SpartanNash Company.

Hacker serves as the Co-Chair of a series of open-end investment companies that are part of the Columbia family of mutual funds and as an independent director and Chair of the Board of Directors of SpartanNash Company.

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

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

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

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

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

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

Prior to that, Mr.

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From January 2017 to March 2019, Mr.

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

Prior to that, Mr.

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

Prior to that,

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

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

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

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

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

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

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

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

In December 2020, Mr.

Sakakida was appointed as Senior Advisor to the CEO of the Company.

In April 2019, Mr.

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

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

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

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

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Audit Committee of the Board of Directors .

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

Takashi Kurihara (Chairman), Noriyuki Yukawa and Douglas A.

Hacker were designated as members of the Audit Committee.

In addition, our Board has determined that Mr.

Hacker is qualified as an audit committee financial expert, under the SEC rules.

EXECUTIVE COMPENSATION

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Compensation Discussion and Analysis

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

Our 2021 fiscal year began on March 1, 2021 and ended on February 28, 2022.

All references herein to a year shall mean our fiscal year unless otherwise noted.

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

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

This Compensation Discussion and Analysis focuses on the compensation paid for our 2021 fiscal year to our current Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers, together referred to as our named executive officers (“NEOs”).

For 2021, our NEOs were:

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Pay for Performance Philosophy

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

We believe executive compensation should be tied to Company performance weighted in favor of long-term performance, and our compensation program for 2021 rewarded executives and employees in two areas:

• Annual Corporate Performance :

Achievement of internal corporate financial metrics focused on:

(i) adjusted return on equity;

(ii) cash flow per share;

and (iii) growth through new investments;

(i) profit before tax;

(ii) cash flow;

(iii) growth through new investments;

and (iv) discrete objectives (as described below);

• Individual Performance :

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

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

For 2021, we made an annual incentive compensation award in the form of a cash bonus, the payment of which was based on a mix of corporate performance and individual performance.

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

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

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

Results below the low end of each range would yield a minimum contribution of 50% to the Company’s incentive compensation pool for that metric.

Conversely, performance above target would result in an enhanced contribution to the Company’s incentive compensation pool, up to a 150% contribution at the upper end of the performance range for each metric.

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

Target Performance Range Weighted Score

Adjusted return on equity (1)

For 2021, we established the following targets, performance ranges and relative weightings for the corporate financial metrics:

(in millions) Performance Range Weighted Score

Profit before tax (1)

$ 23.0 50%-150% 20%

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$ 361.0 50%-150% 40%

Net investments (3) (in billions)

Net investments (3)

$ 800.0 50%-150% 20%

Discrete objectives (4)

— 50%-150% 20%

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

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

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

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

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

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

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

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

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(1) Profit before tax is Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments, plus earnings of unconsolidated equity method investments.

(2) Cash flow for a period is Cash Flow from Operations plus distributions from our joint venture investment, if any.

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

Individual and Functional Performance Goals and Compensation.

(4) Our discrete objectives are a qualitative rating based on our performance in maintaining our investment grade ratings, managing our assets and effectiveness on placements given the market environment.

Individual Performance Goals and Compensation.

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

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

For 2021, we determined incentive pay for each employee by applying the weighted corporate and individual performance metrics.

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

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

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

For 2021, our annual incentive compensation awards were paid out to our executive officers in the form of cash.

For additional retention purposes, we introduced a new long term incentive award program in 2021 – see below for further discussion regarding our new long term incentive program.

Compensation Overview

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

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

For 2021, there were three primary elements of total direct compensation:

base salary, annual cash bonus, and annual long term incentive award.

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

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

Annual Incentive Compensation .

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

We make an incentive compensation award in the form of a cash bonus based on the Company’s performance against corporate financial metrics and performance against individual performance goals.

Long-Term Incentive Plan .

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

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

In 2021, we introduced a new long term incentive (“LTI”) award program, in the form of cash awards, for our executive officers and certain other senior professionals.

The LTI awards are intended to enhance management retention by rewarding participants for exceptional performance over a three-year performance period using the internal rate of return with respect to the common shareholders’ equity book equity “Book Equity IRR”) Internal Rate of Return (“IRR”) as the measure of long-term performance.

Each fiscal year within the three-year performance period constitutes a performance year.

Our LTI awards are granted with a target award amount, whereby one-third of the target award relates to each performance year.

The annual award earned in respect of a given performance year is adjusted based on the Book Equity IRR achieved, which is calculated as the internal rate of return based on the change in our common shareholders’ equity.

The Book Equity IRR for each performance year is evaluated against a performance range in order to determine the target annual award earned.

The LTI awards yield a minimum payout of 50% and a maximum payout of 150% of the target annual award.

The LTI awards for our non-executive officers vest ratably over the three-year performance period subject to continued employment through each annual vesting date.

For maximum retention, our executive officers’ LTI awards cliff vest at the end of the three-year performance period subject to continued employment through such date.

Our LTI awards granted in May 2021 have the following performance range with results between the minimum and target and the maximum and target being interpolated on a linear basis.

Annual Performance Range for 2021 LTI Awards

Book Equity (IRR) % of Target Annual Award Earned

Equal to or greater than 6% 150%

Greater than 2.5% and less than 6% Interpolated

Equal to 0.5% through 2.5% 100%

Greater than -3.0% and less than 0.5% Interpolated

Less than or equal to -3.0% 50%

Actual Performance for 2021 .

The Russian invasion of Ukraine and resulting sanctions greatly impacted the global aviation industry and the Company’s financial performance.

We recorded net non-cash impairment changes of $252 million.

As a result of the impairment charges, the Book Equity IRR for 2021 was below the minimum target.

Therefore, the portion of those 2021 LTI awards related to the 2021 performance year were earned and accrued at 50%.

For our executive officers, these awards will vest on February 29, 2024.

Other Compensation .

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

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

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

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

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

Recoupment Policy .

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

The policy requires reimbursement of incentive payments awarded to an executive

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

The policy requires reimbursement of incentive payments awarded to an executive officer based upon financial results that were subsequently the subject of a restatement due to the Company’s material noncompliance with financial reporting requirements.

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

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

For our executive officers, we have designed a qualifying retirement feature that will allow the LTI awards to continue to vest following retirement, subject to satisfaction of the Book Equity IRR performance objectives.

For purposes of the LTI awards, a qualifying retirement means:

(a) a retirement date no earlier than March 27, 2024;

(b) the executive provides at least twelve months' notice;

(c) the executive is at least 55 years old on the date of retirement and (d) such individual is not an executive officer (or serving in any other senior commercial role) with certain competitors prior to the vesting date.

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

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Performance versus Corporate Financial Metrics .

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

Target Weighting 2020 Performance Performance Range Performance Weighted Score

Adjusted Return on Equity (1)

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

For 2021, the Company’s performance against its corporate financial metrics resulted in an incentive compensation pool equal to 95% of the total target, as shown in the table below.

Certain financial metrics, such as profit before tax, were impacted by the continuing effects of the COVID-19 pandemic on the commercial aviation industry, as well as the Russian invasion of Ukraine in late fiscal year 2021.

(in millions) Weighting 2021 Performance (in millions) Performance Range Performance Weighted Score

Profit before tax $ 23.0 20% $ 286.2 50% - 150% 50 % 10 %

Cash flow (1)

$ 361.0 40% $ 372.9 50% - 150% 111 % 44 %

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

New investments (in millions) $ 800.0 20% $ 763.3 50% - 150% 95 % 19 %

Discrete objectives — 20% — 50% - 150% 110 % 22 %

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

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

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

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

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

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

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

The Compensation Committee took the following actions related to fiscal year 2021 annual incentive compensation for our NEOs, which was determined solely based on corporate and individual performance levels.

Named Executive Officer 2021 Incentive Compensation

Pre-Merger Bonus Payable in Cash at Target

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

$337,500 cash

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

$133,333 cash

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

Inglese $729,375 cash

Dahlke $465,500 cash

$563,500 cash

Christopher L.

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

$563,500 cash

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

$465,500 cash

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

How We Make Decisions

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

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

Base salary is a fixed amount that does not encourage risk taking, and our annual incentive compensation program and LTI award program are both limited to a maximum payout of 150% of target.

Role of Executive Officers.

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

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

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

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

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

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Summary Compensation Table for 2021

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

The table below sets forth information regarding fiscal years 2021 and 2020, the Transition Period (“2020 (2mo)”) and 2019 compensation for each of our NEOs.

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

Long Term Incentive Plan (3)

Long Term Equity Incentive Plan (3)(6)

All Other Compensation (4)

Inglese 2021 (FY) $ 750,000 $ 678,060 $ — $ — $ 13,340 $ 1,441,400

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

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

Chief Executive Officer 2020 (FY) 675,000 1,076,868 — — 12,840 1,764,708

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

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

Dahlke 2021 (FY) $ 475,000 $ 300,240 $ — $ — $ 13,340 $ 788,580

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

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

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

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

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

Winter 2021 (FY) $ 575,000 $ 375,300 $ — $ — $ 13,508 $ 963,808

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

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

Chief Commercial Officer 2020 (FY) 500,000 506,803 — — 21,527 1,028,330

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

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

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Beers 2021 (FY) $ 575,000 $ 375,300 $ — $ — $ 13,987 $ 964,287

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

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

Chief Legal Officer & 2020 (FY) 500,000 506,803 — — 13,250 1,020,053

Secretary 2020 (2mo) 83,333 233,631 — — 2,208 319,172

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

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2021 (FY) $ 475,000 $ 300,240 $ — $ — $ 13,440 $ 788,680

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

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

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

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

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

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

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

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

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

The amounts reported in the Long-Term Equity Incentive Plan column for 2019 reflect, in part, the aggregate fair value on the grant date of the adjusted return on equity (“AROE”) performance share units (“PSUs”) and the total stockholder return (“TSR”) PSUs granted to our NEOs determined in accordance with FASB ASC Topic 718 based on the probable achievement of the applicable AROE and TSR performance conditions as of the grant date.

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

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Chandran $600,000.

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

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

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

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

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

(2) Bonus compensation consists of:

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

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

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

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

and (iii) the portion of 2019 bonus restricted cash awards vested in 2020 and 2021.

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

No Annual Equity Awards or Long Term Equity Incentive Plan awards were granted after 2019.

See Compensation Overview-Long Term Incentive Plan above for information regarding our new cash-based LTI awards granted for the first time in 2021.

Pursuant to SEC rules, amounts paid out to our NEOs with respect to our cash-based LTI awards will be reported in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table for the year earned, not the year granted

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

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Chandran was promoted to Chief Strategy Officer.

Stock Vested for 2020

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

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

(6) 2021 LTI awards granted to our NEOs, which vest on February 29, 2024, and in accordance with SEC rules are not reported in the Summary Compensation Table for 2021 as part of our 2021 compensation, were provided in the following target award amounts:

Inglese $2,500,000;

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Winter $1,000,000;

Christopher L.

Beers $1,000,000;

Roy Chandran 72,820 2,330,240

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

Chandran $600,000.

Grants of Plan-Based Awards for 2021

Estimated Possible Payouts under Non-Equity Incentive Plan Awards(1)

Name Grant Date Minimum ($) Target ($) Maximum ($)

Inglese May 20, 2021 $ 1,250,000 $ 2,500,000 $ 3,750,000

Dahlke May 20, 2021 300,000 600,000 900,000

Winter May 20, 2021 500,000 1,000,000 1,500,000

Christopher L.

Beers May 20, 2021 500,000 1,000,000 1,500,000

Roy Chandran May 20, 2021 300,000 600,000 900,000

Represents our new cash-based LTI awards granted to our NEOs in May 2021 which vest on February 29, 2024.

The LTI awards yield a minimum payout of 50% and a maximum payout of 150% of the target annual award.

See Compensation Overview – Long Term Incentive Plan above for information regarding our new cash-based LTI awards granted for the first time in 2021.

Employment Agreements with NEOs

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

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

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

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

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

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Cash Severance $ — $ — $ 1,500,000 $ 3,000,000 $ 1,500,000 $ — $ —

Pro-rata Bonus (assumes

February 27 termination) — — 750,000 750,000 750,000 — 750,000

COBRA Reimbursement — — 60,181 60,181 60,151 — 60,181

Vacation 80,769 80,769 80,769 80,769 80,769 80,769 80,769

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

Remainder of Restricted Cash

and LTI Awards (1)

— — 2,457,643 2,457,643 2,457,643 — 2,457,643

Cash Severance $ — $ — $ 950,000 $ 1,900,000 $ 950,000 $ — $ —

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Vacation 51,154 51,154 51,154 51,154 51,154 51,154 51,154

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

Remainder of Restricted Cash

and LTI Awards (1)

— — 634,907 634,907 634,907 — 634,907

Cash Severance $ — $ — $ 1,150,000 $ 2,300,000 $ 1,150,000 $ — $ —

3 unchanged sentences

Vacation 61,923 61,923 61,923 61,923 61,923 61,923 61,923

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

Remainder of Restricted Cash

and LTI Awards (1)

— — 1,001,967 1,001,967 1,001,967 — 1,001,967

Christopher L.

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Vacation 61,923 61,923 61,923 61,923 61,923 61,923 61,923

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

Remainder of Restricted Cash

and LTI Awards (1)

— — 1,001,967 1,001,967 1,001,967 — 1,001,967

Cash Severance $ — $ — $ 950,000 $ 1,900,000 $ 950,000 $ — $ —

3 unchanged sentences

Vacation 51,154 51,154 51,154 51,154 51,154 51,154 51,154

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

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

Remainder of Restricted Cash

and LTI Awards (1)

— — 634,907 634,907 634,907 — 634,907

_______________

(1) Includes the portion of 2019 bonus restricted cash awards vesting on February 28, 2022, the portion of 2020 bonus restricted cash awards vesting on March 1, 2023 and 2024, and the 2021 LTI awards vesting on February 29, 2024.

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

Under the employment agreements for our named executive officers:

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

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

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

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

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

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

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

(iv) accelerated vesting of any remaining LTI awards, payable within 60 days following the performance period or, if the NEO’s employment is terminated following a change in control event, within 60 days following the date of termination;

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

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

Employment Agreements with NEOs

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

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

Director Compensation

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

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

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

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

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

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

Name Fees Earned

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

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

Giovanni Bisignani 15,117 93,103 108,220

Cave 20,236 93,103 113,339

Hacker 34,455 93,103 127,558

Jun Horie (1)

Takashi Kurihara (1)

Merriman 21,079 93,103 114,182

Agnes Mura 18,550 93,103 111,653

Pollard 22,766 93,103 115,869

Takayuki Sakakida (1)

Ueberroth 40,472 93,103 133,575

_______________

(1) Our affiliated and management Directors, Messrs.

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

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

Name Fees Earned

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

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

Giovanni Bisignani 6,830 41,897 48,727

Cave 9,106 41,897 51,003

Director Compensation Table for 2021

The table below describes our compensation of Directors for the fiscal year ended February 28, 2022:

Name Fees Earned or Paid in Cash ($) Total ($)

Hacker $ 180,000 $ 180,000

Jun Horie (1)

Taro Kawabe (1)

Takashi Kurihara (1)

Merriman 9,486 41,897 51,383

Agnes Mura 8,317 41,897 50,214

Pollard 180,000 180,000

Takayuki Sakakida (1)

Ueberroth 9,486 41,897 51,383

Noriyuki Yukawa (1)

_______________

(1) Our affiliated and management Directors, Messrs.

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

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

Equity Compensation Plan Information .

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

Plan Category Number of securities to

be issued upon exercise

of outstanding options,

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

remaining available for

future issuance under

equity compensation plans

(excluding securities

reflected in column (a))

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Total 3,948,503

_______________

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

Security Ownership of Certain Beneficial Owners and Management .

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

Marubeni Corporation Shareholder Agreement Amendment and Limited Waiver

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

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

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

The Shareholder Agreement terminated upon completion of the Merger.

Merger Agreement with Affiliates of Marubeni and Mizuho Leasing

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

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

Parent is controlled by affiliates of Marubeni and Mizuho Leasing.

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

On April 26, 2021, we entered into an amendment that reduced the size of our revolving credit facility with Mizuho Bank Ltd., a related party, from $150,000 to $50,000 and extended its maturity date to July 30, 2022.

Mizuho Bank, Ltd.

is now a lender for our $1,000,000 revolving credit facility with a commitment in the amount of $100,000.

On December 6, 2021, the Company entered into a $100,000 senior unsecured revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party.

The facility bears interest at a rate of LIBOR plus 1.625%, matures on December 6, 2023, and requires the Company to have a minimum of $20,000 revolving credit outstanding throughout the term of the facility.

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

On December 9, 2021, we entered into a loan agreement to provide the joint venture with a $1,500 unsecured loan facility, which bears interest at a rate of LIBOR plus 2% and is payable on December 9, 2022.

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

During the year ended February 28, 2022, the Company incurred $5.0 million in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides certain management and administrative services to the Company.

The Company also entered into a parts management services and supply agreement with an affiliate of Marubeni under which we purchased parts totaling $5.9 million during the year ended February 28, 2022.

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

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

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

Pursuant to the terms of the Related Person Policy, the Audit Committee must review and approve in advance any transaction involving an affiliate or related party (as defined under Accounting Standards Codification Topic 850), in which the amount involved exceeds $5.0 million, other than those that are pre-approved pursuant to pre-approval guidelines or rules that may be established by the Audit Committee to cover specific categories of transactions, including the guidelines described below.

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

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Director Independence

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

Allen, Giovanni Bisignani, Michael J.

Cave, Douglas A.

Hacker, Jun Horie, Michael J.

Inglese, Takashi Kurihara, Ronald L.

Merriman, Agnes Mura, Charles W.

Pollard, Takayuki Sakakida, and Peter V.

The Board determined that Messrs.

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

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

In addition, the Board determined that all

members of the Audit (Messrs.

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

Hacker, Merriman, Pollard and Ms.

Mura) and Nominating and Corporate Governance Committees (Messrs.

Bisignani, Pollard, Ueberroth and Ms.

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

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

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

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

Hacker and Pollard to be independent and that Directors Messrs.

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

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

Kurihara and Yukawa) and Compensation Committees (Messrs.

Inglese and Kurihara) include non-independent Directors.

Our standing Risk and Governance, Audit and Compensation Committees include independent and non-independent Directors.

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

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

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

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

Twelve Months Ended February 28, 2021 Two

Months Ended February 29, 2020 (3)

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

The following summarizes the fees paid by us to EY for professional services rendered in the years ended February 28, 2022 and 2021:

Year Ended February 28,

Audit fees (1)

$ 2,230,600 $ 2,168,000

1,056,500 808,000

All other fees 5,200 5,200

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Report of Independent Registered Public Accounting Firm.

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

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

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

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

Consolidated Balance Sheets as of February 28, 2022 and 2021.

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019.

Consolidated Statements of Cash Flows for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019.

Consolidated Statements of Changes in Shareholders’ Equity for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019.

Notes to Consolidated Financial Statements.

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

3.5 Certificate of Designations, dated June 8, 2021 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 8, 2021).

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

333-134669) filed on July 25, 2006).

4.2 Indenture, dated as of April 4, 2012, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 5, 2012).

4.3 Indenture, dated as of November 30, 2012, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 30, 2012).

4.2 Amended and Restated Shareholder Agreement, dated as of February 18, 2015, by and between Aircastle Limited and Marubeni Corporation (incorporated by reference to Exhibit 4.8 to the Company’s Quarterly Report on Form 10-Q filed on May 6, 2015).

3 unchanged sentences

Morgan Securities LLC and RBC Capital Markets, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on December 6, 2013).

4.7 First Supplemental Indenture, dated as of December 5, 2013, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on December 6, 2013).

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

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

4.6 Fourth Supplemental Indenture, dated as of March 24, 2016, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on March 24, 2016).

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

Description of Exhibit

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

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

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

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

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

Description of Exhibit

4.12 Deposit Agreement, dated June 8, 2021, among Aircastle Limited, Computershare Inc.

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

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

8 unchanged sentences

10.7 Form of Employment Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on September 8, 2017).

10.8 Form of Amendment to Executive Employment Agreement.

10.8 Form of Amendment to Executive Employment Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Annual Report on Form 10-K filed on February 13, 2020) .

10.9 Form of Amended and Restated Indemnification Agreement with directors and officers (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 8, 2011).

5 unchanged sentences

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

Description of Exhibit

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

10.15 Form of Restricted Share Agreement for Certain Executive Officers Under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 4, 2014).

Description of Exhibit

10.16 Form of Non-Officer Director Restricted Share Agreement Under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on November 4, 2014).

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10.25 Amendment No.

5 to Purchase Agreement COM0270-15, dated as of April 19, 2018, by and between Aircastle Holding Corporation and Embrarer S.A.

5 to Purchase Agreement COM0270-15, dated as of April 19, 2018, by and between Aircastle Holding Corporation and Embraer S.A.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2018).

10.26 Amendment No.

6 to Purchase Agreement COM0270-15, dated as of June 29, 2018, by and between Aircastle Holding Corporation and Embrarer S.A.

6 to Purchase Agreement COM0270-15, dated as of June 29, 2018, by and between Aircastle Holding Corporation and Embraer S.A.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on November 1, 2018).

4 unchanged sentences

8 to Purchase Agreement COM0270-15, dated as of October 24, 2019, by and between Aircastle Holding Corporation and Embraer S.A .

(incorporated by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K filed on February 13, 2020) .

10.29 Amendment No.

9 to Purchase Agreement COM0270-15, dated as of August 28, 2020, by and between Aircastle Holding Corporation and Embraer S.A.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

10.30 Amendment No.

10 to Purchase Agreement COM0270-15, dated as of September 18, 2020, by and between Aircastle Holding Corporation and Embraer S.A.

(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

10.31 Amendment No.

11 to Purchase Agreement COM0270-15, dated as of December 4, 2020, by and between Aircastle Holding Corporation and Yaborã Indústria Aeronáutics S.A.

(incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

Description of Exhibit

10.32 Amendment No.

12 to Purchase Agreement COM0270-15, dated as of June 2, 2021, by and between Aircastle Holding Corporation and Yaborã Indústria Aeronáutics S.A.

(incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

10.33 Amendment No.

13 to Purchase Agreement COM0270-15, dated as of September 2, 2021, by and between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

10.34 Amendment No.

14 to Purchase Agreement COM0270-15, dated as of September 17, 2021, by and between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

10.35 Amendment No.

15 to Purchase Agreement COM0270-15, dated as of December 3, 2021, by and between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

10.36 Amendment No.

16 to Purchase Agreement COM0270-15, dated as of February 9, 2022, by and between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

10.37 Amendment No.

1 to Letter Agreement COM0271-15 in Purchase Agreement COM0270-15, dated as of November 11, 2016, by and between Aircastle Holding Corporation and Embraer S.A.

3 unchanged sentences

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

Description of Exhibit

10.39 Amendment No.

3 to Letter Agreement COM0271-15 in Purchase Agreement COM0270-15, dated as of February 23, 2018, by and between Aircastle Holding Corporation and Embrarer S.A.

3 to Letter Agreement COM0271-15 in Purchase Agreement COM0270-15, dated as of February 23, 2018, by and between Aircastle Holding Corporation and Embra er S.A.

(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2018).

10.40 Amendment No.

4 to Letter Agreement COM271-15 in Purchase Agreement COM0270-15, dated as of April 19, 2018, by and between Aircastle Holding Corporation and Embrarer S.A.

4 to Letter Agreement COM271-15 in Purchase Agreement COM0270-15, dated as of April 19, 2018, by and between Aircastle Holding Corporation and Embra er S.A.

(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 7, 2018).

1 unchanged sentence

5 to Letter Agreement COM0270-15, dated as of October 24, 2019, by and between Aircastle Holding Corporation and Embraer S.A.

(incorporated by reference to Exhibit 10.33 to the Company’s Annual Report on Form 10-K filed on February 13, 2020).

10.42 Amendment No.

6 to Letter Agreement COM0270-15, dated as of December 4, 2020, by and between Aircastle Holding Corporation and Yaborã Indústria Aeronáutics S.A.

(incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

10.43 Amendment No.

7 to Letter Agreement COM0270-15, dated as of December 3, 2021, by and between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

10.44 Notice and Consent COM0439-19, dated as of September 18, 2020, between Aircastle Holding Corporation, Embraer S.A.

and Yaborã Indústria Aeronáutics S.A.

(incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on October 13, 2021).

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

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21.1 Subsidiaries of the Subsidiaries of the Registrant .

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

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

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

Description of Exhibit

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

32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Certification of Chief Executive Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of 2002 .

32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Certification of Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Act of 2002 .

101 The following materials from the Company’s Annual Report on Form 10-K for the year ended February 28, 2022, formatted in iXBRL (Inline eXtensible Business Reporting Language):

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

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

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

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

(i) Consolidated Balance Sheets as of February 28, 2022 and 2021;

(ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019;

(iii) Consolidated Statements of Cash Flows for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019;

(iv) Consolidated Statements of Changes in Shareholders’ Equity for the years ended February 29, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019;

and (v) Notes to Consolidated Financial Statements*

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Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

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

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

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

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

Report of Independent Registered Public Accounting Firm (PCAOB ID 42 )

Consolidated Balance Sheets as of February 28, 2022 and February 28, 2021 F - 5

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019 F - 6

Consolidated Statements of Cash Flows for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019 F - 7

Consolidated Statements of Changes in Shareholders’ Equity for the years ended February 28, 2022 and 2021, two months ended February 29, 2020, and year ended December 31, 2019 F - 8

Notes to consolidated financial statements F - 9

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Opinion on the Financial Statements

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

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

We have audited the accompanying consolidated balance sheets of Aircastle Limited and Subsidiaries (the Company) as of February 28, 2022 and 2021, the related consolidated statements of income (loss), comprehensive income (loss), changes in shareholders' equity and cash flows for the years then ended, the two months ended February 29, 2020, and the year ended December 31, 2019, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at February 28, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, the two months ended February 29, 2020, and the year ended December 31, 2019, in conformity with U.S.

generally accepted accounting principles.

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

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

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

As a result of the assessments during the year ended February 28, 2022, the Company recorded impairment charges of $452 million related to the flight equipment held for lease.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As more fully described in Note 10 to the consolidated financial statements, the Company recognized a consolidated benefit for income taxes of $8 million for the year ended February 28, 2022.

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

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(Dollars in thousands, except share data)

February 28, February 29, December 31,

2021 2020 2019

Cash and cash equivalents $ 167,891 $ 578,004

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Net investment in leases, net of allowance for credit losses of $ 1,764 and $ 864 , respectively

150,325 195,376

Unconsolidated equity method investments 38,317 35,377

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SHAREHOLDERS’ EQUITY

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

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

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

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

Preference shares, $ 0.01 par value, 50,000,000 shares authorized, 400 (aggregate liquidation preference of $ 400,000 ) shares issued and outstanding at February 28, 2022 and no shares issued and outstanding at February 28, 2021

Common shares, $ 0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at February 28, 2022 and 2021

Additional paid-in capital 1,878,774 1,485,777

Retained earnings 245,293 578,461 605,269

Accumulated other comprehensive loss — — —

Retained earnings (accumulated deficit) ( 49,075 ) 245,293

Total shareholders’ equity 1,829,699 1,731,070

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66,338 88,413 22,901 77,034

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

Provision for credit losses 930 5,258 288 —

Impairment of flight equipment 452,250 425,579 62,657 7,404

Maintenance and other costs 31,166 20,005 1,703 24,828

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Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment ( 289,251 ) ( 325,258 ) 4,838 175,140

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

Earnings (loss) of unconsolidated equity method investment,

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

Earnings of unconsolidated equity method investment,

net of tax 3,044 2,326 496 4,102

Net income (loss) $ ( 278,209 ) $ ( 333,168 ) $ 3,659 $ 156,575

Preference share dividends ( 16,159 ) — — —

Net income (loss) available to common shareholders $ ( 294,368 ) $ ( 333,168 ) $ 3,659 $ 156,575

Net derivative loss reclassified into earnings — — — 184

Other comprehensive income — — — 184

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

Total comprehensive income (loss) available to common shareholders $ ( 294,368 ) $ ( 333,168 ) $ 3,659 $ 156,759

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

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Cash flow hedges reclassified into earnings — — — 184

Collections on direct financing and sales-type leases 16,859 5,658 25,842 —

Collections on net investments in leases 14,297 16,859 5,658 25,842

Security deposits and maintenance payments included in earnings ( 123,969 ) ( 135,115 ) ( 47,293 ) ( 49,029 )

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Proceeds from sale of flight equipment 210,718 180,342 103,679 361,747

Net investment in direct financing and sales-type leases — — — ( 15,783 )

Collections on direct financing and sales-type leases — — — 29,961

Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits ( 202 ) ( 13,024 ) ( 4,614 ) 760

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Parent contribution at Merger — 25,536 — —

Net proceeds from preference share issuance 392,997 — — —

Proceeds from secured and unsecured debt financings 20,000 1,932,943 100,000 2,116,848

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Net cash and restricted cash provided by (used in) financing activities ( 196,281 ) 212,667 ( 161,004 ) 235,201

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

Net (decrease) increase in cash and restricted cash ( 409,916 ) 409,161 15,994 ( 12,410 )

Cash and restricted cash at beginning of year 580,598 171,437 155,443 167,853

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(Dollars in thousands, except share amounts)

Common Shares Preference Shares Additional

Capital Retained

(Deficit) Accumulated

Comprehensive

Income (Loss) Total

Deficit) Accumulated Other Comprehensive Income (Loss) Total

Shareholders’

Common Shares

Shares Amount

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

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

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

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

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

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

Net income — — — 247,919 — 247,919

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

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

Shares Amount Shares Amount

Balance, December 31, 2018 75,454,511 $ 754 — $ — $ 1,468,779 $ 539,332 $ ( 184 ) $ 2,008,681

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

Issuance of preference shares — — 400 — 392,997 — — 392,997

Preference share dividends — — — — — ( 16,159 ) — ( 16,159 )

Net loss — — — — — ( 278,209 ) — ( 278,209 )

Balance, February 28, 2022 14,048 $ — 400 $ — $ 1,878,774 $ ( 49,075 ) $ — $ 1,829,699

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

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Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda exempted company that was incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act of 1981 of Bermuda.

Aircastle’s business is investing in aviation assets, including acquiring, leasing, managing and selling commercial jet aircraft.

Aircastle’s business is acquiring, leasing, managing and selling commercial jet aircraft.

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

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

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

Aircastle is a holding company that conducts its business through subsidiaries.

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

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

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

generally accepted accounting principles (“U.S.

The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment:

The Company manages, analyzes and reports on its business and results of operations based on one operating segment:

leasing, financing, selling and managing commercial flight equipment.

Our Chief Executive Officer is the chief operating decision maker.

Effective January 1, 2020, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 326, Financial Instruments - Credit Losses (“ASC 326”).

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

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

Net investment in leases comprised the Company’s financial asset principally affected by the standard.

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

Upon the Company’s adoption of ASC 326, our net investment in leases was recorded in the consolidated financial statements net of an allowance for credit losses.

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

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

Our allowance also considers the potential loss due to non-credit risk related to unguaranteed residual values.

We adopted the standard using the “modified retrospective” approach with a January 1, 2020 adjustment to retained earnings.

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

Effective January 1, 2020, the Company adopted the FASB Accounting Standard Update (“ASU”) No.

2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.

The standard modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.

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

Effective January 1, 2020, the Company adopted the FASB ASU No.

2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.

The standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use-software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.

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

Effective January 1, 2020, the Company adopted the FASB ASU No.

2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities.

The standard changes how all entities evaluate

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

decision-making fees under the variable interest entity guidance.

The standard is applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented.

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

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of February 28, 2022, through the date on which the consolidated financial statements included in this Annual Report were issued.

Principles of Consolidation

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

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

The consolidated financial statements include the accounts of Aircastle and all its subsidiaries, including any Variable Interest Entity (“VIE”) of which Aircastle is the primary beneficiary.

All intercompany transactions and balances have been eliminated in consolidation.

We consolidate VIEs in which we have determined that we are the primary beneficiary.

We use judgment when deciding (a) whether an entity is subject to consolidation as a VIE, (b) who the variable interest holders are, (c) the potential expected losses and residual returns of the variable interest holders, and (d) which variable interest holder is the primary beneficiary.

When determining which enterprise is the primary beneficiary, we consider (1) the entity’s purpose and design, (2) which variable interest holder has the power to direct the activities that most significantly impact the entity’s economic performance, and (3) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE.

When certain events occur, we reconsider whether we are the primary beneficiary of VIEs.

We do not reconsider whether we are a primary beneficiary solely because of operating losses incurred by an entity.

Risk and Uncertainties

In the normal course of business, Aircastle encounters several significant types of economic risk including credit, market, aviation industry and capital market risks.

Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations.

Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations to Aircastle.

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

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

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

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

Use of Estimates

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GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

While Aircastle believes that the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

While Aircastle believes the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

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

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

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

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

Flight Equipment Held for Lease and Depreciation

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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 annually during the second quarter.

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

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

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 lease rental and maintenance payments, future projected lease rates, transition costs, estimated down time, estimated residual or scrap values for an aircraft, economic conditions and other factors.

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 2 – Fair Value Measurements.

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

The factors considered in estimating the

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

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors.

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

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

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 entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain other customers or 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 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 to adjust the allowance for changes to management’s estimate of expected credit losses.

Unconsolidated Equity Method Investment

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These maintenance payments are based on hours or cycles of utilization or on calendar time, depending upon the component, and are required to be made monthly in arrears or at the end of the lease term.

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

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

Whether to permit a lessee to make maintenance payments at the end of the lease term, rather than requiring such payments to be made monthly,

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

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

depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease.

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

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

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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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We did not have any unrecognized tax benefits.

Fair value measurements

Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We measure the fair value of our cash and cash equivalents and restricted cash and cash equivalents on a recurring basis and measure the fair value of our investment in

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

unconsolidated joint ventures and aircraft on a non-recurring basis.

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

Lease Revenue Recognition

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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

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

term using the prevailing rate at lease commencement.

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

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

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

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

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.

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

As a result of COVID-19, there has been a dramatic slowdown in air traffic, with many markets in near complete shutdown.

According to the International Air Transport Association (“IATA”), as of February 2021, air travel was down to approximately 30 % of normal levels and a full recovery to pre-pandemic levels is not expected for several years.

Substantially all the world’s airlines are experiencing financial difficulties and liquidity challenges.

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

the extent and duration of which cannot currently be determined.

Airlines have been seeking to preserve liquidity through a combination of requesting government support, raising debt and equity, delaying or canceling new aircraft orders, furloughing employees, as well as requesting deferrals from lessors.

We have agreed to defer near-term lease payments with certain of our airline customers, which they are obliged to repay over time.

As of April 15, 2021, we have agreed to defer approximately $ 108,400 in near-term lease payments of which approximately $ 87,400 are included in Accounts receivable or Other assets as of February 28, 2021.

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

These deferrals have been agreed to with 26 airlines, representing 35 % of our customer base, for an average deferral of five months of lease rentals.

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

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

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

As of April 15, 2021, seven of our customers are subject to judicial insolvency proceedings or similar protection.

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

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

Based on historic experience, the judicial process can take anywhere from twelve months to eighteen months to be resolved.

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

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

Comprehensive Income (Loss)

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GAAP, are excluded from net income (loss).

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Share-Based Compensation

4 unchanged sentences

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No.

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

The standard applies to entities that have contracts, such as debt agreements, lease agreements or derivative instruments, which reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

Entities can elect not to apply certain modification accounting requirements for contract modifications that replace a reference rate affected by reference rate reform.

If elected, such contracts are accounted for as a continuation of the existing contract and no reassessments or re-measurements are required.

The standard is effective for all entities from March 12, 2020 through December 31, 2022 and does not apply to contract modifications made after December 31, 2022.

We have not adopted ASC 848 and are currently evaluating the election available to us under the standard and the impact it may have on our financial statements.

In April 2020, the FASB Staff issued a question-and-answer document (the “Q&A”) regarding accounting for lease concessions related to the effects of the COVID-19 pandemic.

The Q&A provides that entities may elect to apply or not apply the lease modification guidance in ASC 842, “Leases,” for lease concessions provided by lessors as a result of the COVID-19 pandemic.

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

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform Topic 848 (“ASC 848”), in response to the market transition from the LIBOR and other interbank offered rates (“IBORs”) to alternative reference rates.

GAAP requires entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract.

ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform.

The standard provides this temporary election through December 31, 2022, and cannot be applied to contract modifications that occur after December 31, 2022.

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

As of February 28, 2022, we have only one aircraft with a floating-rate lease rental and for the year ended February 28, 2022, 4 % of our interest expense was derived from floating-rate debt which is referenced to LIBOR.

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

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

The guidance aims to simplify the accounting for income taxes by removing certain

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

exceptions to the general principles within the current guidance and by clarifying and amending the current guidance.

The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020.

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

Update on COVID-19 Pandemic and Russian Invasion of Ukraine

COVID-19 Pandemic

The COVID-19 pandemic and related mitigation efforts has 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 certain markets, according to IATA, as of February 28, 2022, air travel was still down 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 vaccination efforts and the continued easing of widespread 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, 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 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 consideration in exchange for near-term economic concessions.

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

If air traffic remains depressed and our customers are unable to raise sufficient funds, we may need to grant additional deferrals 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 25, 2022, four of our customers are subject to judicial insolvency proceedings or similar protection.

These customers lease eighteen aircraft, which comprise 12 % of our Net Book Value and 9 % of our lease rental and direct financing and sales-type lease 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 have signed restructured leases for all thirteen of our LATAM aircraft, subject only to LATAM emerging from the Chapter 11 process.

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

and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A.

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

The allowed amount of our unsecured claims was approved by the Bankruptcy Court and proceeds from the sales of these claims in the amount of $ 55,213 were received during the second quarter of 2021 and recognized in other income (expense).

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

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

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

Russian Invasion of Ukraine

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.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 $ 251,878 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 for our former Russian lessees were approximately $ 3,488 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 $ 49,502 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 $ 350,000 .

The ten aircraft that are not in our possession had a pre-impairment book value of $ 314,127 .

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.

Fair Value Measurements

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(Dollars in thousands, except per share amounts)

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

The following tables set forth our financial assets and liabilities as of February 28, 2022 and 2021, that we measured at fair value on a recurring basis by level within the fair value hierarchy.

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

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

Derivative assets 19 — 19 — Market

Total $ 580,598 $ 580,598 $ — $ —

2019 Fair Value Measurements at December 31, 2019

Using Fair Value Hierarchy

Level 1 Level 2 Level 3 Valuation

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

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

Derivative assets 115 — 115 — Market

Total $ 155,558 $ 155,443 $ 115 $ —

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

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

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

Our interest rate derivative included in Level 2 consists of United States dollar-denominated interest rate cap, and its fair value is based on the market comparisons for similar instruments.

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

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

For the years ended February 28, 2022 and 2021, we had no transfers into or out of Level 3.

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

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Fair value measurements for aircraft in impairment tests are based on the average of the market approach that uses Level 2 inputs, which include third party appraisal data and an income approach that uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

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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 $ 110,926 , of which $ 107,705 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 $ 61,414 of maintenance revenue for these seven aircraft.

During the year ended February 28, 2022, the Company recorded impairment charges totaling $ 341,324 related to ten narrow-body, one wide-body, and two freighter aircraft that were leased to Russian and Ukrainian airlines.

The Company recognized $ 89,446 of lease rentals received in advance, maintenance, security deposits and other revenue for

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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 $ 425,579 , of which $ 378,247 were transactional impairments, which primarily related to seventeen narrow-body and eight wide-body aircraft.

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

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

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

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

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

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

We did not record any transactional impairments during 2018.

Annual Recoverability Assessment

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

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

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

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

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

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 – see the discussion above for further detail regarding transactional impairment charges recorded during the year ended February 28, 2022.

Although we have completed our annual recoverability assessment, we will 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 have focused 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 other customers or 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 estimated undiscounted future cash flows.

We develop the assumptions used in the recoverability assessment, including those relating to current and future demand for each aircraft type, based on management’s experience in the aircraft leasing industry, as well as information received from third-party sources.

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If our estimates or assumptions change, including those related to our customers that have entered judicial insolvency proceedings, we may revise our cash flow assumptions and record future impairment charges.

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

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

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, amounts borrowed under financings and interest rate derivatives.

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

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, and amounts borrowed under financings.

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

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

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

Aircastle Limited and Subsidiaries

1 unchanged sentence

(Dollars in thousands, except per share amounts)

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

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

The carrying amounts and fair values of our financial instruments at February 28, 2021, February 29, 2020 and December 31, 2019 are as follows:

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

The carrying amounts and fair values of our financial instruments at February 28, 2022 and 2021, are as follows:

February 28, 2022 February 28, 2021

Carrying Amount

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of Liability Fair Value

of Liability Carrying Amount

of Liability Fair Value

Credit Facilities $ 20,000 $ 20,000 $ — $ —

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

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

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

Region 2022 2021 2020 2019

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

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

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

2022 2021 2020 2019

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Largest lessees by lease rental revenue (1)

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

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

6 38 % 4 30 % 3 21 % 2 16 %

Country Revenue % of

Revenue Revenue % of

______________

99,522 12 % — — % 115,865 13 % — — %

Indonesia (3)

— — % 25,373 13 % — — % — —

89,314 11 % — — % — — % — —

South Africa (5)

— — % 50,781 26 % — — % — —

______________

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

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

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

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

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

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

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

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

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

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

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

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

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

(1) The number of lessees and combined percentage for the year ended February 28, 2022 includes one of our Russian lessees, which accounted for 5 % of total lease rental revenue.

Lease rental revenue for this customer includes the recognition of lease rentals received in advance of $ 17,194 into revenue;

excluding this amount, this customer accounted for 2 % of total lease rental revenue.

For the year ended February 28, 2022, we had six Russian lessees that accounted for $ 129,703 , or 17 %, of our total revenue.

Total revenue from these lessees included $ 89,446 of lease rentals received in advance, maintenance, security deposits and other revenue resulting from the sanctions placed on Russia, which required the termination of leasing activities.

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

For the year ended February 28, 2022, total revenue attributable to India was $ 82,246 , or 11 %, and included maintenance and other revenue, including early lease termination fees, totaling $ 6,141 .

For the years ended February 28, 2021 and December 31, 2019, total revenue attributable to India was 12 % and 13 %, respectively.

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

Geographic concentration of our Net Book Value of flight equipment was as follows:

February 28, 2022 February 28, 2021

Region Number of

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Aircraft Net Book

Value % Number of

Aircraft Net Book

Asia and Pacific 71 32 % 79 37 %

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Total 251 100 % 252 100 %

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

______________

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

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

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

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

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

(1) 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.

(2) 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 following table sets forth Net Book Value of flight equipment attributable to individual countries representing at least 10% of Net Book Value of flight equipment based on each lessee’s principal place of business as of:

February 28, 2022 February 28, 2021

Region Net Book

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Value % Number

Lessees Net Book

Value Net Book

Value % Number

India $ 670,523 10 % 3 $ 756,514 11 % 3

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

At February 28, 2022 and 2021, the amounts of lease incentive liabilities recorded in maintenance payments on the consolidated balance sheets were $ 16,481 and $ 14,673 , respectively.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Net Investment in Direct Financing and Sales-Type Leases

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

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

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

At February 28, 2022 and 2021, our net investment in leases consisted of eleven and fifteen aircraft, respectively.

The components of our net investment in leases at February 28, 2022 and 2021 were as follows:

Lease receivable $ 52,021 $ 67,075

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Net investment in leases, net of allowance $ 150,325 $ 195,376

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

Balance at December 31, 2019 $ —

Adoption of accounting standard 6,270

The activity in the allowance for credit losses related to our net investment in leases for the years ended February 28, 2022 and 2021 is as follows:

Balance at February 29, 2020 $ 6,558

Provision for credit losses 5,258

Write-offs ( 10,952 )

Balance at February 28, 2021 864

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Balance at February 28, 2022 $ 1,764

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

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

During the year ended February 28, 2022, we sold five aircraft that were classified as net investment in direct financing and sales-type leases and wrote-off the corresponding allowance for credit losses.

At February 28, 2022, future lease payments on net investment in leases are as follows:

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Difference between undiscounted lease payments and lease receivable $ 9,329

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Unconsolidated Equity Method Investment

We have a joint venture with Mizuho Leasing that has nine aircraft with a net book value of $ 298,473 at February 28, 2022.

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

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

Distributions ( 419 )

Earnings from joint venture, net of tax 2,326

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Investment in joint ventures at February 28, 2022 $ 38,317

Variable Interest Entities

Aircastle consolidates two VIEs (the “Air Knight VIEs”), of which it is the primary beneficiary.

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

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

In June 2020, the leases of the four aircraft subject to the ECA Financings were formally terminated and the aircraft were released as security under such financings.

The only assets that the Air Knight VIEs have on their books are net investments in leases that are eliminated in the consolidated financial statements.

The related aircraft, with a net book value as of February 28, 2021 of $ 89,320 , were included in our flight equipment held for lease.

The consolidated debt outstanding, net of debt issuance costs, of the Air Knight VIEs as of February 28, 2021 is $ 36,058 .

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

On December 9, 2021, we entered into a loan agreement to provide the joint venture with a $ 1,500 unsecured loan facility, which bears interest at a rate of LIBOR plus 2 % and is payable on December 9, 2022.

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

Borrowings from Secured and Unsecured Debt Financings

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At February 28, 2022 At

February 29, 2020 At

December 31, 2019

February 28, 2021

Debt Obligation Outstanding

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Maturity Outstanding

Borrowings Outstanding

Secured Debt Financings:

ECA Financings (1)

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

Bank Financings (2)

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

$ 21,576 1 3.49 % 11/30/24 $ 36,423

Bank Financings 666,258 31 2.25% to 4.55% 06/17/23 to 03/06/25 738,353

Debt Issuance Costs ( 3,795 ) ( 5,926 )

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Senior Notes due 2022 — 5.50 % 02/15/22 500,000

— 7.625 % 04/15/20 300,000 300,000

Senior 5.00% Notes due 2023 500,000 5.00 % 04/01/23 500,000

— 5.125 % 03/15/21 500,000 500,000

Senior 4.40% Notes due 2023 650,000 4.40 % 09/25/23 650,000

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Senior Notes due 2028 750,000 2.85 % 01/26/28 750,000

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

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

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

Unsecured Term Loan 155,000 1.753 % 02/27/24 215,000

Revolving Credit Facilities 20,000 1.625% to 2.25% 06/27/22 to 04/26/25 —

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_______________

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

During February 2020, the Company repaid the ECA Financings for four aircraft owned by the Air Knight VIEs, which were released as security for such financings during the second quarter of 2020 – see Note 6.

(1) The borrowings under these financings at February 28, 2022 have a weighted-average fixed rate of interest of 3.23 %.

(3) Repaid on April 15, 2020.

(4) Repaid on February 25, 2021.

Secured Debt Financings:

Bank Financings

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

Aircastle Limited and Subsidiaries

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Unsecured Debt Financings:

Senior Notes due 2020

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

Senior Notes due 2025

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

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

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

Senior Notes due 2028 and 2021

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

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

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

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

Revolving Credit Facility

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

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

Revolving Credit Facilities

During the year ended February 28, 2022, we entered into various amendments for one of our unsecured revolving credit facilities that, among other things, expanded the size of the facility and split the commitment into two tranches.

As a result, the existing $ 300,000 commitment was expanded to $ 365,000 , with $ 135,000 and $ 230,000 of the commitment allocated to Tranche A and Tranche B, respectively.

Tranche A matured on the facility’s previously stated maturity date of December 27, 2021 and Tranche B will mature on February 28, 2023.

On April 26, 2021, we entered into an amendment that increased the size of one of our revolving credit facilities from $ 800,000 to $ 1,000,000 .

The stated maturity date for $ 900,000 of the total commitment was extended to April 26, 2025, and the remaining $ 100,000 commitment will mature on the facility’s previously stated maturity date of June 27, 2022.

On April 26, 2021, we entered into an amendment that reduced the size of our revolving credit facility with Mizuho Bank Ltd., a related party, from $ 150,000 to $ 50,000 and extended its maturity date to July 30, 2022.

Mizuho Bank, Ltd.

is now a lender for our $ 1,000,000 revolving credit facility with a commitment in the amount of $ 100,000 .

On December 6, 2021, the Company entered into a $ 100,000 senior unsecured revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party.

The facility bears interest at a rate of LIBOR plus 1.625 %, matures on December 6, 2023, and requires the Company to have a minimum of $ 20,000 revolving credit outstanding throughout the term of the facility.

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

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

As of February 28, 2022, we had $ 20,000 in borrowings outstanding under our revolving credit facilities and had $ 1,360,000 available for borrowing.

Unsecured Term Loan

On February 18, 2022, we repaid Tranche A of our unsecured term loan in the amount of $ 60,000 .

Senior Notes due 2022

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

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

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As of February 28, 2022, we were in compliance with all applicable covenants in our financings.

Shareholders’ Equity and Share-Based Payment

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

In December 2019, the Company accelerated the vesting of certain restricted common share awards and the vesting and payment of certain Performance Share Units (“PSUs”) held by the Company’s executive officers, initially granted under the Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan.

Share-based compensation expense of

Shareholders’ Equity

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

The Preference Shares are perpetual and have no maturity date.

Aircastle Limited and Subsidiaries

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(Dollars in thousands, except per share amounts)

$ 914 related to restricted common shares and $ 4,247 related to PSUs represents the cost of this accelerated vesting from March 1, 2020 through the Merger Date.

As per the Agreement and Plan of Merger, dated as of November 5, 2019 (the “Merger Agreement”), on the Merger Date, the Company paid $ 4,063 and $ 21,473 representing the payment for 126,971 unvested restricted common shares and 671,030 unvested PSUs, respectively.

Concurrently, the Company received $ 25,536 from MM Air Limited, which was recorded as an additional paid-in-capital as of the Merger Date.

Included in share-based compensation expense for the year ended February 28, 2021 is $ 3,921 and $ 18,967 related to remaining outstanding restricted common shares and remaining outstanding PSUs, respectively, that were accelerated and paid out (in the case of PSUs, at the maximum level of performance) in accordance with the Merger Agreement.

On February 13, 2020, the Company declared a dividend of $ 0.32 per common share and paid $ 24,025 on March 6, 2020, to all shareholders of record as of February 28, 2020.

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

Dividends will be payable:

(i) from the date of original issue to, but excluding September 15, 2026 (the “original reset date”) at a fixed rate per annum of 5.250 %;

(ii) from, and including, the original reset date to, but excluding, September 15, 2031 (the “2031 reset date”), at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.410 %;

(iii) from, and including, the 2031 reset date to, but excluding, September 15, 2046 (the “2046 reset date”), during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.660 %;

and (iv) from, and including, the 2046 reset date, during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 5.410 %.

Dividends on the Preference Shares will accumulate daily and be cumulative from, and including, the date of original issuance of the Preference Shares.

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

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

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

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

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

Additionally, on January 6, 2022, the Company’s Board of Directors approved a quarterly dividend for the Company’s Preference Shares in the amount of $ 10,500 , which was paid on March 15, 2022.

Related Party Transactions

On April 10, 2020, we sold two engines to Magellan Aviation Group LLLP, an affiliate of Marubeni, for $ 5,355 for a minimal gain.

On April 26, 2021, the Company entered into an amendment that reduced the size and extended the term of our unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 7 in the Notes to the Consolidated Financial Statements for additional information.

On December 6, 2021, the Company entered into a $ 100,000 senior unsecured revolving credit facility with Mizuho Marubeni Leasing America Corporation, a related party – see Note 7 in the Notes to the Consolidated Financial Statements for additional information.

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

On July 30, 2020, the Company entered into a $ 150,000 unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 7 for additional information.

On February 24, 2021, the Company entered into an intra-company service agreement with Marubeni, whereby Marubeni will provide management services, strategy consultancy, and general administrative support to the Company for an annual fee of $ 1,680 .

During the year ended February 28, 2022, the Company incurred $ 5,048 in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides certain management and administrative services to the Company.

The Company also entered into a parts management services and supply agreement with an affiliate of Marubeni under which we purchased parts totaling $ 5,857 during the year ended February 28, 2022.

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned.

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

The sources of income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, were as follows:

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The sources of income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019, were as follows:

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

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Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment $ ( 289,251 ) $ ( 325,258 ) $ 4,838 $ 175,140

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The components of the income tax provision from continuing operations for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, consisted of the following:

The components of the income tax provision (benefit) from continuing operations for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019, consisted of the following:

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

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( 16,185 ) 1,757 ( 687 ) 11,000

Deferred income tax provision (benefit) 6,505 1,452 20,223 ( 496 )

Deferred income tax (benefit) ( 9,386 ) 6,505 1,452 20,223

Total $ ( 7,998 ) $ 10,236 $ 1,675 $ 22,667

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2021, February 29, 2020, and December 31, 2019 and 2018, consisted of the following:

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2022 and 2021, February 29, 2020, and December 31, 2019, consisted of the following:

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

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Net deferred tax liabilities $ ( 65,553 ) $ ( 74,487 ) $ ( 65,292 ) $ ( 63,667 )

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

The Company had $ 102,435 of federal net operating loss (“NOL”) carry forwards available at February 28, 2022 to offset future taxable income subject to U.S.

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Withholding tax of $ 2,002 would be due if such earnings were remitted.

Aircastle Limited and Subsidiaries

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share amounts)

Our aircraft-owning subsidiaries that are recognized as corporations for U.S.

tax purposes are primarily non-U.S.

corporations.

These subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S.

Our aircraft-owning subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S.

federal, state or local income taxes.

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

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

are subject to tax in those respective jurisdictions.

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subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, consisted of the following:

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019, consisted of the following:

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

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Other 71 ( 4,708 ) — 339

Provision for income taxes $ 10,236 $ 1,675 $ 22,667 $ 5,642

Provision (benefit) for income taxes $ ( 7,998 ) $ 10,236 $ 1,675 $ 22,667

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities.

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Interest, Net

The following table shows the components of interest, net for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018:

The following table shows the components of interest, net.

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

2022 2021 2020 2019

Interest on borrowings, net settlements on interest rate derivatives, and other liabilities $ 221,246 $ 38,915 $ 245,673 $ 221,987

Interest on borrowings and other liabilities $ 200,220 $ 221,246 $ 38,915 $ 245,673

Amortization of deferred losses related to interest rate derivatives — — — 184

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Commitments and Contingencies

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 1,626 , $ 278 , $ 1,601 and $ 2,865 for the year ended February 28, 2021, the two months ended February 29, 2020, and the years ended December 31, 2019 and 2018, respectively.

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 1,621 , $ 1,626 , $ 278 and $ 1,601 for the years ended February 28, 2022 and 2021, the two months ended February 29, 2020, and the year ended December 31, 2019, respectively.

As of February 28, 2022, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut;

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Total $ 11,323

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

for $ 825,119 .

Remaining commitments, including $ 101,933 of progress payments, contractual price escalations and other adjustments for these aircraft at February 28, 2021, net of amounts already paid, are as follows:

At February 28, 2022, we had commitments to acquire 23 for $ 819,273 .

Commitments under signed purchase agreements, including $ 76,675 of remaining progress payments, contractual price escalations and other adjustments for these aircraft at February 28, 2022, net of amounts already paid, are as follows:

Year Ending February 28/29, Amount

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Total $ 819,273

As of April 15, 2021, we have commitments to acquire 25 aircraft for $ 825,119 .

Aircastle Limited and Subsidiaries

2 unchanged sentences

The following table describes the principal components of other assets on our consolidated balance sheets as of:

February 28, February 29, December 31,

2021 2020 2019

Deferred income tax asset $ 570 $ 637

Lease incentives and premiums, net of accumulated amortization of $ 81,553 and $ 75,126 , respectively

53,513 75,169

Flight equipment held for sale 77,636 53,289

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Right-of-use asset (1)

8,056 9,148 9,329

Deferred rent receivable 55,478 69,103

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The following table describes the principal components of accounts payable, accrued expenses and other liabilities recorded on our consolidated balance sheets as of:

February 28, February 29, December 31,

2021 2020 2019

Accounts payable and accrued expenses $ 58,882 $ 43,088

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/s/ Aaron Dahlke Chief Financial Officer April 28, 2022

Connelly Chief Accounting Officer April 21, 2021

/s/ Dane Silverman Chief Accounting Officer April 28, 2022

Dane Silverman

/s/ Takashi Kurihara Chairman of the Board April 28, 2022

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures