What changed in this filing

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Item 1A. Risk Factors

2024-04-25 compared with 2023-04-25 · 116 added, 111 removed, 355 unchanged (39% of the section changed)

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

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

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

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

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

• manufacturer production levels and reliability of new aircraft and engine types;

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

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• geopolitical events, including war, terrorism, epidemic or pandemic diseases and natural disasters;

• impact of climate change and emissions on demand for air travel;

• impact of climate change and emissions on demand and supply of air travel;

• cyber risk, including information hacking, viruses, ransomware and malware;

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

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

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

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

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

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

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

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

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

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

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

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

We may incur maintenance, refurbishment or repair costs that a defaulting lessee has failed to incur or pay and that are necessary to put the aircraft in suitable condition for re-lease or sale.

We may incur maintenance, refurbishment or repair costs that a defaulting lessee has failed to undertake or pay and that are necessary to put the aircraft in suitable condition for re-lease or sale.

We may be required to pay off liens, claims, taxes and other governmental charges to obtain clear possession and to remarket the aircraft for re-lease or sale.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

An adverse economic or political event in any region or country in which our lessees or our aircraft are concentrated could affect the ability of our lessees to meet their obligations to us or

expose us to various legal or political risks associated with the affected jurisdictions, which could have a material adverse effect on our financial results.

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

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• manufacturer production levels and technological innovation;

• new-entrant manufacturers, or existing manufacturers producing new aircraft models;

• new-entrant manufacturers, or existing manufacturers producing new aircraft and engine types;

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

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• the number of operators using that type of aircraft;

• whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to us;

• whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to the lessor;

• the demand for and availability of such aircraft;

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

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

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

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

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

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

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

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

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

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

The Boeing 737 MAX and 787 and the Airbus A220, A320neo, A330neo and A350 are all currently in production.

The Boeing 777X is expected to enter service in 2025.

The Commercial Aircraft Corporation of China Ltd.

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

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

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

The effects of emissions and noise regulations and policies may negatively affect the airline industry.

This may cause lessees to default on their lease payment obligations and may limit the market for certain aircraft in our portfolio.

Many governments have imposed limits on aircraft engine emissions, such as NOx, CO and CO 2 , consistent with current ICAO standards.

In 2015, over 190 countries, including the United States, reached an agreement to reduce global GHG emissions at the United Nations Framework Convention on Climate Change.

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

The effects of emissions and noise regulations and policies may challenge the current growth trajectory of the airline industry.

Sustainability regulations and initiatives could increase the operating costs of our customers.

Many governments have imposed limits on aircraft engine emissions, such as NOx, CO and CO 2 , consistent with current International Civil Aviation Organization (“ICAO”) standards.

In February 2024, the Federal Aviation Administration released guidance to reduce carbon pollution emitted by most large airplanes flying in U.S.

The rule requires incorporating improved fuel-efficient technologies for airplanes manufactured after January 1, 2028, and for subsonic jet airplanes and large turboprop and propeller airplanes that are not yet certified.

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

has included the aviation sector in its emissions trading scheme (“ETS”) but its application to flights within the European Economic Area (“EEA”) deferred any further application until 2024, pending a review of the results of a new initiative introduced by the promulgated by ICAO.

On December 6, 2022, a provisional agreement on the European Commission’s “Fit for 55” proposal was reached between the European Parliament and the European Council that will modify the ETS system by phasing out ETS allowances for the aviation sector by 2026.

It remains to be seen how this agreement will be implemented and what effect, if any, this will have on our business.

In October 2016, ICAO adopted a global market-based measure to control CO 2 emissions from international aviation.

This measure is the “Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”) with the aim of achieving carbon-neutral growth from 2020 onwards.

The CORSIA pilot phase (2021-2023) and the CORSIA first phase (2024-2026) will apply only to routes between countries that have each volunteered to participate in the scheme.

has included the aviation sector in its emissions trading scheme (“ETS”), a cap-and-trade system that sets a limit on the amount of carbon dioxide that can be emitted by all industries, including aviation.

Although the ETS was initially implemented granting free emissions allowances based on an airline’s emissions history, during 2023, a provision of the European Commission’s “Fit for 55” proposal was adopted by the European Parliament and the European Council, which modifies the ETS system such that ETS free emissions allowances will phase out for the aviation sector by 2026.

Although the ETS is likely to increase costs for airlines operating in Europe, it remains to be seen what effect, if any, this will have on our business.

ICAO adopted a global market-based measure to control CO 2 emissions from international aviation called the “Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”).

CORSIA is currently in its first phase (2024-2026) wherein compliance applies only to routes between countries that have each volunteered to participate in the scheme.

All airlines that operate routes between two volunteering countries will be subject to the offsetting requirements.

The requirement to offset emissions will be divided among airlines in proportion to their total CO 2 emissions, which is referred to as the “sectoral” approach to emissions.

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

From 2027 onwards, CORSIA compliance will be mandatory.

The Eligible Emissions Units required to offset emissions in accordance with CORSIA will require a

Corresponding Adjustment which is a mechanism to avoid double counting and is granted by the government of the country in which an emissions reduction or removal occurs.

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

Such initiatives may be based on concerns regarding climate change, energy security, public health, local impacts, or other factors, and may impact the global market for certain

aircraft and cause behavioral shifts that result in decreased demand for air travel.

These concerns could result in limitations on our customers’ operation of our fleet and our ability to lease or re-lease certain older mid-life aircraft, particularly aircraft equipped with older technology engines.

Such initiatives may be based on concerns regarding climate change, energy security, public health, local impacts, or other factors, and may impact the global market for certain aircraft and cause behavioral shifts that result in decreased demand for air travel.

These concerns could result in limitations on our customers’ operation of our fleet and our ability to lease or re-lease certain older aircraft, particularly aircraft equipped with older technology engines.

Compliance with current or future regulations could cause our lessees to incur higher costs and lead to higher ticket prices, which could mean lower demand for travel and adverse impacts on the financial condition of our lessees.

Such compliance may also affect our lessees’ ability to make rental and other lease payments and limit the market for aircraft in our portfolio.

Public perception of the company’s commitment to positive ESG initiatives could expose us to additional risk.

Perception of the company’s commitment to certain ESG initiatives could expose us to additional risks and costs.

Companies are facing increasing and frequently evolving scrutiny globally from customers, regulators, financiers, employees and other stakeholders related to their ESG practices and disclosure.

There has been an increased expectation for the global aviation industry to balance commercial interests with conscientious ESG performance focused on accountability to stakeholders.

There has been an increased expectation for industries to balance commercial interests with conscientious ESG performance focused on accountability to stakeholders.

In recognition of this trend, organizations are sometimes reviewed by rating agencies using varying sustainability evaluation criteria.

In some cases, these reviews result in ESG-specific ratings.

Institutions who invest in our unsecured notes or with whom we have secured lending facilities may also have an elevated focus on the ESG perception of those with whom they transact.

Institutions who invest in our unsecured notes or with whom we have secured lending facilities may be required to consider the ESG risk of their lending portfolios and in some cases, this might require them to limit exposure to certain industry segments.

Our ability to obtain financing at strategic rates could be impacted by these perceptions and ratings or by any developing key performance indicators which the Company and financiers may develop over time.

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Some competitors may have a lower cost of funds and access to funding sources that are not available to us.

In addition, some of our competitors may have higher risk tolerances, lower investment return expectations or different risk or residual value assessments, which could allow them to consider a wider variety of investments, establish more relationships, bid more aggressively on aviation assets available for sale and offer lower lease rates or sales prices than we can.

In addition, some of our competitors may have higher risk tolerances, lower investment return

expectations or different risk or residual value assessments, which could allow them to consider a wider variety of investments, establish more relationships, bid more aggressively on aviation assets available for sale and offer lower lease rates or sales prices than we can.

Some of our competitors may provide financial services, maintenance services or other inducements to potential lessees or buyers that we cannot provide.

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

Additionally, the barriers to entry in the aircraft acquisition and

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

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

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

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

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

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

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

A substantial number of our leases do not provide for any periodic maintenance reserve payments to be made to us.

Other leases do not provide for any periodic maintenance reserve payments to be made to us.

Typically, these lessees are required to make payments at the end of the lease term.

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Even if we receive maintenance payments, these payments may not cover the entire expense of the scheduled maintenance they are intended to fund.

In addition, maintenance payments typically cover only certain scheduled maintenance requirements and do not cover all required maintenance and all scheduled maintenance.

In addition, maintenance payments typically cover only certain scheduled maintenance requirements and may not cover all required maintenance and all scheduled maintenance.

As a result, we may incur unanticipated or significant costs at the conclusion of a lease.

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However, they are not generally required to maintain political risk insurance.

Following the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of insurance coverage available to airlines for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events.

Following the September 11, 2001 terrorist attacks and, more recently, the Russian invasion of Ukraine, aviation insurers have reassessed their coverage and significantly increased premiums.

Aviation insurers significantly reduced the amount of insurance coverage available to airlines for liability to persons other than employees or passengers for claims resulting from acts of terrorism, war or similar events.

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

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

The Russian invasion of Ukraine has also led insurers to reassess their coverage and significantly increase premiums.

Our lessees’ insurance (including any available governmental supplemental coverage) and our contingent and possessed insurance may not cover, or be sufficient to cover, all types of claims that may be asserted against us and recovery may also be subject to aggregate limits.

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Events outside of our control, including the threat or realization of epidemic or pandemic diseases, terrorist attacks, war or armed hostilities between countries or non-state actors, and natural disasters may adversely affect the demand for air travel, the financial condition of our lessees and of the aviation industry more broadly, and may ultimately impact our business.

Air travel has historically been disrupted, sometimes severely, by the occurrence of unexpected events outside of our and our lessees’ control.

Air travel can be disrupted, sometimes severely, by the occurrence of unexpected events outside of our and our lessees’ control.

The occurrence of any such event, or multiple such events, could cause our lessees to experience decreased passenger demand, to incur higher costs and to generate lower revenues, which could adversely affect their ability to make lease payments to us.

This in turn may lead to lease restructurings and repossessions and could result in reductions to our lease revenues and cash flows, and cause us to record impairment charges to the extent we cannot recover our investment in our aircraft assets.

Passenger demand for air travel has been recently impacted by the COVID-19 pandemic and, in the past, by other epidemic diseases such as severe acute respiratory syndrome, bird flu, swine flu, the Zika virus, and Ebola.

According to IATA, air travel approximated 85% of pre-pandemic levels as of February 28, 2023, compared to 55% as of February 28, 2022.

If air traffic remains depressed over an extended period and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to provide lease concessions to certain customers in the form of deferrals or broader lease restructurings.

We have also experienced and may still experience other impacts from the COVID-19 pandemic, including weaker demand for certain aircraft types and defaults, bankruptcies or reorganizations of our lessees.

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

Passenger demand for air travel has been most recently impacted by the COVID-19 pandemic and, in the past, by other epidemic diseases such as severe acute respiratory syndrome, bird flu, swine flu, the Zika virus, and Ebola.

These events have resulted, and similar events in the future may result, in a prolonged period of depressed air traffic levels, which may lead to weaker demand for certain aircraft types as well as airline customer defaults, bankruptcies or reorganizations.

At the onset of the COVID-19 pandemic in early 2020, air travel dropped to approximately 20% of pre-pandemic levels, according to IATA, and did not return to historical levels until 2023.

To the extent our lessees do not have substantial liquidity to sustain such periods, and if our customers are unable to obtain sufficient funds from private, government or other sources, we may need to provide lease concessions to customers in the form of deferrals or broader lease restructurings.

These types of concessions in the future may negatively impact our business, financial condition,

cash flows and results of operations.

Future epidemic diseases and other diseases, or the fear of such events could provoke responses that negatively affect passenger air travel.

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These events may lead to decreased passenger demand and revenue due to safety concerns, the inconvenience of additional security measures, the higher price of jet fuel, increased financing costs, and difficulty in raising funds on favorable terms, or at all.

In addition, these events may lead to higher costs of aircraft

insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and affect the extent to which such insurance has been or will continue to be available.

In addition, these events may lead to higher costs of aircraft insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other similar perils, and affect the extent to which such insurance has been or will continue to be available.

They may also lead to higher insurance costs due to the increased security measures and potential special charges, such as those related to the impairment of aircraft and other long-lived assets stemming from the above conditions.

More recently, the Russian invasion of Ukraine and resulting sanctions by various countries, including the United States, countries in the E.U., and the U.K., have significantly affected our business, financial condition, and results of operations.

The Russia invasion of Ukraine has and may continue to have adverse effects on macroeconomic conditions, including fuel prices, the availability and cost of insurance, security conditions, currency exchange rates and financial markets.

It is not possible to predict the broader or longer-term consequences of the Russian invasion of Ukraine, which could include new or additional sanctions (including counter responses by the Russian government or other jurisdictions), embargoes, further escalation or regional instability, and geopolitical shifts.

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

More recently, the Russian invasion of Ukraine and the conflict in the Middle East have and may continue to have adverse effects on macroeconomic conditions, including fuel prices, the availability and cost of insurance, security conditions, currency exchange rates and financial markets.

Ongoing airspace closures require certain of our airline customers to re-route flights to avoid such airspace which has resulted in increased flight times and fuel costs.

Prolonged periods of conflict could result in new or additional sanctions, embargoes, further escalation or regional instability, and geopolitical shifts.

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

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

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

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

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

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

We continue to closely monitor the impact of recent crises, such as the Russian invasion of Ukraine and the COVID-19 pandemic, 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 continue to focus on aircraft with near-term lease expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers and aircraft variants that are more susceptible to the impact of these above crises and value deterioration.

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

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

Credit rating downgrades or being put on negative watch, may

make it more difficult and/or more costly to satisfy our funding requirements.

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

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

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

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

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

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

Our compliance with these ratios, tests and covenants depends upon, among other things, the timely receipt of lease payments from our lessees and upon our overall financial performance.

• Senior Notes Our senior note indentures impose operating and financial restrictions on our activities.

• Senior Notes.

Our senior note indentures impose operating and financial restrictions on our activities.

These restrictions limit our ability to, or in certain cases prohibit us from guaranteeing additional indebtedness, incurring liens and a cross-default to certain other financings of the Company.

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The terms of our financings also restrict our ability to incur or guarantee additional indebtedness or engage in mergers, amalgamations or consolidations among our subsidiary companies or between a subsidiary company and a third party or otherwise dispose of all or substantially all of our assets.

We are subject to various risks and requirements associated with transacting business in foreign jurisdictions.

We are subject to various risks and requirements associated with foreign laws, rules and regulations.

The international nature of our business exposes us to trade and economic sanctions and other restrictions imposed by the U.S.

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

Our information technology systems are subject to disruption,

damage or failure from a variety of sources, including malware, ransomware, security breaches, cyber-attacks, employee error and defects in design.

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

and other countries resulting from the Russian invasion of Ukraine.

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

There may also be an elevated risk of cyber-attacks and cybersecurity incidents by Russia or other countries.

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

Although various measures have been implemented to manage our risks related to the information technology systems and network disruptions, our resources and technical sophistication may not be adequate to prevent all types of cyber-attacks that could lead to the payment of fraudulent claims, loss of sensitive information, including our own proprietary information or that of our customers, suppliers and employees, and could harm our reputation and result in lost revenues and additional costs and potential liabilities.

Although various measures have been implemented to manage our risks related to the information technology systems and network disruptions, our resources and technical sophistication may not be adequate to prevent all types of cyber-attacks and cybersecurity incidents that could lead to the payment of fraudulent claims, loss of sensitive information, including our own proprietary information or that of our customers, suppliers and employees, and could harm our reputation and result in lost revenues and additional costs and potential liabilities.

Risks Related to Our Organization and Structure

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Treasury and guidance issued by the Internal Revenue Service.

We currently do not expect these changes to have a material impact on our financial position;

These changes are not expected to have a material impact on our financial position;

however, we will continue to evaluate the impact as further information becomes available.

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lessors (Bermuda and Ireland each do), and certain other requirements must be satisfied.

We can satisfy these requirements in any year if, for more than half

the days of such year, our shares are primarily and regularly traded on a recognized exchange and certain shareholders, each of whom owns 5% or more of our shares (applying certain attribution rules), do not collectively own more than 50% of our shares.

We can satisfy these requirements in any year if, for more than half the days of such year, our shares are primarily and regularly traded on a recognized exchange and certain shareholders, each of whom owns 5% or more of our shares (applying certain attribution rules), do not collectively own more than 50% of our shares.

Following the Merger, these stock ownership requirements are currently tested at the Marubeni and Mizuho Leasing levels such that Aircastle and its subsidiaries can continue to qualify for the Section 883 exemption if the stock of Marubeni is considered to be primarily and regularly traded on a recognized stock exchange and non-qualifying 5% or greater shareholders are not considered to collectively own more than 50% of Marubeni’s shares, as described above.

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The imposition of such taxes would adversely affect our business.

Bermuda Economic Substance Act 2018.

We are subject to risks related to the Bermuda Economic Substance Act 2018.

Pursuant to the Economic Substance Act 2018 (as amended) of Bermuda (the “ESA”) that came into force in January 2019, a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda (“non-resident entity”) that carries on as a business any one or more of the “relevant activities” referred to in the ESA must comply with economic substance requirements.

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

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

or other jurisdiction of the entity’s beneficial owners, on an entity’s non-compliance or being struck-off as a registered entity in Bermuda.

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

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The Registrar of Companies in Bermuda ultimately assesses compliance with the ESA requirements.

We expect to become subject to a Corporate Income Tax Regime in Bermuda

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.

In December 2023, the Government of Bermuda enacted the Bermuda Corporate Income Tax Act which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025 and is expected to supersede the Minister of Finance’s assurance from such date onwards.

The Company expects to be subject to Bermuda corporate income tax with respect to its fiscal year beginning March 1, 2025 and subsequent years.

We may become subject to an increased rate of Irish taxation which would adversely affect our business.

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

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

Previously, Irish Revenue had issued certain confirmations regarding the application of the 12.5% tax rate to activities, such as leasing and financing, undertaken by Irish lessors.

Irish Revenue has advised that these confirmations no longer apply, effective as of January 1, 2024.

Instead, certain aspects of the Irish leasing regime have been codified into law in Finance Act (No.2) 2023 and Irish Revenue released new guidance in January 2024 regarding the tax treatment of leasing companies.

The combination of the revised law and guidance could impose a higher threshold on our Irish lessors and financing companies when demonstrating they have sufficient activity to avail of the 12.5% tax rate.

The changes, along with any associated restructuring that may be required, could increase our Irish effective tax rate.

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

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

Furthermore, certain expenses in non-trading companies may also be non-deductible for tax purposes, increasing the effective tax rate further.

The Finance Act (No.2) 2023 also introduced new outbound payment rules which will apply to certain interest and royalty payments and, distributions made on or after April 1, 2024.

The new rules will apply withholding tax, or disapply existing domestic withholding tax exemptions, to certain outbound payments.

These new measures only apply to payments or distributions made by a company to an ‘associated entity’ (e.g., a related party) which is located either on the E.U.

list of non-cooperative jurisdictions or a zero-tax territory.

Transactions with unrelated third parties should not be affected by the provisions.

Aircraft lease rentals are outside the scope of these rules (as they are not considered to be a royalty).

There are a number of exemptions available with respect to interest payments, including where the payment is an “excluded payment.” An excluded payment is a payment where an amount of income, profits or gains arising from the payment is subject to a supplemental tax such as a tax under controlled foreign corporation rules or Pillar Two or such income, profits or gains are subject to foreign tax at a rate greater than zero or a domestic tax.

The provision also does not apply where the associated lender makes a corresponding payment to another person within twelve months of the end of the tax period in which the payment is made to the lender and that payment would have been an excluded payment if it had been made directly to that other person and the payments were made for bona fide commercial purposes.

There are also a number of exemptions available with respect to distributions, including where the payment is an “excluded payment” or the distribution is made out of income, profits or gains which have been chargeable directly or indirectly to Irish income tax, corporation tax or capital gains tax.

The outbound payment rules may therefore apply to certain payments which may increase the effective tax rate in Ireland.

Ireland also enacted the E.U.

Minimum Tax Directive into domestic legislation with effect from January 1, 2024.

The implementation of these rules mean that the group must be taxed at a minimum effective tax rate of 15%.

In Ireland, the Directive has been implemented by means of a new top-up tax to achieve the effective rate of 15%.

Further guidance on the operation of Pillar Two is expected to be released during 2024.

Any further guidance or Directives issued by the OECD or the E.U.

could alter the operation of this tax.

Our Irish subsidiaries may incur additional top-up tax charges in future periods to ensure that the Irish companies are taxed at a minimum effective tax rate of 15%.

We may become subject to income or other taxes in the non-U.S.

jurisdictions in which our aircraft operate, where our lessees are located or where we perform certain services which would adversely affect our business.

Certain Aircastle entities are expected to be subject to the income tax laws of Ireland and the United States.

In addition, we may be subject to income or other taxes in other jurisdictions by reason of our activities and operations, where our aircraft operate or where the lessees of our aircraft (or others in possession of our aircraft) are located.

Certain Aircastle entities are expected to be subject to the income tax laws of Bermuda, Ireland and the United States.

Although we have adopted operating procedures to reduce the exposure to such taxation, we may be subject to such taxes in the future and such taxes may be substantial.

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

It is unclear what impact the OECD and the BEPS initiatives will have on our business.

On January 29, 2019, the OECD announced an initiative , to create an international consensus on new rules (referred to as “BEPS 2.0”) for the framework governing international taxation, which was supported by the publication of the Pillar One and Pillar Two Blueprint Reports (the “Blueprints”) on October 12, 2020.

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

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

On October 8, 2021, 136 countries, including Ireland and Bermuda, approved a statement, known as the OECD BEPS Inclusive Framework (the “IF”), providing a framework for BEPS 2.0, which builds upon the Blueprints.

The IF and revised Pillar Two Blueprint include a global minimum effective tax rate of 15% for groups with annual consolidated revenue in excess of €750 million, subject to certain exclusions.

The OECD published detailed rules to assist in the implementation of the Pillar 2 rules involving 137 countries on December 20, 2021, and again on March 14, 2022.

These detailed rules should allow some countries to introduce the Pillar 2 rules into domestic legislation during the course of 2023.

On December 22, 2021, the European Commission published a proposed E.U.

Directive to incorporate the Pillar 2 tax rules into E.U.

law and has also issued further publications since that date.

On December 12, 2022, the E.U.

council unanimously agreed to adopt this Directive giving E.U.

countries until December 31, 2023 to transpose the Directive into domestic legislation.

Further guidance is expected from the OECD and the E.U.

as to how certain aspects of the Pillar

Two Blueprint and the Directive will operate mechanically, and as such it is difficult to determine the degree to which these changes may result in an increase in our effective tax rate and cash tax liabilities in future periods.

On March 12, 2022, the E.U.

released the latest draft of the E.U.

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

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

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

Given that the OECD and the E.U.

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

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

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

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

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

Based on the final legislation in Finance Act 2021 signed into law on December 21, 2021, the interest limitation rule will apply to limit the deductibility of a company’s exceeding borrowing costs (i.e., its interest (and equivalent) borrowing costs as reduced by its interest (and equivalent) income) to 30% of tax adjusted EBITDA.

Importantly for companies carrying on a leasing

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

The legislation was finalized on December 21, 2021 and Irish Revenue released guidance on the application of these rules on August 4, 2022, and updated guidance in February 2023.

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ATAD 3”) and has since issued a number of draft amendments.

On January 17, 2023, the European Parliament approved the report on the Unshell Proposal Directive.

ATAD 3 was initially expected to be adopted and published into E.U.

member states’ national laws by June 30, 2023, and become effective as of January 1, 2024, there is considerable uncertainty surrounding the development of the proposal and its implementation.

One of the proposed amendments has been to delay the application of E.U.

ATAD 3 to January 1, 2025.

ATAD 3 could result in additional reporting and disclosure obligations.

Based on a tentative timeline, we understand that E.U.

Member States will have until December 31, 2024 to transpose this Directive into national legislation, with the provisions applying from January 1, 2025.

The proposal is subject to a consultation procedure and, in its final form, will require the unanimous approval of the E.U.

Council before it is adopted.

Until the proposal receives approval and a final Directive is published, it is not possible to provide definitive guidance on the impact of the proposals for us.

However, at a minimum, the proposal could result in additional reporting and disclosure obligations for us.

On May 11, 2022, the European Commission issued a proposal for a Council Directive laying down rules providing for a debt-equity bias reduction allowance within the E.U.

DEBRA is intended to provide a notional interest deduction in respect of equity invested in a company, with the interest calculated based on the 10-year risk-free rate for the relevant currency, with the maximum deduction available limited to 30% of earnings before interest, tax, depreciation and amortization.

DEBRA is expected to be enacted into legislation in the coming years, but the timing and development of this legislation are uncertain.

DEBRA could result in additional reporting and disclosure obligations.

UNRESOLVED STAFF COMMENTS

Economic and Financial Affairs Council meeting on December 6, 2022, it was agreed that the examination of the DEBRA proposal should be suspended until other proposals in the area of corporate income tax have been put forward.

Therefore it is not clear if DEBRA will be enacted into legislation but, if it is, DEBRA could result in additional reporting and disclosure obligations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors