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Item 1A. Risk Factors

2025-04-23 compared with 2024-04-25 · 156 added, 81 removed, 390 unchanged (38% of the section changed)

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The risks described below are not the only risks facing our Company.

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

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

Summary of Risk Factors

Risks Related to Our Lessees

• We are indirectly impacted by the risks facing airlines and their ability to perform their obligations under the relevant lease depends on their financial condition, which may be affected by factors beyond our control, such as currency movements, fuel price volatility, weak economic conditions, and geopolitical instability.

• Lessee defaults, bankruptcies, aircraft repossessions, and lease payment restructurings or rescheduling could have a material adverse impact on our future revenue and cash flows.

• An adverse economic or political event in any region or country in which our lessees or our aircraft are concentrated could have a material adverse effect on our financial results.

• Airlines operating in emerging markets face heightened political and economic risks, which could affect the ability of our lessees to meet their obligations to us.

Risks Related to Our Aviation Assets

• Lease rates and aircraft values are subject to supply-demand dynamics and may decline due to excess capacity or the introduction of new aircraft and engine technology.

• Climate-related regulations and preferences for more fuel-efficient aircraft could reduce demand for older aircraft types.

• The concentration of our portfolio around a specific aircraft or engine type could have a material adverse affect on our business should the aircraft or engine type encounter disruptions, manufacturing and quality control issues, or other difficulties.

• We operate in a highly competitive aircraft leasing market with low barriers to entry, which may make it difficult for us to take advantage of investment opportunities or make investments that are consistent with our investment objectives.

Risks Related to Our Leases

• A lessee may fail to meet its maintenance obligations or other operational requirements applicable under the relevant lease, which may require us to incur unanticipated or significant costs.

• The failure to pay certain operational costs and discharge liens on the aircraft could result in the grounding or arrest of our aircraft and prevent or delay the re-lease, sale or other use of our aircraft.

• Failure to obtain adequate insurance coverage or lessee noncompliance with indemnity provisions may result in us, as lessor, being held liable for losses from the operation of the aircraft.

• Political or regulatory restrictions may impair our ability to export, re-register, or transfer aircraft.

Risks Related to Our Operations

• We operate a global business that may be subject to events outside of our control, such as economic downturns, epidemic or pandemic diseases, terrorist attacks, war or armed hostilities, and natural disasters, which may adversely affect the demand for air travel.

• Foreign laws, rules, and regulations, as well as escalating tariffs, trade tensions, and protectionist measures may adversely affect our business, financial condition and results of operations.

• Our ability to obtain debt financing on satisfactory terms depends on financial market conditions, as well as our credit rating, and any volatility in the capital markets or a credit downgrade may increase our borrowing costs and adversely affect our earnings and cash flow.

• We bear the risk or re-leasing and selling our aircraft and may not fully recover our investment through either future lease cash flows or a sale, which may result in a write down of the value of some of our assets.

• We are subject to cybersecurity threats and data protection regulations, and failure to maintain secure IT systems could disrupt our operations.

Risks Related to Our Organization and Structure

• We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.

Risks Related to Taxation

• We are subject to complex and evolving tax laws in jurisdictions where we have significant operations, including Ireland, Bermuda, and the U.S., which may have an adverse effect on our results of operations.

• Our business would be adversely affected by the imposition of taxes should we no longer qualify for certain tax exemptions for which we are currently eligible.

• Global initiatives, such as the Organization for Economic Cooperation and Development’s (“OECD”) action plan with respect to base erosion and profit shifting (“BEPS”) may increase our effective tax rate and tax liabilities in future periods.

Risks Related to Our Lessees

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

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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;

• manufacturer production levels and reliability of new aircraft and engine types resulting from production quality issues and technical or other difficulties;

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

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

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

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

• aircraft accidents;

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

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

In addition, the implementation of strict currency controls by local governments may make it difficult for our lessees to access U.S.

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

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

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

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.

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

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

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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, which could have a material 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.

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

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

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• changes in control of, or restructurings of, other aircraft leasing companies;

• manufacturer production levels and technological innovation;

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

• manufacturer production levels, production quality control issues and technical or other difficulties;

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

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

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

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

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

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

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

New aircraft types that are introduced to the market, and higher production levels of new technology aircraft types that have already been launched, may cause certain aircraft in our existing aircraft portfolio to become less desirable to potential lessees or purchasers.

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

The Boeing 777X is expected to enter service in 2026.

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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.

These new technology aircraft types, and potential variants of these types, may reduce the desirability of, and have an adverse effect on residual value and future lease rates of, older aircraft types and

The development of more fuel-efficient engines could make aircraft in our portfolio with less fuel-efficient engines less attractive to potential lessees.

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

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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 was initially implemented granting free emissions allowances based on an airline’s emissions history, a 2023 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.

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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 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.

Sustainable Aviation Fuel has been identified by IATA as the primary means by which IATA’s NetZero 2050 goal is to be achieved.

Many governments, including the E.U., the United Kingdom, Brazil and Japan, have mandated aviation operators employ benchmarked percentages of SAF “drop in” blend on future commercial flights.

A significant increase in SAF production will be required to make these benchmarks attainable, and at present, the cost of SAF is almost three times the cost of fossil jet fuel.

Meeting mandated SAF blends could pose a significant operating cost to our customers.

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

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

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 industries to balance commercial interests with conscientious ESG performance focused on accountability to stakeholders.

Corporate responsibility, specifically related to ESG matters, could expose us to additional risks and costs.

In recent years, 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.

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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.

More recently, there has been a growing anti-ESG sentiment in the United States, which may conflict with international/E.U.

regulatory requirements, resulting in regulatory uncertainty.

Our efforts to implement ESG initiatives and the speed of their adoption may be impacted by broader changes in ESG sentiment, policy shifts and divergence of

regulations, policies and practices with respect to these matters.

If we are unable to meet ESG-related standards or expectations, whether established by us or third parties, it could result in adverse publicity, reputational harm, and/or loss of investment, which could adversely affect our business, results of operations, financial condition, and liquidity.

The older age of some of our aircraft may expose us to higher maintenance-related expenses.

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Should any aircraft or engine types or any manufacturers encounter disruptions, including supply chain issues, manufacturing and quality control issues, financial instability or other difficulties, it would cause a decrease in the value of these assets, an inability to lease them on favorable terms or at all, or a potential grounding of these aircraft or engines, which may adversely impact our financial results, to the extent the affected type comprises a significant percentage of our portfolio.

There has been an ongoing impact from Pratt & Whitney geared turbofan engines, with more than 600 PW1100G powered Airbus A320 family aircraft parked.

While this may represent the peak, the issue is likely to persist beyond 2025.

These delays in Airbus and Boeing aircraft deliveries may also adversely affect our business, results of operations, financial condition, and liquidity.

We operate in a highly competitive market for investment opportunities and for the leasing and sale of aircraft .

We compete with other lessors, airlines, aircraft manufacturers, financial institutions, aircraft brokers and other investors with respect to aircraft acquisitions, leasing and sales.

The aircraft leasing industry is highly competitive and may be divided into three basic activities:

(i) aircraft acquisition;

(ii) leasing or re-leasing of aircraft;

and (iii) aircraft sales.

The aircraft leasing industry is highly competitive and we compete with other lessors, airlines, aircraft manufacturers, financial institutions, aircraft brokers and other investors with respect to aircraft acquisitions, leasing and sales.

A number of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do.

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.

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

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

and airworthiness directives, although in certain cases we may agree to share certain of these costs.

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

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

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

Our leases may 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.

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Risks Related to Our Operations

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.

Escalating tariffs, trade tensions, and protectionist measures may adversely affect our business, financial condition and results of operations.

Our business relies on the global movement of aircraft across international borders, and our airline customers operate in a highly interconnected global marketplace.

The unpredictable nature of tariffs and trade policies and the potential for rapid escalation of tensions creates ongoing uncertainty that may impact our operations.

Increasing protectionist sentiments in key markets worldwide, including the U.S., the E.U.

and China, may impact where we can source aircraft acquisitions, place and deliver aircraft, and sell or dispose of aircraft and other flight equipment.

The implementation of new, or expansion of existing, tariffs and other trade barriers may negatively impact our financial performance and operations, including, but not limited to:

• tariffs on aircraft and related components may increase aircraft acquisition costs or maintenance expenses to us, where such expenses are borne by us, and our lessees;

• retaliatory trade measures may disrupt global supply chains for aircraft and engine manufacturers, potentially delaying aircraft deliveries;

• increased scrutiny of leasing arrangements in certain jurisdictions could complicate or prevent transactions or limit our ability to place aircraft with certain lessees;

• trade restrictions may limit our lessees' ability to operate profitably on certain routes, potentially affecting their financial stability and ability to meet lease payment obligations;

• escalation of tensions due to tariffs or trade disputes may result in broader geopolitical conflicts affecting regions where we have significant assets deployed.

Given the current volatility and complexity of trade policies, it is difficult to predict exactly how, and to what extent, such policies may impact our business, our lessees and aircraft and engine manufacturers.

However, unfavorable government trade restrictions, including tariffs and regulatory controls on imports and exports, may adversely affect our business, financial condition, and results of operations.

Events outside of our control, including economic downturns, 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 can be disrupted, sometimes severely, by the occurrence of unexpected events outside of our and our lessees’ control.

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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.

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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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 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.

More recently, the conflicts in Russia, Ukraine and 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.

Airspace closures have and may require certain of our airline customers to continue re-routing 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.

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The amount of debt that may be borrowed or issued, refinanced, and/or repurchased, repaid, redeemed or otherwise retired, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with our debt covenants and other considerations.

The availability and pricing of debt financing remains susceptible to global events, including political changes, rising interest rates, currency fluctuations, and the rate of international economic growth.

The availability and pricing of debt financing remains susceptible to global events, including economic downturns, political changes, rising interest rates, currency fluctuations, and the rate of international economic growth.

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

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Other factors that may affect our ability to fully realize our investment in our aircraft and that may increase the likelihood of impairment charges include credit deterioration of a lessee, higher fuel prices which may reduce demand for older, less fuel-efficient aircraft, additional environmental regulations, age restrictions, customer preferences and other factors that may effectively shorten the useful life of older aircraft.

We own and lease long-lived assets and have written down the value of some of our assets.

If market conditions worsen, or in the event of a customer default, we may be required to record further write-downs.

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

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

We develop 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.

We own and lease long-lived assets.

If market conditions worsen, or in the event of a customer default, we may be required to write down the value of some of our assets.

We perform a recoverability assessment of all aircraft and other flight equipment on a quarterly and annual basis.

We perform customer or aircraft specific recoverability tests whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable.

For assets with indicators of impairment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceed its net book value.

The undiscounted cash flows consist of cash flows from currently contracted lease rentals 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.

Our assumptions are 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 net 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.

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

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 value deterioration.

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

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As of February 28, 2025, our total indebtedness was $5.0 billion, representing 66% of our total capitalization.

Aircastle Limited is either the principal obligor or has guaranteed most of this indebtedness, and we are responsible for timely payment when due and compliance with covenants under the related debt documentation.

Aircastle Limited is either the principal or co-obligor or has guaranteed most of this indebtedness, and we are responsible for timely payment when due and compliance with covenants under the related debt documentation.

We may be unable to generate sufficient cash to pay, when due, the principal of, interest on or other amounts due with respect to our indebtedness, and our substantial amount of indebtedness may increase our vulnerability to adverse economic and industry conditions, reduce our flexibility in planning for or reaction to changes in the business environment or in our business or industry, and adversely affect our cash flow and our ability to operate our business and compete with our competitors.

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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.

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

• Term Financings.

Our secured term financings contain, among other customary provisions, a minimum net worth covenant of $1.1 billion, a 2.0:1.0 minimum interest coverage ratio, a 2.0:1.0 minimum fixed coverage ratio, a 75% maximum loan-to-value ratio, a 2.0:1.0 EBITDA to cash interest ratio and a cross-default to certain other financings of the Company.

Our secured term financing contains, among other customary provisions, a minimum net worth covenant of $1.1 billion, a 2.0:1.0 minimum interest coverage ratio, a 75% maximum loan-to-value ratio and a cross-default to certain other financings of the Company.

• Unsecured Revolving Credit Facilities.

Our unsecured revolving credit facilities/loan contain $750 million to $1.1 billion minimum net worth covenants, minimum unencumbered asset ratios, minimum fixed coverage ratios and cross-defaults to certain other financings of the Company.

Our unsecured revolving credit facilities contain $1.1 billion minimum net worth covenants, minimum unencumbered asset ratios, minimum fixed coverage ratios and cross-defaults to certain other financings of the Company.

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.

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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.

There may also be an elevated risk of cyber-attacks and cybersecurity incidents by certain countries based on geopolitical tensions and events.

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

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We are a holding company with no operations and rely on our operating subsidiaries to provide us with funds necessary to meet our financial obligations.

We are a holding company with no material direct operations.

Aircastle Limited is a holding company with no material direct operations.

Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries.

As a result, we are dependent on loans, dividends and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations.

Although there are currently no material legal restrictions on our operating subsidiaries’ ability to distribute assets to us, legal restrictions, including governmental regulations and contractual obligations, could restrict or impair our operating subsidiaries’ ability to pay dividends or make loan or other distributions to us.

As a result, we are dependent on loans, dividends, distributions and other payments from our subsidiaries to generate the funds necessary to meet our financial obligations, including our debt service obligations.

Although there are currently no material legal restrictions on our operating subsidiaries’ ability to distribute assets to us, legal restrictions, including governmental regulations and contractual obligations, or future debt agreements entered into by us or our subsidiaries, could restrict, prohibit or impair our operating subsidiaries’ ability to pay dividends or make loan or other distributions to us.

Our subsidiaries are legally distinct from us and may be prohibited or restricted from paying dividends or otherwise making funds available to us under certain conditions.

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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.

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

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

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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.

The Company previously 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 (“CIT Act”) which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025, which overrides the Minister of Finance’s assurance from such date onwards.

The Company will be subject to Bermuda corporate income tax with respect to its fiscal year beginning March 1, 2025 and subsequent years as a Bermuda constituent entity of a multi-national group.

A multi-national group is defined for these purposes as a group with entities in more than one jurisdiction with consolidated revenues of at least €750 million for two out of the four previous fiscal years.

If Bermuda constituent entities of a multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15% of the net taxable income of such constituent entities as determined in accordance with and subject to the adjustments set out in the CIT Act (including in respect of foreign tax credits applicable to the Bermuda constituent entities).

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

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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.

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

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.

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.

The tax treatment of financing activity within the group, however, is much less certain.

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.

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

For arrangements in place on or before October 19, 2023, the provisions will only apply to payments or distributions made on or after January 1, 2025.

The rules 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”.

Two entities will be associated if there is more than a 50% relationship in terms of share capital or ownership.

Two entities will also be associated in cases where one entity has definite influence in the management of the other entity, or where the two entities are both associated entities of another entity.

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

In addition, to be in scope of the rules, the interest or royalty payment must also be made by a company to an “associated entity” that is resident in a “specified territory”.

A “specified territory” is defined as (i) a territory that is on Annex I of the E.U.

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

A specified territory cannot be another E.U./European Economic Area country.

A “zero-tax territory” means a territory that, other than in respect of an entity whose income, profits or gains are treated by that territory, or would be so treated but for an insufficiency of income, profits or gains, as arising or accruing to another entity (a) generally subjects entities to tax at a rate of zero per cent on income, profits and gains, or (b) does not generally subject entities, whether on a remittance basis or otherwise, to a tax on income, profits and gains.

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 provision also does not apply where the associated lender makes a corresponding payment to another person within 12 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%.

Ireland has implemented Pillar Two and we 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.

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Certain Aircastle entities are expected to be subject to the income tax laws of Bermuda, 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

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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Changes in tax law could impose withholding taxes on lease payments during the term of a lease.

Our leases typically require our lessees to indemnify us in respect of taxes, but some leases may not require such indemnification, or a lessee may fail to make such indemnification payment.

Our leases typically require our lessees to indemnify us in respect of taxes, however, a lessee may fail to make such indemnification payment.

The imposition of such taxes could adversely affect our business.

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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 expected that Pillar Two will increase the effective tax rate of the group.

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, 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.

On December 12, 2022, the E.U.

council unanimously agreed to allow E.U.

countries until December 31, 2023 to adopt the Pillar 2 rules into domestic legislation.

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

as to how certain aspects of the Pillar Two rules 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.

Ireland has enacted the E.U.

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

The legislation is largely in line with the E.U.

Minimum Tax Directive and OECD Guidance.

The implementation of these rules mean that the group must be taxed at a minimum effective tax rate of 15% as calculated under the Pillar 2 Global Anti-Base Erosion rules.

Ireland will continue to apply the 12.5% corporation tax rate to companies with consolidated global turnover below this threshold.

In Ireland, the E.U.

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

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

could alter the operation of this tax and could have an adverse impact on the group’s effective tax rate and cash tax liabilities in future periods.

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

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member states to introduce a number of anti-tax avoidance measures.

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

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

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

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jurisdictions where we have operations.

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

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

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

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

Importantly for companies carrying on a leasing

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

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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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.

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.

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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.

On December 10, 2024 the E.U.

Council adopted the proposal on the Faster and Safer Tax Relief of Excess Withholding Taxes (“FASTER”) Directive.

The FASTER Directive applies to dividends from publicly traded shares and, where applicable, interest from publicly traded bonds paid to registered owners who are resident for tax purposes outside a given E.U.

Member State.

The FASTER Directive is expected to be published in the E.U.

Official Journal in 2025, and Member States will be required to transpose the Directive into national law by December 31, 2028, with the rules becoming applicable as of January 1, 2030.

Until final Irish implementing legislation is published, it is not possible to provide definitive guidance on the impact, if any, of the FASTER Directive.

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