Aircastle LTD 10-K

ITEM 9A. CONTROLS AND PROCEDURES Management’s Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure. An evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the Company’s disclosure controls and procedures as of February 28, 2022. Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of February 28, 2022. Management’s Annual Report on Internal Control over Financial Reporting The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an assessment of the effectiveness of our internal control over financial reporting as of February 28, 2022. The assessment was based on criteria established in the Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on this assessment, management concluded that our internal control over financial reporting was effective as of February 28, 2022. Changes in Internal Control over Financial Reporting There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended February 28, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ITEM 9B. OTHER INFORMATION None. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS None. 46 PART III ITEM 10. 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 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 . The members of the board of directors of the Company (the “Board”) are Douglas A. Hacker, Michael J. Inglese, Taro Kawabe, Takashi Kurihara, Charles W. Pollard, Takayuki Sakakida and Noriyuki Yukawa. Name Age Douglas A. Hacker 66 Michael J. Inglese 61 Taro Kawabe 54 Takashi Kurihara 61 Charles W. Pollard 64 Takayuki Sakakida 50 Noriyuki Yukawa 63 Douglas A. Hacker was appointed to our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from August 2, 2006 to the consummation of the Merger. Mr. Hacker is currently an independent business executive and formerly served as Executive Vice President, Strategy for UAL Corporation, an airline holding company, and has served in such position from December 2002 to May 2006. Prior to that, Mr. Hacker served with UAL Corporation as President, UAL Loyalty Services from September 2001 to December 2002, and as Executive Vice President and Chief Financial Officer from July 1999 to September 2001. Mr. Hacker served as a director of Travelport from 2016 until May 2019. Mr. 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. Michael J. Inglese was appointed a member of our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from June 2017 to the consummation of the Merger. He became our Chief Executive Officer in June 2017, having served as Aircastle’s Acting Chief Executive Officer from January 2017. He was previously our Chief Financial Officer from April 2007 to January 2017. Prior to joining the Company, Mr. Inglese served as Chief Financial Officer of PanAmSat Holding Corporation from June 2000 until the closing of PanAmSat’s sale to Intelsat in July 2006. Mr. Inglese joined PanAmSat in May 1998 as Vice President, Finance after serving as Chief Financial Officer for DIRECTV Japan, Inc. He is a Chartered Financial Analyst who holds a BS in Mechanical Engineering from Rutgers University College of Engineering and his MBA from Rutgers Graduate School of Business Management. Taro Kawabe was appointed to our Board on March 27, 2020 following the consummation of the Merger. Mr. 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. Kawabe was the General Manager of the Leasing Business Department of Marubeni from April 2016 to March 2019. Mr. Kawabe joined Marubeni in April 1990. Mr. Kawabe received his degree from Waseda University in 1990. Takashi Kurihara was appointed to our Board on March 27, 2020 following the consummation of the Merger and served on the prior Board of Aircastle Limited from May 2019 to the consummation of the Merger, and was nominated by Marubeni. Mr. Kurihara is the Advisor to the President of Marubeni America Corporation. From January 2017 to March 2019, Mr. Kurihara was a director of the Agricultural Solutions Business Division of Bridgestone. Prior to that, 47 Mr. Kurihara was Deputy General Manager, Regional Coordination and Administration Department at Marubeni from April 2016 to September 2016. From July 2013, he was Vice President and a Board member of Gavilon Agriculture Investment until April 2015, when Mr. Kurihara became Executive Vice President and a Board member of Gavilon Agriculture Investment. Mr. Kurihara received his MBA at Columbia Business School in New York and his bachelor’s degree of political science at Keio University in Tokyo. Mr. 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. Charles W. 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. Mr. Pollard joined Omni Air International, Inc., a passenger charter carrier, in 1997, where he served variously as Managing Director, President and CEO, and Vice Chairman until 2009. Previously, he spent ten years in senior management positions, including President and CEO, at World Airways, Inc. Prior to joining World Airways, Inc., he practiced corporate law at Skadden, Arps, Slate, Meagher & Flom. He currently serves on the board of directors of Allegiant Travel Company. Takayuki Sakakida was appointed to our Board on March 27, 2020 upon the consummation of the Merger and served on the prior Board of Aircastle Limited from June 9, 2017 to the consummation of the Merger, and was nominated by Marubeni. In December 2020, Mr. Sakakida was appointed as Senior Advisor to the CEO of the Company. In April 2019, Mr. Sakakida was appointed as General Manager, Finance & Leasing Business Dept. – II, Marubeni. In April 2017, Mr. Sakakida was appointed as Vice President and General Manager, Aerospace and Ship Unit, Marubeni America Corporation, which is a subsidiary of Marubeni, a general trading company, engaged as an intermediary, importer/exporter, facilitator or broker in various types of trade between and among business enterprises and countries. In April 2016, Mr. Sakakida was appointed as Assistant General Manager, Aerospace and Defense Systems Department, Marubeni. From April 2015 to April 2016, he served as General Manager, Business Administration Section, Aerospace and Defense Systems Department of Marubeni. From April 2011 to 2015, he seconded to MD Aviation Capital Pte Ltd (Singapore) as Managing Director. Mr. 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. Noriyuki Yukawa was appointed to our Board on March 27, 2020 following the consummation of the Merger. Mr. Yukawa is currently an Advisor at Mizuho Leasing, and from April 2013 until March 2020, he also held the title of Managing Executive Officer. From April 2017 to March 2020, he led the Aviation, Finance and Real Estate Departments, and from April 2013 to March 2017 he was in charge of Real Estate. Prior to joining Mizuho Leasing in April 2009, Mr. Yukawa had a 28-year career at Mizuho Bank. His roles included General Manager of the M&A Advisory Division, Joint General Manager of the M&A Finance Division, and Deputy General Manager of the Real Estate Finance Division, as well as an Executive Assistant for the Chairman of the Board. Mr. Yukawa received a Master of Comparative Laws from the University of Illinois, College of Law and a Bachelor of Law from the University of Tokyo. Mr. Yukawa is also a member of the Board of Directors of PLM Fleet LLC. Information about our Executive Officers . The names of the executive officers of the Company and their ages, titles and biographies may be found in: Information about our Executive Officers. Code of Business Conduct and Ethics . To help ensure that the Company abides by applicable corporate governance standards, our Board has adopted a Code of Business Conduct and Ethics and a Code of Ethics for Chief Executive and Senior Financial Officers, which are posted on our website at http://www.aircastle.com under “Investors—Governance Documents” and which are available in print to any shareholder of the Company upon request. Audit Committee of the Board of Directors . 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. 48 ITEM 11. EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION Compensation Discussion and Analysis 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 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: Named Executive Officer Title Michael J. Inglese Chief Executive Officer Aaron A. Dahlke Chief Financial Officer Douglas C. Winter Chief Commercial Officer Christopher L. Beers Chief Legal Officer & Secretary Roy Chandran Chief Strategy Officer Pay for Performance Philosophy We believe executive compensation should be tied to Company performance weighted in favor of long-term performance, and our compensation program for 2021 rewarded executives and employees in two areas: • Annual Corporate Performance : Achievement of internal corporate financial metrics focused on: (i) profit before tax; (ii) cash flow; (iii) growth through new investments; and (iv) discrete objectives (as described below); and • Individual Performance : Achievement of individual performance goals set at the beginning of each year. 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: Position Corporate Performance Individual Performance CEO 85% 15% Other NEOs 80% 20% 2021 Corporate Financial Metrics . We based corporate performance targets on the Company’s business plan and established a performance range for each metric. Results below the low end of each range would 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 2021, we established the following targets, performance ranges and relative weightings for the corporate financial metrics: Metric 2021 Target (in millions) Performance Range Weighted Score Profit before tax (1) $ 23.0 50%-150% 20% Cash flow (2) $ 361.0 50%-150% 40% Net investments (3) $ 800.0 50%-150% 20% Discrete objectives (4) — 50%-150% 20% _______________ (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. (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. 49 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 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 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 2021, there were three primary elements of total direct compensation: base salary, annual cash bonus, and annual long term incentive award. Base Salary. 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 NEOs. Annual Incentive Compensation . 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 . 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 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 50 market. In addition, our NEOs are also eligible to participate in our employee benefit plans, including medical, dental, life insurance and 401(k) plans. These plans are available to all employees and do not discriminate in favor of our 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 amount of reimbursement would be to the extent that a lower payment would have been awarded to the executive based on the restated financial results. The policy applies to all incentive compensation awarded or paid to an executive officer in the three years prior to the restatement, even if the executive officer did not engage in conduct which contributed to the restatement. In addition, we may seek to recover any portion of incentive compensation when we determine that an executive officer engaged in a certain misconduct, namely involving: (i) material acts of fraud or dishonesty in connection with employment by the Company; (ii) willfully not complying with material policies or procedures of the Company; or (iii) the commission of a felony or a crime involving material dishonesty. Retirement. 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. Summary . The primary goals of our compensation programs are to attract, motivate and retain the most talented and dedicated employees and to align incentive compensation. What We Don’t Pay or Provide • Individual contractual rights to change in control benefits based on a single trigger; • Deferred compensation plans; • Company cars or aircraft; • Individual contractual rights to income tax gross-ups; and • Special or enhanced pension or retirement programs. 2021 Compensation Performance versus Corporate Financial Metrics . 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. Metric 2021 Target (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 millions) $ 800.0 20% $ 763.3 50% - 150% 95 % 19 % Discrete objectives — 20% — 50% - 150% 110 % 22 % Total 95 % _______________ 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. 51 Named Executive Officer 2021 Incentive Compensation Michael J. Inglese $729,375 cash Aaron A. Dahlke $465,500 cash Douglas C. Winter $563,500 cash Christopher L. Beers $563,500 cash Roy Chandran $465,500 cash How We Make Decisions Risk . The Compensation Committee reviews the risks and rewards associated with the Company’s compensation programs. We believe that our compensation programs encourage prudent business judgment and appropriate risk-taking, with the overall goal of building sustainable and profitable growth. We believe none of our compensation programs create risks that are reasonably likely to have a material adverse impact on the Company. Base salary is a fixed amount that does not encourage risk taking, 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. For 2021, the Committee set the corporate financial metrics at the beginning of the year based on the annual business plan endorsed by the Board. We set performance goals for the Chief Executive Officer, who in turn established individual performance goals for the other NEOs. Regularly during the year, the senior management team presented to us the Company’s actual performance against the corporate performance metrics. We shared these discussions with the full Board on a regular basis. Tax Implications of Our Compensation The Tax Cuts and Jobs Act, enacted on December 22, 2017, substantially modified Section 162(m) of the Internal Revenue Code and, among other things, eliminated the performance-based exception to the $1.0 million deduction limit effective as of January 1, 2018. As a result, beginning in 2018, compensation paid to certain executive officers in excess of $1.0 million will generally be nondeductible, whether or not it is performance-based. In addition, beginning in 2018, the executive officers subject to Section 162(m) (the “Covered Employees”) will include any individual who served as the CEO or Chief Financial Officer (“CFO”) at any time during the taxable year and the three other most highly compensated officers (other than the CEO and CFO) for the taxable year, and once an individual becomes a Covered Employee for any taxable year beginning after December 31, 2016, that individual will remain a Covered Employee for all future years. Effective as of the closing of the Merger, Section 162(m) no longer applied to the Company. COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board is currently comprised of three Directors and operates pursuant to a written charter, which is available at http://www.aircastle.com under “Investors—Governance Documents.” The Compensation Committee is primarily responsible for reviewing, approving and overseeing the Company’s compensation plans and practices and works with management to establish the Company’s executive compensation philosophy and programs. The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis with management and based on that review and discussion, has recommended to the Board that it be included in this Form 10-K. Respectfully submitted, The Compensation Committee Charles W. Pollard, Chair Takashi Kurihara Michael J. Inglese 52 Summary Compensation Table for 2021 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. Awards (1) Name and Principal Position Fiscal Year Salary Bonus Annual Equity Award (3) Long Term Equity Incentive Plan (3)(6) All Other Compensation (4) Total Michael J. Inglese 2021 (FY) $ 750,000 $ 678,060 $ — $ — $ 13,340 $ 1,441,400 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 Aaron A. Dahlke 2021 (FY) $ 475,000 $ 300,240 $ — $ — $ 13,340 $ 788,580 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 Douglas C. Winter 2021 (FY) $ 575,000 $ 375,300 $ — $ — $ 13,508 $ 963,808 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 Christopher L. Beers 2021 (FY) $ 575,000 $ 375,300 $ — $ — $ 13,987 $ 964,287 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 Roy Chandran (5) 2021 (FY) $ 475,000 $ 300,240 $ — $ — $ 13,440 $ 788,680 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 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: Mr. Inglese $2,475,000; Mr. Winter $1,000,000; Mr. Dahlke $600,000; Mr. Beers $1,000,000; and Mr. Chandran $600,000. 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: (i) cash bonuses; (ii) cash-based long-term incentive compensation awarded in 2020 with a one-year vesting period; and (iii) the portion of 2019 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. Winter as a dividend payment on unvested restricted common shares. (5) In March 2020, Mr. Chandran was promoted to Chief Strategy Officer. (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: Mr. Inglese $2,500,000; Mr. Dahlke $600,000; Mr. Winter $1,000,000; Mr. Beers $1,000,000; and Mr. Chandran $600,000. 53 Grants of Plan-Based Awards for 2021 Estimated Possible Payouts under Non-Equity Incentive Plan Awards(1) Name Grant Date Minimum ($) Target ($) Maximum ($) Michael J. Inglese May 20, 2021 $ 1,250,000 $ 2,500,000 $ 3,750,000 Aaron A. Dahlke May 20, 2021 300,000 600,000 900,000 Douglas C. 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 1. 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. 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. 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.” 54 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The following table and summary set forth potential amounts payable to our NEOs upon termination of employment or a change in control, as described below. The table below reflects amounts payable to our NEOs assuming termination of employment on February 28, 2022: Name and Principal Position Voluntary resignation by executive Termination by us for cause Termination by us without cause Termination by us without cause or by executive for good reason following change in control (1) Termination by executive for good reason Normal retirement Death or Disability Michael J. Inglese 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 Restricted Cash and LTI Awards (1) — — 2,457,643 2,457,643 2,457,643 — 2,457,643 Aaron A. Dahlke Cash Severance $ — $ — $ 950,000 $ 1,900,000 $ 950,000 $ — $ — Pro-rata Bonus (assumes February 27 termination) — — 475,000 475,000 475,000 — 475,000 COBRA Reimbursement — — 60,181 60,181 60,181 — 60,181 Vacation 51,154 51,154 51,154 51,154 51,154 51,154 51,154 Remainder of Restricted Cash and LTI Awards (1) — — 634,907 634,907 634,907 — 634,907 Douglas C. Winter Cash Severance $ — $ — $ 1,150,000 $ 2,300,000 $ 1,150,000 $ — $ — Pro-rata Bonus (assumes February 27 termination) — — 575,000 575,000 575,000 — 575,000 COBRA Reimbursement — — 46,545 46,545 46,545 — 46,545 Vacation 61,923 61,923 61,923 61,923 61,923 61,923 61,923 Remainder of Restricted Cash and LTI Awards (1) — — 1,001,967 1,001,967 1,001,967 — 1,001,967 Christopher L. Beers Cash Severance $ — $ — $ 1,150,000 $ 2,300,000 $ 1,150,000 $ — $ — Pro-rata Bonus (assumes February 27 termination) — — 575,000 575,000 575,000 — 575,000 COBRA Reimbursement — — 60,181 60,181 60,181 — 60,181 Vacation 61,923 61,923 61,923 61,923 61,923 61,923 61,923 Remainder of Restricted Cash and LTI Awards (1) — — 1,001,967 1,001,967 1,001,967 — 1,001,967 Roy Chandran Cash Severance $ — $ — $ 950,000 $ 1,900,000 $ 950,000 $ — $ — Pro-rata Bonus (assumes February 27 termination) — — 475,000 475,000 475,000 — 475,000 COBRA Reimbursement — — 60,181 60,181 60,181 — 60,181 Vacation 51,154 51,154 51,154 51,154 51,154 51,154 51,154 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. 55 Under the employment agreements for our named executive officers: • if the employment of such named executive officer is terminated without “cause” or with “good reason” (as defined in such employment agreement), and if he signs a general release of claims and complies with the covenants described below, then he will be entitled to receive: (i) an amount equal to the sum of the base salary and target annual cash bonus for the year of termination, payable over a one-year period (two times such amount and payable in a lump sum if the termination occurs within 120 days prior to or within two years following a “change in control” as defined in such employment agreement); (ii) a pro-rata annual bonus for the year of termination; (iii) reimbursement of COBRA premiums for up to twelve months; (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; and • such named executive officer covenants not to compete with Aircastle for six months following termination of his employment for any reason and will not solicit the employees of Aircastle or the clients or customers of Aircastle for competing business, in each case, for a period of twelve months following termination. Each of the employment agreements were amended effective as of December 19, 2019, to provide that any grants of restricted cash awards in lieu of the annual PSU grants for 2020 and the equity-based portion of the annual bonuses in respect of 2019 will not constitute a good reason event for purposes of the employment agreements or for any other purpose. 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 ($) Total ($) Douglas A. Hacker $ 180,000 $ 180,000 Charles W. Pollard 180,000 180,000 56 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Security Ownership of Certain Beneficial Owners and Management . The table below sets forth information as of April 22, 2020 as to the beneficial ownership of our Common Shares. Name and Address of Beneficial Owner Common Shares Held Percent of Class Marubeni Corporation (1) 7-1 Nihonbashi 2-chome Chuo-ku, Tokyo, 103-6060 Japan 7,024 50 MM Air Limited (2) c/o Compass Administration Services Ltd. Crawford House 50 Cedar Avenue Hamilton, HM11, Bermuda 7,024 50 _______________ (1) Marubeni beneficially owns 7,024 Common Shares through its wholly owned subsidiary MHC. On March 27, 2020, Aircastle consummated the Merger. At the Effective Time, each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) shares canceled or converted into shares of the surviving company pursuant to the Merger Agreement and (ii) restricted shares canceled and exchanged pursuant to the Merger Agreement) was canceled and converted into the right to receive the Merger Consideration. The shares that were owned by MHC immediately prior to the Effective Time were converted into the same percentage of shares of the surviving company in the Merger. As a result, immediately following the Effective Time, MHC beneficially owned 28.8% of the outstanding common shares of the surviving company in the Merger, and MM Air Limited beneficially owned the remaining 71.2%. On March 27, 2020, MM Air Limited transferred 2,976 Common Shares to MHC, resulting in MHC owning 7,024 Common Shares. (2) MM Air Limited beneficially owns 7,024 Common Shares. MM Air Limited is controlled by affiliates of Marubeni and Mizuho Leasing. On March 27, 2020, Aircastle consummated the Merger. At the Effective Time, each Common Share issued and outstanding immediately prior to the Effective Time (other than (i) shares canceled or converted into shares of the surviving company pursuant to the Merger Agreement (as described in footnote (1) above) and (ii) restricted shares canceled and exchanged pursuant to the Merger Agreement) was canceled and converted into the right to receive the Merger Consideration. The shares that were owned by MHC immediately prior to the Effective Time were converted into the same percentage of shares of the surviving company in the Merger. As a result, immediately following the Effective Time, MHC beneficially owned 28.8% of the outstanding common shares of the surviving company in the Merger, and MM Air Limited beneficially owned the remaining 71.2%. On March 27, 2020, MM Air Limited transferred 2,976 Common Shares to MHC, resulting in MM Air Limited owning 7,024 Common Shares. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Relationships and Related Party Transactions The following is a summary of material provisions of certain transactions we entered into with our executive officers, Directors or 5% or greater shareholders. We believe the terms and conditions set forth in such agreements were reasonable and customary for transactions of this type. 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. 57 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 $5.0 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. Our Related Person Policy covers all transactions, arrangements or relationships (or any series of similar transactions, arrangements or relationships) in which the Company or any of its subsidiaries was, is or will be a participant, in which the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect material interest. A Related Person is any person who is, or at any time since the beginning of the Company’s last fiscal year was, a Director or executive officer of the Company or a nominee to become a Director of the Company; Marubeni and Mizuho Leasing or their affiliates; any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Director, executive officer, nominee or Marubeni and Mizuho Leasing or their affiliates, and any person (other than a tenant or employee) sharing the household of such Director, executive officer, nominee or Marubeni and Mizuho Leasing or their affiliates. Director Independence 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. 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. Certain Relationships and Related Transactions, and Director Independence—Certain Relationships and Related Party Transactions” in making the independence determinations. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 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”) 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, 2022 2021 Audit fees (1) $ 2,230,600 $ 2,168,000 Tax fees (2) 1,056,500 808,000 All other fees 5,200 5,200 _______________ (1) Represents fees for the audit of the Company’s consolidated financial statements and internal control over financial reporting, the reviews of interim financial statements included in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, certain Current Reports on Form 8-K, audits of IBJ Air joint venture, consultations concerning financial accounting and reporting standards, statutory audits and services rendered relating to the Company’s registration statements. (2) Represents fees related primarily to assistance with tax compliance matters, including international, federal and state tax return preparation, and consultations regarding tax matters. (3) Estimate based on approved fees, subject to finalization upon completion of audit work. 58 Audit Committee Pre-Approval Policies and Procedures The Audit Committee has policies and procedures that require the pre-approval by the Audit Committee or one of its members of all services performed by the Company’s independent registered public accounting firm and related fee arrangements. In the early part of each year, the Audit Committee approves the proposed services, including the nature, type and scope of services contemplated, and the related fees, to be rendered by these firms during the year. In addition, pre-approval by the Audit Committee or one of its members is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees pre-approved by the Audit Committee pursuant to the Sarbanes-Oxley Act. In accordance with this policy, the Audit Committee pre-approved all services to be performed by the Company’s independent registered accounting firm. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (A) 1. Consolidated Financial Statements. The following is a list of the “Consolidated Financial Statements” of Aircastle Limited and its subsidiaries included in this Annual Report on Form 10-K, which are filed herewith pursuant to Item 8: Report of Independent Registered Public Accounting Firm. 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. 2. Financial Statement Schedules. There are no Financial Statement Schedules filed as part of this Annual Report, since the required information is included in the Consolidated Financial Statements, including the notes thereto, or the circumstances requiring inclusion of such schedules are not present. 3. Exhibits. The exhibits filed herewith are listed on the Exhibit Index filed as part of this Annual Report on Form 10-K. 59 (B) EXHIBIT INDEX Exhibit No. Description of Exhibit 2.1 Agreement and Plan of Merger, dated as of November 5, 2019, by and among Aircastle Limited, MM Air Limited and MM Air Merger Sub Limited (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K on filed November 7, 2019). ^ 3.1 Memorandum of Association (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (Amendment No. 2) (No. 333-134669) filed on July 25, 2006). 3.2 Amended Bye-laws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-3 (No. 333-182242) filed on June 20, 2012). 3.3 Amended and Restated Memorandum of Association of Aircastle Limited (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on March 27, 2020). 3.4 Amended and Restated Bye-laws of Aircastle Limited (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on March 27, 2020). 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. 2) (No. 333-134669) filed on July 25, 2006). 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). 4.3 Amendment Agreement No. 1 to the Amended and Restated Shareholder Agreement, dated as of September 23, 2016, by and between Aircastle Limited and Marubeni Corporation (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 26, 2016). 4.4 Indenture, dated as of December 5, 2013, by and between Aircastle Limited and Wells Fargo Bank, National Association, as trustee, Citigroup Global Markets, Inc., Goldman, Sachs & Co., J.P. 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). 4.5 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). 4.6 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). 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). 4.9 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). E - 1 Exhibit No. 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. 333-134669) filed on June 2, 2006). # 10.2 Form of Amended Restricted Share Grant Letter under the Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-K filed on March 5, 2010). # 10.3 Form of Amended Restricted Share Agreement for Certain Executive Officers under the Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K filed on March 10, 2011). # 10.4 Form of Amended International Employee Restricted Share Unit Agreement under the Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed on March 5, 2010). # 10.5 Amended and Restated Aircastle Limited 2005 Equity and Incentive Plan (incorporated by reference to Exhibit 10.28 to the Company’s Registration Statement on Form S-1 (Amendment No. 2) (No. 333-134669) filed on July 25, 2006). # 10.6 Letter Agreement, dated as of February 24, 2006, by and between Aircastle Advisor LLC and Joseph Schreiner (incorporated by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 (No. 333-134669) filed on June 2, 2006). # 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 (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). 10.10 Registration Rights Agreement, dated as of April 4, 2012, by and among Aircastle Limited and Goldman, Sachs & Co., Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as representatives of the several Initial Purchasers named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 5, 2012). 10.11 Share Purchase Agreement, dated as of August 7, 2012, by and among Aircastle Limited and the Fortress Shareholders named therein (incorporated by reference to Exhibit 1.2 to the Company’s Current Report on Form 8-K filed on August 13, 2012). 10.12 Registration Rights Agreement, dated as of November 30, 2012, by and among Aircastle Limited and J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Goldman, Sachs & Co and RBC Capital Markets, LLC, as representatives of the several Initial Purchasers named therein (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 30, 2012). 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). 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). # E - 2 Exhibit No. 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). # 10.17 Form of Performance Share Unit Agreement for Certain Executive Officers under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2016). # 10.18 Form of Restricted Share Unit Agreement Under the Aircastle Limited 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 4, 2017). # 10.19 Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed on May 25, 2017). # 10.20 Purchase Agreement COM0270-15, dated as of June 12, 2015, by and between Aircastle Holding Corporation and Embraer S.A. (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed on August 6, 2015). Ø 10.21 Amendment No. 1 to Purchase Agreement COM0270-15, dated as of June 22, 2016, by and between Aircastle Holding Corporation and Embraer S. A. (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed on February 14, 2017). Ø 10.22 Amendment No. 2 to Purchase Agreement COM0270-15, dated as of November 11, 2016, by and between Aircastle Holding Corporation and Embraer S.A. (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on February 14, 2017). Ø 10.23 Amendment No. 3 to Purchase Agreement COM0270-15, dated as of January 13, 2017, by and between Aircastle Holding Corporation and Embraer S.A. (incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on February 14, 2017). Ø 10.24 Amendment No. 4 to Purchase Agreement COM0270-15, dated as of August 11, 2017, by and between Aircastle Holding Corporation and Embraer S.A. (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2017). Ø 10.25 Amendment No. 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). Ø 10.26 Amendment No. 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). Ø 10.27 Amendment No. 7 to Purchase Agreement COM0270-15, dated as of February 5, 2019, 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 May 2, 2019). ØØ 10.28 Amendment No. 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) . ØØ 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). ØØ 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). ØØ 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). ØØ E - 3 Exhibit No. 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). * ØØ 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. * ØØ 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. * ØØ 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. * ØØ 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. * ØØ 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. (incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed on February 14, 2017). Ø 10.38 Amendment No. 2 to Letter Agreement COM0271-15 in Purchase Agreement COM0270-15, dated as of August 11, 2017, by and between Aircastle Holding Corporation and Embraer S.A. (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed on November 2, 2017). Ø 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 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). Ø 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 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). Ø 10.41 Amendment No. 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). ØØ 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). ØØ 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. * ØØ 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). ^ ØØ 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). # 10.46 Retirement and Transition Agreement, dated September 17, 2018, for Michael L. Kriedberg (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 19, 2018). # 10.47 Voting and Support Agreement, dated as of November 5, 2019, by and among Aircastle Limited, Marubeni Corporation, Marubeni Aviation Corporation and Marubeni Aviation Holding Coöperatief U.A. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 7, 2019). 10.48 Form of Indemnification Agreement with directors and officers (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 27, 2020). 21.1 Subsidiaries of the Subsidiaries of the Registrant . * 31.1 Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002 . * E - 4 Exhibit No. 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 Act of 2002 of 2002 . * 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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, 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* 104 Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. _____________ # Management contract or compensatory plan or arrangement. * Filed herewith. Ø Portions of this exhibit have been omitted pursuant to a request for confidential treatment. ^ Certain schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request. ØØ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. ITEM 16. FORM 10-K SUMMARY None. E - 5 Index to Financial Statements Page No. Consolidated Financial Statements Report of Independent Registered Public Accounting Firm (PCAOB ID 42 ) F - 2 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 F - 1 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Aircastle Limited and Subsidiaries Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Aircastle Limited and Subsidiaries (the Company) as of 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. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. F - 2 Recoverability assessment and Impairment of flight equipment held for lease Description of 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 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 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. How We 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 and measure the impairment charge, where applicable. 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 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, and evaluating scenario probabilities based on market conditions and publications. 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. We assessed the historical accuracy of certain assumptions by performing a look back analysis. F - 3 Accounting for Income Tax Description of the Matter The Company is incorporated in Bermuda and leases its aircraft within over 40 countries. The Company’s income is subject to U.S. federal, state and local income taxes, as well as foreign income tax in many of the jurisdictions it leases aircraft. As more fully described in Note 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. Specifically, the auditing of the application of changes in tax law and transactions to transfer, buy or sell aircraft in foreign jurisdictions required increased auditor effort, including the use of tax professionals with specialized skills, to evaluate the Company’s application of the tax laws in relevant jurisdictions and the related income tax. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process to prepare the consolidated income tax provision. Our procedures also included, among others, an evaluation of management’s review and consideration of the international tax structure, identification of changes to tax laws in the various jurisdictions in which it operates and its treatment of the transactions to transfer, buy and sell aircraft. To test the income tax related accounts, we performed audit procedures that included, among others, understanding the Company’s tax structure as it relates to current leases through review of its organization chart and various lease documents. We evaluated the Company’s treatment of tax law changes, if any, in the foreign jurisdictions it operates to current tax laws. We also obtained, and assessed the completeness of, a list of transactions to transfer, purchase and sell aircraft during the period and evaluated the tax treatment of a sample of transactions through review of the lease documents and our assessment of the tax law. Our audit procedures were performed with the assistance of our tax professionals with specialized skills and knowledge. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2004. Stamford, CT April 28, 2022 F - 4 Aircastle Limited and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share data) February 28, 2022 2021 ASSETS Cash and cash equivalents $ 167,891 $ 578,004 Restricted cash and cash equivalents 2,791 2,594 Accounts receivable 63,666 82,572 Flight equipment held for lease, net of accumulated depreciation of $ 2,766,429 and $ 2,076,972 , respectively 6,313,950 6,492,471 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 Other assets 356,326 311,944 Total assets $ 7,093,266 $ 7,698,338 LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES Borrowings from secured financings, net of debt issuance costs $ 684,039 $ 768,850 Borrowings from unsecured financings, net of debt issuance costs 3,835,841 4,366,261 Accounts payable, accrued expenses and other liabilities 177,424 174,267 Lease rentals received in advance 37,361 58,013 Security deposits 69,189 80,699 Maintenance payments 459,713 519,178 Total liabilities 5,263,567 5,967,268 Commitments and Contingencies SHAREHOLDERS’ EQUITY 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 (accumulated deficit) ( 49,075 ) 245,293 Total shareholders’ equity 1,829,699 1,731,070 Total liabilities and shareholders’ equity $ 7,093,266 $ 7,698,338 The accompanying notes are an integral part of these consolidated financial statements. F - 5 Aircastle Limited and Subsidiaries Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Dollars in thousands, except per share amounts) Year Ended February 28, Two Months Ended February 29, Year Ended December 31, 2022 2021 2020 2019 Revenues: Lease rental revenue $ 595,236 $ 611,421 $ 131,119 $ 777,403 Direct financing and sales-type lease revenue 10,733 18,215 4,447 32,295 Amortization of lease premiums, discounts and incentives ( 20,190 ) ( 22,842 ) ( 3,669 ) ( 22,636 ) Maintenance revenue 152,030 172,668 41,214 74,987 Total lease revenue 737,809 779,462 173,111 862,049 Gain on sale of flight equipment 26,001 33,536 15,354 45,532 Other revenue 5,977 19,290 9,183 10,357 Total revenues 769,787 832,288 197,648 917,938 Operating expenses: Depreciation 337,528 347,517 59,853 356,021 Interest, net 214,352 235,338 41,038 258,070 Selling, general and administrative (including non-cash share-based payment expense of $ 0 , $ 28,049 , $ 10,678 and $ 15,830 , respectively) 66,338 88,413 22,901 77,034 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 Total operating expenses 1,102,564 1,122,110 188,440 723,357 Other income (expense): Loss on extinguishment of debt ( 14,156 ) ( 2,640 ) ( 3,955 ) ( 7,577 ) Merger expenses — ( 32,605 ) ( 321 ) ( 7,372 ) Other 57,682 ( 191 ) ( 94 ) ( 4,492 ) Total other income (expense) 43,526 ( 35,436 ) ( 4,370 ) ( 19,441 ) 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 (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) available to common shareholders $ ( 294,368 ) $ ( 333,168 ) $ 3,659 $ 156,759 The accompanying notes are an integral part of these consolidated financial statements. F - 6 Aircastle Limited and Subsidiaries Consolidated Statements of Cash Flows (Dollars in thousands) Year Ended February 28, Two Months Ended February 29, Year Ended December 31, 2022 2021 2020 2019 Cash flows from operating activities: Net income (loss) $ ( 278,209 ) $ ( 333,168 ) $ 3,659 $ 156,575 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 337,528 347,517 59,853 356,021 Amortization of deferred financing costs 16,267 14,791 2,446 14,578 Amortization of lease premiums, discounts and incentives 20,190 22,842 3,669 22,636 Deferred income taxes ( 9,386 ) 6,506 1,453 20,223 Non-cash share-based payment expense — 28,049 10,678 15,830 Cash flow hedges reclassified into earnings — — — 184 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 ) Gain on the sale of flight equipment ( 26,001 ) ( 33,536 ) ( 15,354 ) ( 45,532 ) Loss on extinguishment of debt 14,156 2,640 3,955 7,577 Impairment of aircraft 452,250 425,579 62,657 7,404 Provision for credit losses 930 5,258 288 — Other ( 3,043 ) ( 2,305 ) ( 402 ) 206 Changes on certain assets and liabilities: Accounts receivable 16,948 ( 57,292 ) ( 6,377 ) ( 13,162 ) Other assets ( 29,963 ) ( 66,290 ) 5,786 2,594 Accounts payable, accrued expenses and other liabilities ( 5,716 ) ( 13,655 ) 10,205 ( 5,483 ) Lease rentals received in advance ( 23,414 ) ( 53,658 ) 143 19,954 Net cash and restricted cash provided by operating activities 372,865 175,022 101,024 536,418 Cash flows from investing activities: Acquisition and improvement of flight equipment ( 795,426 ) ( 145,589 ) ( 23,035 ) ( 1,172,370 ) Proceeds from sale of flight equipment 210,718 180,342 103,679 361,747 Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits ( 202 ) ( 13,024 ) ( 4,614 ) 760 Unconsolidated equity method investment and associated costs — — — ( 15,175 ) Distributions from unconsolidated equity method investment in excess of earnings 104 419 — 36,750 Other ( 1,694 ) ( 676 ) ( 56 ) 4,259 Net cash and restricted cash provided by (used in) investing activities ( 586,500 ) 21,472 75,974 ( 784,029 ) Cash flows from financing activities: Repurchase of shares — ( 25,536 ) ( 2,370 ) ( 36,739 ) 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 Repayments of secured and unsecured debt financings ( 646,943 ) ( 1,697,662 ) ( 268,799 ) ( 1,817,558 ) Deferred financing costs ( 5,339 ) ( 12,832 ) — ( 13,800 ) Debt extinguishment costs ( 13,372 ) ( 1,524 ) ( 2,685 ) ( 7,183 ) Security deposits and maintenance payments received 88,891 87,510 29,806 202,833 Security deposits and maintenance payments returned ( 26,857 ) ( 71,743 ) ( 16,956 ) ( 117,872 ) Dividends paid ( 5,658 ) ( 24,025 ) — ( 91,328 ) Net cash and restricted cash provided by (used in) financing activities ( 196,281 ) 212,667 ( 161,004 ) 235,201 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 Cash and restricted cash at end of year $ 170,682 $ 580,598 $ 171,437 $ 155,443 Aircastle Limited and Subsidiaries Consolidated Statements of Cash Flows (Continued) (Dollars in thousands) Year Ended February 28, Two Months Ended February 29, Year Ended December 31, 2022 2021 2020 2019 Reconciliation to Consolidated Balance Sheets: Cash and cash equivalents $ 167,891 $ 578,004 $ 166,083 $ 140,882 Restricted cash and cash equivalents 2,791 2,594 5,354 14,561 Unrestricted and restricted cash and cash equivalents $ 170,682 $ 580,598 $ 171,437 $ 155,443 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 200,922 $ 241,011 $ 21,487 $ 246,026 Cash paid (received) during the year for income taxes $ 240 $ 1,469 $ ( 15 ) $ ( 656 ) Supplemental disclosures of non-cash investing activities: Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment $ 12,391 $ 70,716 $ 7,873 $ 90,397 Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions $ 21,764 $ 29,869 $ 16,693 $ 31,958 Transfers from Flight equipment held for lease to Net investment in direct financing and sales-type leases and Other assets $ 57,489 $ 90,352 $ 31,821 $ 104,838 The accompanying notes are an integral part of these consolidated financial statements. F - 7 Aircastle Limited and Subsidiaries Consolidated Statements of Changes in Shareholders’ Equity (Dollars in thousands, except share amounts) Common Shares Preference Shares Additional Paid-In Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Total Shareholders’ Equity Shares Amount Shares Amount Balance, December 31, 2018 75,454,511 $ 754 — $ — $ 1,468,779 $ 539,332 $ ( 184 ) $ 2,008,681 Issuance of common shares to stockholders, directors and employees 1,281,598 13 — — ( 13 ) — — — Repurchase of common shares from stockholders, directors and employees ( 1,613,980 ) ( 16 ) — — ( 36,723 ) — — ( 36,739 ) Amortization of share-based payments — — — — 13,825 — — 13,825 Reclassification of prior year director stock award liability — — — — 796 — — 796 Dividends declared — — — — — ( 91,328 ) — ( 91,328 ) Net income — — — — — 156,575 — 156,575 Adoption of accounting standard — — — — — 690 — 690 Net derivative loss reclassified into earnings — — — — — — 184 184 Balance, December 31, 2019 75,122,129 $ 751 — $ — $ 1,446,664 $ 605,269 $ — $ 2,052,684 Issuance of common shares to stockholders, directors and employees 28,568 1 — — ( 1 ) — — — Repurchase of common shares from stockholders, directors and employees ( 73,903 ) ( 1 ) — — ( 2,369 ) — — ( 2,370 ) Amortization of share-based payments — — — — 10,678 — — 10,678 Reclassification of prior year director stock award liability — — — — 2,005 — — 2,005 Dividends declared — — — — — ( 24,025 ) — ( 24,025 ) Net income — — — — — 3,659 — 3,659 Adoption of accounting standard — — — — — ( 6,442 ) — ( 6,442 ) Balance, February 29, 2020 75,076,794 $ 751 — $ — $ 1,456,977 $ 578,461 $ — $ 2,036,189 Amortization of share-based payments — — — — 28,049 — — 28,049 Net loss — — — — — ( 333,168 ) — ( 333,168 ) Payment of unvested shares at Merger ( 101,809 ) ( 1 ) — — ( 25,535 ) — — ( 25,536 ) Parent contribution at Merger — — — — 25,536 — — 25,536 Share cancellation and re-issuance at Merger ( 74,960,937 ) ( 750 ) — — 750 — — — Balance, February 28, 2021 14,048 $ — — $ — $ 1,485,777 $ 245,293 $ — $ 1,731,070 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. F - 8 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Note 1. Summary of Significant Accounting Policies Organization and Basis of Presentation 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 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”). Aircastle is a holding company that conducts its business through 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. GAAP”). 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. 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, including any Variable Interest Entity (“VIE”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. 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 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 its business or to refinance existing debt facilities. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. 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 Aircastle considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. 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. F - 9 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (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 Flight equipment held for lease is stated at cost and depreciated using the straight-line method, typically over a 25 -year life from the date of manufacture for passenger aircraft and over a 30 to 35 -year life for freighter aircraft, depending on whether the aircraft is a converted or purpose-built freighter, to estimated residual values. Estimated residual values are generally determined to be approximately 15 % of the manufacturer’s estimated realized price for passenger aircraft when new and 5 % to 10 % for freighter aircraft when new. Management may make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of situations where exceptions may arise include but are not limited to: • flight equipment where estimates of the manufacturer’s realized sales prices are not relevant (e.g., freighter conversions); • flight equipment where estimates of the manufacturer’s realized sales prices are not readily available; and • flight equipment which may have a shorter useful life due to obsolescence. Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to get the aircraft ready for initial service are capitalized and depreciated over the remaining life of the flight equipment. For planned major maintenance activities for aircraft off-lease, the Company capitalizes the actual maintenance costs by applying the deferral method. Under the deferral method, we capitalize the actual cost of major maintenance events, which are depreciated on a straight-line basis over the period until the next maintenance event is required. In accounting for flight equipment held for lease, we make estimates about the expected useful lives, the fair value of attached leases, acquired maintenance assets or liabilities and the estimated residual values. In making these estimates, we rely upon actual industry experience with the same or similar aircraft types and our anticipated lessee’s utilization of the aircraft. For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the fair value of the aircraft and lease. The fair value of the lease may include a maintenance premium and a lease premium or discount. When we acquire an aircraft with a lease, determining the fair value of attached leases requires us to make assumptions regarding the current fair values of leases for specific aircraft. We estimate a range of current lease rates of like aircraft in order to determine if the attached lease is within a fair value range. If a lease is below or above the range of current lease rates, we present value the estimated amount below or above the fair value range over the remaining term of the lease. The resulting lease discount or premium is amortized into lease rental income over the remaining term of the lease. Impairment of Flight Equipment 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 and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 3 in the Notes to the Consolidated Financial Statements. F - 10 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in 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 If a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we recognize the lease as a direct financing or sales-type lease. The net investment in direct financing and sales-type leases consists of the lease receivable, estimated unguaranteed residual value of the lease flight equipment at lease-end and, for direct financing leases, deferred selling profit. For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of flight equipment. Selling profit on a direct financing lease is deferred and amortized over the lease term, and a selling loss is recognized at lease commencement. Interest income on our net investment in leases is recognized as Direct financing and sales-type leases revenue over the lease term in a manner that produces a constant rate of return on the net investment in the lease. The net investment in leases is recorded net of an allowance for credit losses. The allowance for credit losses is recorded upon the initial recognition of the net investment in the lease based on the Company’s estimate of expected credit losses over the lease term. The allowance reflects the Company’s estimate of lessee default probabilities and loss given default percentages. When determining the credit loss allowance, we consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the net investment in the lease. The allowance also considers potential losses due to non-credit risk related to unguaranteed residual values. A provision for credit losses is recorded as a component of operating expenses to adjust the allowance for changes to management’s estimate of expected credit losses. Unconsolidated Equity Method Investment Aircastle accounts for its interest in an unconsolidated joint venture using the equity method as we do not control the joint venture entity. Under the equity method, the investment is initially recorded at cost and the carrying amount is affected by its share of the unconsolidated joint venture’s undistributed earnings and losses, and distributions of dividends and capital. The investment may also reflect an equity loss in the event that circumstances indicate an other-than-temporary impairment. Security Deposits Most of our operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit. Security deposits represent cash received from the lessee that is held on deposit until lease expiration or termination. If a lease is terminated, we recognize security deposits in excess of outstanding lease payments as other revenue. Maintenance Payments Typically, under an operating lease, the lessee is responsible for performing all maintenance but they may also be required to make payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft. 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, F - 11 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease. If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work. If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease; however, in some cases, we may owe a net payment to the lessee in the event heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception. We record monthly maintenance payments by the lessee as accrued maintenance payments liabilities in recognition of our contractual commitment to refund such receipts. In these contracts, we typically do not recognize such maintenance payments as maintenance revenue during the lease. Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability. We currently defer maintenance revenue recognition of most monthly maintenance payments until we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance, which generally occurs at or near the end of the lease. End of lease term maintenance payments made to us are recognized as maintenance revenue, and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue. Lease Incentives and Amortization 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. We estimate the amount of our portion for such costs, typically for the first major maintenance event for the airframe, engines, landing gear and auxiliary power units, expected to be paid to the lessee based on assumed utilization of the related aircraft by the lessee, the anticipated amount of the maintenance event cost and the estimated amounts the lessee is responsible to pay. The assumptions supporting these estimates are re-evaluated annually. This estimated lease incentive is not recognized as a lease incentive liability at the inception of the lease. We recognize the lease incentive as a reduction of lease revenue on a straight-line basis over the life of the lease, with the offset being recorded as a lease incentive liability which is included in maintenance payments on the balance sheet. The payment to the lessee for the lease incentive liability is first recorded against the lease incentive liability, and any excess above the lease incentive liability is recorded as a prepaid lease incentive asset, which is included in other assets on the balance sheet and continues to amortize over the remaining life of the lease. Lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs are capitalized and amortized into revenue over the initial life of the lease, assuming no lease renewals, and are included in other assets. Income Taxes Aircastle uses an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount estimated by us to be realizable. 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. 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 F - 12 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 We lease flight equipment under net operating leases with lease terms typically ranging from three to seven years . We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. 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. In certain instances, we may provide lease concessions to customers, generally in the form of lease rental deferrals. While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease term is generally the same as that which was required under the original lease agreement. We account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other assets. 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. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that, under U.S. GAAP, are excluded from net income (loss). Share-Based Compensation Aircastle recognized compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued. Aircastle used the straight-line method of accounting for compensation cost on share-based payment awards that contained pro-rata vesting provisions. Deferred Financing Costs Deferred financing costs, which are included in borrowings from secured and unsecured financings, net of debt issuance costs, in the Consolidated Balance Sheets, are amortized using the interest method for amortizing loans over the lives of the relevant related debt. Recent Accounting Pronouncements 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. U.S. 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 F - 13 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. Note 2. 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. et al. Case No. 20-11254 (JLG) (Jointly Administered) (the “LATAM Bankruptcy”). The allowed amount of our unsecured claims was approved by the Bankruptcy Court and proceeds from the sales of these claims in the amount of $ 55,213 were received during the 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. F - 14 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. Note 3. Fair Value Measurements Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs. • Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability. The valuation techniques that may be used to measure fair value are as follows: • The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. • The income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts. • The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). F - 15 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) The following tables set forth our financial assets and liabilities as of February 28, 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. Fair Value as of February 28, 2022 Fair Value Measurements at February 28, 2022 Using Fair Value Hierarchy Level 1 Level 2 Level 3 Valuation Technique Assets : Cash and cash equivalents $ 167,891 $ 167,891 $ — $ — Market Restricted cash and cash equivalents 2,791 2,791 — — Market Total $ 170,682 $ 170,682 $ — $ — Fair Value as of February 28, 2021 Fair Value Measurements at February 28, 2021 Using Fair Value Hierarchy Level 1 Level 2 Level 3 Valuation Technique Assets : Cash and cash equivalents $ 578,004 $ 578,004 $ — $ — Market Restricted cash and cash equivalents 2,594 2,594 — — Market Total $ 580,598 $ 580,598 $ — $ — 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. 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. GAAP requires the application of fair value, including events or changes in circumstances that indicate the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on the average of the market approach that uses Level 2 inputs, which include third party appraisal data and an income approach that uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital. We account for our investment in unconsolidated joint ventures under the equity method of accounting. Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital. These investments are also reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary. Aircraft Valuation Impairment of Flight Equipment 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 F - 16 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. Annual Recoverability Assessment 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. Estimates of the undiscounted cash flows for each aircraft type are impacted by changes in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors. 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 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, 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. F - 17 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) 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 of Liability Fair Value of Liability Carrying Amount of Liability Fair Value of Liability Credit Facilities $ 20,000 $ 20,000 $ — $ — Unsecured Term Loan 155,000 152,195 215,000 210,290 ECA Financings 21,576 21,931 36,423 37,942 Bank Financings 666,258 675,667 738,353 740,086 Senior Notes 3,700,000 3,776,997 4,200,000 4,402,722 All of our financial instruments are classified as Level 2 with the exception of our senior notes, which are classified as Level 1. Note 4. Lease Rental Revenues and Flight Equipment Held for Lease Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at February 28, 2022 were as follows: Year Ended February 28/29, Amount 2023 $ 575,556 2024 539,694 2025 426,826 2026 300,320 2027 249,832 Thereafter 714,534 Total $ 2,806,762 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, Region 2022 2021 2020 2019 Asia and Pacific 29 % 40 % 43 % 43 % Europe 36 % 31 % 26 % 27 % Middle East and Africa 5 % 6 % 7 % 10 % North America 15 % 12 % 11 % 9 % South America 15 % 11 % 13 % 11 % Total 100 % 100 % 100 % 100 % The classification of regions in the table above and in the tables and discussion below is determined based on the principal location of the lessee of each aircraft. F - 18 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) The following table shows the number of lessees with lease rental revenue of at least 5% of total lease rental revenue and their combined total percentage of lease rental revenue for the periods indicated: Year Ended February 28, Two Months Ended February 29, Year Ended December 31, 2022 2021 2020 2019 Number of Lessees Combined % of Lease Rental Revenue Number of Lessees Combined % of Lease Rental Revenue Number of Lessees Combined % of Lease Rental Revenue Number of Lessees Combined % of Lease Rental Revenue Largest lessees by lease rental revenue (1) 6 38 % 4 30 % 3 21 % 2 16 % ______________ (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 Aircraft Net Book Value % Number of Aircraft Net Book Value % Asia and Pacific 71 32 % 79 37 % Europe 98 30 % 92 27 % Middle East and Africa 10 4 % 11 4 % North America 36 17 % 28 12 % South America 25 13 % 26 13 % Off-lease 11 (1) 4 % 16 (2) 7 % Total 251 100 % 252 100 % ______________ (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 Value Net Book Value % Number of Lessees Net Book Value Net Book Value % Number of Lessees India $ 670,523 10 % 3 $ 756,514 11 % 3 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. F - 19 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Note 5. Net Investment in Direct Financing and Sales-Type Leases 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: February 28, 2022 2021 Lease receivable $ 52,021 $ 67,075 Unguaranteed residual value of flight equipment 100,068 129,165 Net investment leases 152,089 196,240 Allowance for credit losses ( 1,764 ) ( 864 ) 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 years ended February 28, 2022 and 2021 is as follows: Amount Balance at February 29, 2020 $ 6,558 Provision for credit losses 5,258 Write-offs ( 10,952 ) Balance at February 28, 2021 864 Provision for credit losses 930 Write-offs ( 30 ) Balance at February 28, 2022 $ 1,764 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: Year Ending February 28/29, Amount 2023 $ 13,700 2024 9,539 2025 8,609 2026 7,680 2027 7,392 Thereafter 14,430 Total lease payments to be received 61,350 Present value of lease payments - lease receivable ( 52,021 ) Difference between undiscounted lease payments and lease receivable $ 9,329 F - 20 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Note 6. 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. Amount Investment in joint ventures at February 29, 2020 $ 33,470 Distributions ( 419 ) Earnings from joint venture, net of tax 2,326 Investment in joint ventures at February 28, 2021 35,377 Distributions ( 104 ) Earnings from joint venture, net of tax 3,044 Investment in joint ventures at February 28, 2022 $ 38,317 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. Note 7. Borrowings from Secured and Unsecured Debt Financings The outstanding amounts of our secured and unsecured term debt financings were as follows: At February 28, 2022 At February 28, 2021 Debt Obligation Outstanding Borrowings Number of Aircraft Interest Rate Final Stated Maturity Outstanding Borrowings Secured Debt Financings: ECA Financings (1) $ 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 Less: Debt Issuance Costs ( 3,795 ) ( 5,926 ) Total secured debt financings, net of debt issuance costs and discounts 684,039 32 768,850 Unsecured Debt Financings: Senior Notes due 2022 — 5.50 % 02/15/22 500,000 Senior 5.00% Notes due 2023 500,000 5.00 % 04/01/23 500,000 Senior 4.40% Notes due 2023 650,000 4.40 % 09/25/23 650,000 Senior Notes due 2024 500,000 4.125 % 05/01/24 500,000 Senior Notes due 2025 650,000 5.25 % 08/11/25 650,000 Senior Notes due 2026 650,000 4.25 % 06/15/26 650,000 Senior Notes due 2028 750,000 2.85 % 01/26/28 750,000 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 — Less: Debt issuance costs and discounts ( 39,159 ) ( 48,739 ) Total unsecured debt financings, net of debt issuance costs and discounts 3,835,841 4,366,261 Total secured and unsecured debt financings, net of debt issuance costs and discounts $ 4,519,880 $ 5,135,111 _______________ (1) The borrowings under these financings at February 28, 2022 have a weighted-average fixed rate of interest of 3.23 %. F - 21 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Unsecured Debt Financings: 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, 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: Year Ending February 28/29, Amount 2023 $ 81,611 2024 1,552,698 2025 800,859 2026 727,666 2027 650,000 Thereafter 750,000 Total $ 4,562,834 As of February 28, 2022, we were in compliance with all applicable covenants in our financings. Note 8. 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. F - 22 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) 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. Note 9. Related Party Transactions On April 26, 2021, the Company entered into an amendment that reduced the size and extended the term of our unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 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. 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. Note 10. Income Taxes 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. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. 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. F - 23 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, 2022 2021 2020 2019 U.S. operations $ 20,803 $ 31,848 $ 3,084 $ 9,085 Non-U.S. operations ( 310,054 ) ( 357,106 ) 1,754 166,055 Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investment $ ( 289,251 ) $ ( 325,258 ) $ 4,838 $ 175,140 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, 2022 2021 2020 2019 Current: United States: Federal $ 247 $ ( 1,232 ) $ 6 $ 782 State 161 121 — 437 Non-U.S. 980 4,842 217 1,225 Current income tax provision 1,388 3,731 223 2,444 Deferred: United States: Federal 5,206 3,150 1,578 7,205 State 1,593 1,598 561 2,018 Non-U.S. ( 16,185 ) 1,757 ( 687 ) 11,000 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, 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, 2022 2021 2020 2019 Deferred tax assets: Non-cash share-based payments $ — $ — $ 215 $ 614 Net operating loss carry forwards 117,448 95,462 74,045 69,806 Other 34,955 37,612 54,259 72,732 Total deferred tax assets 152,403 133,074 128,519 143,152 Deferred tax liabilities: Accelerated depreciation ( 189,083 ) ( 170,382 ) ( 140,363 ) ( 136,268 ) Other ( 28,873 ) ( 37,179 ) ( 53,448 ) ( 70,551 ) Total deferred tax liabilities ( 217,956 ) ( 207,561 ) ( 193,811 ) ( 206,819 ) Net deferred tax liabilities $ ( 65,553 ) $ ( 74,487 ) $ ( 65,292 ) $ ( 63,667 ) F - 24 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. graduated tax rates. If not utilized, $ 35,510 of these carry forwards will expire by 2037, with $ 66,925 of these carry forwards having no expiration date. The Company also had NOL carry forwards of $ 729,749 with no expiration date to offset future Irish taxable income. Deferred tax assets and liabilities are included in other assets and accounts payable and accrued liabilities, respectively. We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings. As of February 28, 2022, we have elected to permanently reinvest our accumulated undistributed U.S. earnings of $ 40,041 . Accordingly, no U.S. withholding taxes have been provided. Withholding tax of $ 2,002 would be due if such earnings were remitted. 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 and the U.S. are subject to tax in those respective jurisdictions. We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. 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 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, 2022 2021 2020 2019 Notional U.S. federal income tax expense at the statutory rate: $ ( 60,742 ) $ ( 68,304 ) $ 1,016 $ 36,779 U.S. state and local income tax, net 1,237 1,723 390 1,549 Non-U.S. operations: Bermuda 27,751 82,190 ( 1,845 ) ( 16,950 ) Ireland 23,510 1,545 ( 1,147 ) ( 99 ) Singapore 174 75 ( 6 ) ( 28 ) Other low tax jurisdictions ( 15 ) ( 381 ) 2,533 ( 2,504 ) Non-deductible expenses in the U.S. 16 ( 1,904 ) 734 3,581 Other 71 ( 4,708 ) — 339 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. We did not have any unrecognized tax benefits. We conduct business globally and, as a result, the Company and its subsidiaries or branches are subject to foreign, U.S. federal and various state and local income taxes, as well as withholding taxes. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Ireland and the United States. Our policy is that we will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the year. F - 25 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Note 11. Interest, Net 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 and other liabilities $ 200,220 $ 221,246 $ 38,915 $ 245,673 Amortization of deferred losses related to interest rate derivatives — — — 184 Amortization of deferred financing fees and debt discount 16,267 14,791 2,446 14,578 Interest expense 216,487 236,037 41,361 260,435 Less: Interest income ( 1,209 ) ( 523 ) ( 323 ) ( 2,365 ) Less: Capitalized interest ( 926 ) ( 176 ) — — Interest, net $ 214,352 $ 235,338 $ 41,038 $ 258,070 Note 12. Commitments and Contingencies 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; Dublin, Ireland; and Singapore for future minimum lease payments as follows: Year Ending February 28/29, Amount 2023 $ 1,768 2024 1,702 2025 1,733 2026 1,764 2027 1,795 Thereafter 2,561 Total $ 11,323 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 2023 $ 462,452 2024 171,258 2025 185,563 2026 — 2027 — Thereafter — Total $ 819,273 F - 26 Aircastle Limited and Subsidiaries Notes to Consolidated Financial Statements (Dollars in thousands, except per share amounts) Note 13. Other Assets The following table describes the principal components of other assets on our consolidated balance sheets as of: February 28, 2022 2021 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 Aircraft purchase deposits and Embraer E-2 progress payments 56,157 52,092 Right-of-use asset (1) 7,176 8,056 Deferred rent receivable 55,478 69,103 Other assets 105,796 53,598 Total other assets $ 356,326 $ 311,944 ______________ (1) Net of lease incentives and tenant allowances. Note 14. Accounts Payable, Accrued Expenses and Other Liabilities 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, 2022 2021 Accounts payable and accrued expenses $ 58,882 $ 43,088 Deferred income tax liability 66,123 75,124 Accrued interest payable 42,013 43,676 Lease liability 9,846 11,003 Lease discounts, net of accumulated amortization of $ 45,546 and $ 44,887 , respectively 560 1,376 Total accounts payable, accrued expenses and other liabilities $ 177,424 $ 174,267 F - 27 SIGNATURES Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Aircastle Limited has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: April 28, 2022 Aircastle Limited By: /s/ Michael Inglese Michael Inglese Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Aircastle Limited and in the capacities and on the date indicated. SIGNATURE TITLE DATE /s/ Michael Inglese Chief Executive Officer and Director April 28, 2022 Michael Inglese /s/ Aaron Dahlke Chief Financial Officer April 28, 2022 Aaron Dahlke /s/ Dane Silverman Chief Accounting Officer April 28, 2022 Dane Silverman /s/ Takashi Kurihara Chairman of the Board April 28, 2022 Takashi Kurihara /s/ Douglas A. Hacker Director April 28, 2022 Douglas A. Hacker /s/ Taro Kawabe Director April 28, 2022 Taro Kawabe /s/ Charles W. Pollard Director April 28, 2022 Charles W. Pollard /s/ Takayuki Sakakida Director April 28, 2022 Takayuki Sakakida /s/ Noriyuki Yukawa Director April 28, 2022 Noriyuki Yukawa S - 1