What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-04-27 compared with 2022-11-17 · 566 added, 1276 removed, 261 unchanged (88% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share and per share data)

September 30,

Notes March 31, 2023 December 31, 2022

Cash and cash equivalents 2 $ 40,994 $ 33,565

Restricted cash 2 — 19,500

Accounts receivable, net 113,547 99,443

Leasing equipment, net 4 1,849,662 1,913,553

Finance leases, net

Property, plant, and equipment, net 11,438 10,014

Investments 5 40,202 22,037

Intangible assets, net 6 45,729 41,955

Inventory, net 2 192,790 163,676

Other assets 2 147,082 125,834

Total assets $ 2,441,444 $ 2,429,577

Accounts payable and accrued liabilities $ 105,066 $ 86,452

Management fees payable to affiliate

Loans payable to affiliate

Debt, net 7 2,101,907 2,175,727

Maintenance deposits 2 93,703 78,686

3 unchanged sentences

Commitments and contingencies 14

Ordinary shares ( $ 1.00 par

value per share;

Ordinary shares ($ 0.01 par value per share;

2,000,000,000 shares authorized;

105.2 and 100.0 shares issued and outstanding as of September 30,

2022 and December 31, 2021, respectively)

99,728,786 and 99,716,621 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

Preferred shares ($ 0.01 par value per share;

200,000,000 shares authorized;

15,920,000 and 13,320,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

Additional paid in capital 368,681 343,350

Retained earnings

Accumulated deficit ( 296,205 ) ( 325,602 )

Shareholders' equity 73,632 18,878

Non-controlling interest in equity of consolidated subsidiaries 524 524

Total equity 74,156 19,402

Total liabilities and equity $ 2,441,444 $ 2,429,577

3 unchanged sentences

(Dollars in thousands, except share and per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses

Three Months Ended March 31,

Notes 2023 2022

Lease income $ 55,978 $ 39,325

Maintenance revenue 35,141 36,732

Asset sales revenue 108,691 —

Aerospace products revenue 85,113 14,313

Other revenue 7,795 1,321

Total revenues 12 292,718 91,691

Cost of sales 145,670 9,050

Operating expenses 2 22,534 61,799

General and administrative 4,067 4,561

6 unchanged sentences

Other income (expense)

Equity in losses of unconsolidated entities

Equity in (losses) earnings of unconsolidated entities 5 ( 1,335 ) 198

Gain on sale of assets, net — 16,288

Other income (expense)

Total other income (expense)

Income before income taxes

Other income 8 128

Total other (expense) income ( 1,327 ) 16,614

Income (loss) from continuing operations before income taxes 31,423 ( 177,615 )

Provision for income taxes 10 2,026 1,339

Net income attributable to shareholders

Earnings per share:

Net income (loss) from continuing operations 29,397 ( 178,954 )

Net loss from discontinued operations, net of income taxes 3 — ( 50,705 )

Net income (loss) 29,397 ( 229,659 )

Net loss attributable to non-controlling interests in consolidated subsidiaries:

Continuing operations — —

Discontinued operations 3 — ( 7,466 )

Dividends on preferred shares 6,791 6,791

Net income (loss) attributable to shareholders $ 22,606 $ ( 228,984 )

Earnings (loss) per share:

Continuing operations $ 0.23 $ ( 1.87 )

Discontinued operations $ — $ ( 0.43 )

Continuing operations $ 0.22 $ ( 1.87 )

Discontinued operations $ — $ ( 0.43 )

Weighted average shares outstanding:

Basic 99,728,245 99,366,877

Diluted 100,974,100 99,366,877

See accompanying notes to consolidated financial statements.

FTAI AVIATION LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(Dollars in thousands)

Three and Nine Months Ended September 30,2022

Additional Paid In

Three Months Ended March 31,

Net income (loss) $ 29,397 $ ( 229,659 )

Other comprehensive income (loss):

Other comprehensive loss related to equity method investees, net (1) in discontinued operations

Comprehensive income (loss) 29,397 ( 324,438 )

Comprehensive loss attributable to non-controlling interest:

Continuing operations — —

Discontinued operations — ( 7,466 )

Comprehensive income (loss) attributable to shareholders $ 29,397 $ ( 316,972 )

________________________________________________________

(1) Net of deferred tax expense of $ 0 for the three months ended March 31, 2022.

See accompanying notes to consolidated financial statements.

FTAI AVIATION LTD.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)

Three Months Ended March 31, 2023

Ordinary Shares (1)

Preferred Shares (1)

Additional Paid In Capital Accumulated Deficit Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity

Equity - December 31, 2022 $ 997 $ 133 $ 343,350 $ ( 325,602 ) $ 524 $ 19,402

Capital contributions

Capital distributions

Equity - June 30, 2022

Capital contributions

Capital distributions

Equity - September 30, 2022

Three and Nine Months Ended September 30,2021

Additional Paid In

Net income 29,397 — 29,397

Other comprehensive income — — —

Total comprehensive income 29,397 — 29,397

Issuance of ordinary shares 230 230

Dividends declared - ordinary shares ( 29,919 ) ( 29,919 )

Issuance of preferred shares 26 61,703 61,729

Dividends declared - preferred shares ( 6,791 ) ( 6,791 )

Equity-based compensation 108 108

Equity - March 31, 2023 $ 997 $ 159 $ 368,681 $ ( 296,205 ) $ 524 $ 74,156

Three Months Ended March 31, 2022

Common Shares (1)

Preferred Shares (1)

Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity

Equity - December 31, 2021 $ 992 $ 133 $ 1,411,940 $ ( 132,392 ) $ ( 156,381 ) $ ( 192 ) $ 1,124,100

Capital contributions

Capital distributions

Equity - June 30, 2021

Capital contributions

Capital distributions

Equity - September 30, 2021

Net loss ( 222,193 ) ( 7,466 ) ( 229,659 )

Other comprehensive loss — ( 94,779 ) — ( 94,779 )

Total comprehensive loss ( 222,193 ) ( 94,779 ) ( 7,466 ) ( 324,438 )

Issuance of ordinary shares 164 164

Dividends declared - ordinary shares ( 32,749 ) ( 32,749 )

Dividends declared - preferred shares ( 6,791 ) ( 6,791 )

Equity-based compensation 709 709

Equity - March 31, 2022 $ 992 $ 133 $ 1,372,564 $ ( 354,585 ) $ ( 251,160 ) $ ( 6,949 ) $ 760,995

________________________________________________

(1) Common and Preferred Shares of Fortress Transportation and Infrastructure Investors LLC were exchanged for Ordinary and Preferred Shares of FTAI Aviation Ltd.

when the Merger, as detailed in Note 1, was completed on November 10, 2022.

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net income to cash provided by operating activities:

Net income (loss) $ 29,397 $ ( 229,659 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Equity in losses of unconsolidated entities 1,335 24,013

1 unchanged sentence

Security deposits and maintenance claims included in earnings ( 9,842 ) ( 11,592 )

Equity-based compensation 108 709

Depreciation and amortization 40,926 58,301

Payment-in-kind interest

Asset impairment 1,220 122,790

Change in deferred income taxes 1,692 2,388

Change in fair value of non-hedge derivative — 766

Change in fair value of guarantees ( 1,769 ) —

Amortization of lease intangibles and incentives 7,844 12,013

Amortization of deferred financing costs 2,017 5,771

Provision for credit losses 475 47,914

Accounts receivable, net

Inventory, net

Other ( 326 ) ( 208 )

Accounts receivable ( 14,840 ) 8,619

Inventory 6,984 ( 6,044 )

Other assets ( 2,013 ) ( 4,221 )

Accounts payable and accrued liabilities 6,088 ( 16,597 )

3 unchanged sentences

Cash flows from investing activities:

Distribution from unconsolidated entities

Investment in unconsolidated entities ( 19,500 ) ( 1,637 )

Principal collections on finance leases — 67

2 unchanged sentences

Acquisition of lease intangibles ( 8,640 ) ( 5,282 )

Purchase deposits for aircraft and engines

Purchase deposits for acquisitions ( 9,940 ) ( 3,350 )

Proceeds from sale of leasing equipment 153,679 51,491

Proceeds from deposit of sale of aircraft and engines

Return of purchase deposits

Proceeds from sale of property, plant and equipment — 2,910

Proceeds for deposit on sale of aircraft and engine 1,042 1,775

Net cash used in investing activities $ ( 12,323 ) $ ( 228,127 )

3 unchanged sentences

(Dollars in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

Cash flows from financing activities:

Proceeds from debt $ 145,000 $ 408,980

Repayment of debt ( 220,000 ) ( 224,473 )

Payment of deferred financing costs — ( 10,818 )

Receipt of security deposits 1,459 1,075

2 unchanged sentences

Release of maintenance deposits — ( 250 )

Capital contributions from Parent

Capital distributions to Parent

Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs 61,729 —

Cash dividends - ordinary shares ( 29,919 ) ( 32,749 )

Cash dividends - preferred shares ( 6,791 ) ( 6,791 )

Net cash (used in) provided by financing activities $ ( 38,445 ) $ 145,810

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Net decrease in cash and cash equivalents and restricted cash ( 12,071 ) ( 80,394 )

Cash and cash equivalents and restricted cash, beginning of period 53,065 440,061

Cash and cash equivalents and restricted cash, end of period $ 40,994 $ 359,667

Supplemental disclosure of non-cash investing and financing activities:

Acquisition and transfers of leasing equipment

Assumed and settled security deposits

Assumed and settled maintenance deposits

Acquisition of leasing equipment $ 17,104 $ 9,658

Security deposits, maintenance deposits, other assets and other liabilities settled in the sale of leasing equipment 10,293 —

Settled and assumed security deposits ( 468 ) ( 10,198 )

Billed, assumed and settled maintenance deposits 6,774 ( 31,594 )

Non-cash change in equity method investment — ( 94,779 )

Issuance of ordinary shares 230 164

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in tables in thousands, unless otherwise noted)

BACKGROUND AND BASIS OF PRESENTATION

FTAI Aviation Ltd.

(“we”, “us”, “our” or the “Company and formerly FTAI Finance Holdco Ltd.”) is a Cayman Islands exempted company which, through its subsidiaries, owns and leases

aviation equipment.

The Company was incorporated on December 8, 2017 and as of September 30, 2022, was wholly owned by Fortress Transportation and Infrastructure Investors LLC (the “Parent”).

On November 10, 2022, pursuant to the Agreement and

Plan of Merger dated August 12, 2022, by and among the Company, the Parent, and FTAI Aviation Merger Sub LLC, the Parent became a wholly-owned subsidiary of the Company.

In connection with the consummation of the merger, the Company’s corporate name was changed to FTAI Aviation Ltd., and the Company replaced the Parent as the publicly traded

We consist of an equipment leasing business that owns and leases aviation equipment and also develops, manufactures, repairs and sells aftermarket components for aircraft engines.

(“we”, “us”, “our” or the “Company” and formerly “Fortress Transportation and Infrastructure Investors LLC”) is a Cayman Islands exempted company which through its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through exclusivity arrangements, aftermarket components for aircraft engines.

Additionally, we own and lease offshore energy equipment.

We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 12).

During the third quarter of 2021, the Parent announced its plan to spin off its infrastructure business and separate into two distinct, publicly

traded companies (the ‘‘Separation’’) comprising the infrastructure business and the equipment leasing business.

As part of a restructuring for the Separation, the Company, the Parent and its subsidiaries completed a series of transactions which

included the contribution of remaining interests in aviation legal entities to the Company.

As a result, on March 31, 2022 the Company acquired a 100 %

interest in FTAI CHR JV Holdings LLC, a subsidiary that owns a 25 % ownership interest in the Advanced Engine Repair JV, and a 100 % interest in WWTAI Aviation LLC, a subsidiary that owns aviation assets.

The Parent completed the spin-off of its infrastructure business into an

independent publicly traded company on August 1, 2022.

Basis of Presentation

The accompanying consolidated financial statements were prepared on a standalone legal entity basis.

These financial statements reflect the consolidated historical

results of operations, financial position and cash flows of FTAI Aviation Ltd.

in accordance with U.S.

generally accepted accounting principles (“U.S.

The transfer of a business between entities under common control that result in a change in reporting entity require retrospective combination of the entities for all

periods presented as if the combination had been in effect since the inception of common control.

The transfer of remaining aviation legal entities, as described above, represents a transfer of a business under a common control transaction which

has been recorded at carrying value and accounted for retrospectively for all periods presented.

Historically, separate financial statements have not been prepared for the Company and it has not operated as a standalone business separate from the Parent.

accompanying consolidated financial statements have been prepared from Parent’s historical accounting records and are presented on a standalone basis as if the operations had been conducted independently from Parent.

The historical results of

operations, financial position, and cash flows of FTAI Aviation Ltd.

represented in the consolidated financial statements may not be indicative of what they would have been had the Company actually been a separate standalone entity during such

periods, nor are they necessarily indicative of our future results of operations, financial position, and cash flows.

The assets and liabilities in the consolidated financial statements have been reflected on a historical cost basis.

Corporate Function

The consolidated financial statements include all revenues and costs directly attributable to FTAI Aviation Ltd.

and an allocation of certain expenses.

The Parent is

externally managed by Fortress Investment Group LLC (the ‘‘Manager’’), which performs the Parent’s corporate function (‘‘Corporate’’), and incurs a variety of expenses including, but not limited to, information technology, accounting, treasury,

tax, legal, corporate finance and communications.

For purposes of the Consolidated Statements of Operations, an allocation of these expenses is included to reflect our portion of such corporate overhead from the Parent.

The charges reflected have

either been specifically identified or allocated based on an estimate of time spent on the Company.

These allocated costs are recorded in General and administrative, and Acquisition and transaction expenses in the Consolidated Statements of

We believe the assumptions regarding allocations of the Parent’s corporate expenses are reasonable.

Nevertheless, the allocations may not be indicative of the actual expense that would have been incurred had FTAI Aviation Ltd.

as an independent, standalone public entity, nor are they indicative of FTAI Aviation Ltd.’s future expenses.

Actual costs that may have been incurred if we had been a standalone company would depend on a number of factors, including the

organizational structure, what functions were outsourced or performed by employees and strategic decisions made in areas such as information technology and infrastructure.

The Parent funded our operating and investing activities as needed.

transfers to and from the Parent are reflected in the Consolidated Statements of Cash Flows as ‘‘Capital contributions from Parent” and “Capital distributions to Parent”.

Refer to Note 11 for additional

discussion on corporate costs allocated from the Parent that are included in these consolidated financial statements.

Unaudited interim financial information

The accompanying interim consolidated

balance sheet as of September 30, 2022, the consolidated statements of operations, changes in equity and cash flows for the nine months ended September 30, 2022 and 2021 are unaudited.

These unaudited interim consolidated financial statements have

been prepared in accordance with U.S.

In the opinion of our management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments

necessary for the fair statement of our financial position as of September 30, 2022, the results of operations, changes in equity and cash flows for the nine months ended September 30, 2022 and 2021.

The results of operations for the nine months

ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other period.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

On August 1, 2022, the Company completed the spin-off of its infrastructure business into an independent publicly traded company.

Accordingly, the operating results of, and costs to separate, the infrastructure business are reported in Net loss from discontinued operations, net of income taxes in the Consolidated Statements of Operations for all periods presented.

All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted.

For additional information, see Note 3, "Discontinued Operations."

On November 10, 2022, the Company completed a reverse merger transaction pursuant to the Agreement and Plan of Merger (the “Merger”) between Fortress Transportation and Infrastructure Investors LLC (“FTAI LLC”) and the Company and the parties thereto, with FTAI LLC becoming a subsidiary of the Company.

This reverse merger represents a transaction between entities under common control.

Upon merger completion, FTAI LLC’s shareholders received one share of the Company’s ordinary shares, Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares in exchange for each share of FTAI LLC’s common shares, Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares, respectively, with the new Shares of FTAI Aviation Ltd.

having substantially similar rights and privileges as the respective FTAI LLC shares being converted.

All exchanges were completed without any further action from the shareholders.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting —The accompanying consolidated

financial statements are prepared in accordance with U.S.

generally accepted accounting principles and include both our accounts and those of our subsidiaries.

Principles of Consolidation —We consolidate all

entities in which we have a controlling financial interest and control over significant operating decisions.

All intercompany transactions and balances have been eliminated.

We use the equity method of accounting for investments in entities in which we exercise significant influence, but which do not meet the

requirements for consolidation.

Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities.

Use of Estimates —The preparation of financial

statements in conformity with U.S.

financial statements and the reported amounts of revenues and expenses during the reporting period, including allocations from the Parent.

Basis of Accounting — The accompanying consolidated financial statements are prepared in accordance with U.S.

generally accepted accounting principles (“U.S.

GAAP”) and include the accounts of us and our subsidiaries.

These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary.

All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.

We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation.

Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive loss.

Use of Estimates — The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Risks and Uncertainties —In the normal course of

business, we encounter several significant types of economic risk including credit, market, and capital market risks.

Credit risk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to

fulfill its other contractual obligations.

Market risk reflects the risk of a downturn or volatility in the underlying industry in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or

customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets.

Capital market risk is the risk that we are unable to obtain capital at

reasonable rates to fund the growth of our business.

Risks and Uncertainties — In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks.

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

Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets.

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

We, through our subsidiaries, also conduct operations outside of the United States;

such international operations are subject to the same risks as those associated with our United States

operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws.

have significant exposure to foreign currency risk as all of our leasing and customer arrangements are denominated in U.S.

Cash and Cash Equivalents —We consider all highly

liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.

Inventory, net —We hold aircraft engine modules,

spare parts and used material inventory for trading and to support operations.

Inventory, net is carried at the lower of cost or net realizable value on our Consolidated Balance Sheets.

Property, Plant and Equipment, Leasing Equipment and Depreciation — Property,

plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to estimated residual values which are

summarized as follows:

Range of Estimated Useful Lives

Residual Value Estimates

25 years from date of manufacture

Generally not to exceed 15 % of manufacturer’s list price when new

Aircraft engines

based on maintenance adjusted service life

Sum of engine core salvage value plus the estimated fair value of life limited parts

Aviation tooling and equipment

from date of purchase

Scrap value at end of useful life

Furniture and fixtures

from date of purchase

Major improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required to get the

asset ready for initial service are capitalized and depreciated over the remaining life of the asset.

Property, plant and equipment is included in Other Assets in the Consolidated Balance Sheets.

We review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our

depreciation policies, useful lives of our equipment or the assigned residual values is warranted.

For planned major maintenance or component overhaul activities for aviation equipment off lease, the cost of such major maintenance or component

overhaul event is capitalized and depreciated on a straight-line basis over the period until the next maintenance or component overhaul event is required.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

In accounting for leasing equipment, we make estimates about the expected useful lives, residual values and the fair value of acquired in-place

leases and acquired maintenance liabilities.

In making these estimates, we rely upon observable market data for the same or similar types of equipment and our own estimates with respect to a lessee’s anticipated utilization of the aircraft or

When we acquire leasing equipment subject to an in-place lease, determining the fair value of the in-place lease requires us to make assumptions regarding the current fair values of leases for identical or similar equipment, in order to

determine if the in-place lease is within a fair value range of current lease rates.

If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease

income over the remaining term of the lease.

Impairment of Long-Lived Assets —We perform a

recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable.

Indicators may include, but are not

limited to, a significant lease restructuring or early lease termination;

a significant change in market conditions;

or the introduction of newer technology aircraft or engines.

When performing a recoverability assessment, we measure whether the

estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value.

The undiscounted cash flows consist of cash flows from currently contracted leases, future projected leases, transition costs,

estimated down time and estimated residual or scrap values.

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

Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future

expectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from third party industry sources.

The factors considered in estimating the undiscounted cash flows are

impacted by changes in future periods due to changes in contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.

Security Deposits —Our operating leases generally

require the lessee to pay a security deposit or provide a letter of credit.

Security deposits are held until specified return dates stipulated in the lease or lease expiration.

Maintenance Payments —Typically, under an operating

lease of aircraft, the lessee is responsible for performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine.

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

If a lessee is making monthly maintenance payments, we would

typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event,

usually shortly following the completion of the relevant work.

We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the

Consolidated Balance Sheets.

Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability.

In certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery

conditions stipulated at the inception of the lease.

When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets, for the estimated value of the

end-of-life maintenance payment at acquisition.

We recognize payments received as end-of-lease compensation adjustments, within lease revenue or as a reduction to the maintenance right asset, when payment is received or collectability is assured.

In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payment.

Lease Incentives and Amortization —Lease incentives,

which include lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs, are capitalized and amortized as a reduction of lease income over the primary term of the lease,

assuming no lease renewals.

Intangibles and Amortization —Intangibles include

the value of acquired favorable and unfavorable leases.

In accounting for acquired leasing equipment, we make estimates about the fair value of the acquired leases.

In determining the fair value of

these leases, we make assumptions regarding the current fair values of leases for identical or similar equipment in order to determine if the acquired lease is within a fair value range of current lease rates.

If a lease is below or above the range

of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease.

such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws.

We do not have significant exposure to foreign currency risk as all of our leasing arrangements are denominated in U.S.

Cash and Cash Equivalents — We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.

Restricted Cash —Restricted cash consists of funds required for the Company’s investment in Quick Turn, as described in Note 5, of $ 19.5 million as of December 31, 2022.

The Company had no restricted cash as of March 31, 2023.

Inventory — We hold aircraft engine modules, spare parts and used material inventory for trading and to support operations.

Inventory is carried at the lower of cost or net realizable value on our consolidated balance sheets.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Operating Leases— We lease equipment

pursuant to op erating leases.

Revenues — We disaggregate our revenue from contracts with customers by products and services.

Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers , unless otherwise noted.

We have elected to exclude sales and other similar taxes from revenues.

During the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output of our recurring, ordinary activities.

As a result of this update, the transaction price allocated to the sale of assets is included in Asset sales revenue in the Consolidated Statement of Operations beginning in the third quarter of 2022 and are accounted for in accordance with ASC 606.

The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations beginning in the third quarter of 2022.

Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets.

Generally, assets sold were under leasing arrangements with customers prior to sales and were included in Leasing equipment, net, on the Consolidated Balance Sheets.

Operating Leases —We lease equipment pursuant to operating leases.

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

Revenue is not recognized when collection is not reasonably

Revenue is not recognized when collection is not reasonably assured.

When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the

lessee’s utilization of the leased asset or at the end of the lease.

Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease.

Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease.

These periodic

maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee.

In the event the

total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.

These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee.

In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.

Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets.

All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues.

Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted

utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions.

Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions.

Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period.

For purchase and lease back transactions, we account for the transaction as a single arrangement.

We allocate the consideration paid based on the

relative fair value of the aircraft and lease.

We allocate the consideration paid based on the relative fair value of the aircraft and lease.

The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable lease intangible.

Finance Leases —From time to time we enter into finance lease

arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the

fair value of the leased equipment at the date of lease inception.

Finance Leases —From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the date of lease inception.

Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income.

The lease payments are segregated into principal and interest

components similar to a loan.

The lease payments are segregated into principal and interest components similar to a loan.

Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income.

The principal component of the lease payment is reflected as a reduction to the net

investment in finance leases.

The principal component of the lease payment is reflected as a reduction to the net investment in finance leases.

Revenue is not recognized when collection is not reasonably assured.

When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are

Asset sales revenue —Asset sales revenue primarily consists of the

transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment.

From time to time, the Company may assign the related lease agreements to the customer as part of the sale of these assets.

sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business.

When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Asset sales revenue —Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment.

From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets.

We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business.

As such, these sales are accounted for within the scope of ASC 606.

Revenue is recognized when a performance obligation is

satisfied by transferring control over an asset to a customer.

Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer.

Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations.

See Note 9 for additional information.

Aerospace Products revenue —Aerospace Products revenue primarily

consists of the transaction price related to the sale of repaired CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606.

Revenue is recognized when a performance

obligation is satisfied by transferring control over the related asset to a customer.

Aerospace Products revenue —Aerospace Products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606.

Revenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer.

Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations.

Leasing Arrangements —At contract inception, we evaluate whether an

arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time).

Operating lease right-of-use (“ROU”) assets and lease liabilities are

included in Other assets and Other liabilities in our Consolidated Balance Sheets.

Aerospace products revenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to customers as they become unserviceable during the contract term.

The Company recognizes revenue over time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the

information available at commencement date of the lease.

Leasing Arrangements — At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time).

Operating lease right-of-use (“ROU”) assets and lease liabilities are included in Other assets and Other liabilities in our Consolidated Balance Sheets, respectively.

Finance lease ROU assets are recognized in Other assets and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets.

All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease.

ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives.

Operating lease ROU assets are

subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives.

Operating lease ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives.

The finance lease ROU assets are subsequently amortized using the straight-line method.

Operating lease expenses are recognized on a straight-line basis over the lease term.

With respect to finance leases, amortization of the ROU

asset is presented separately from interest expense related to the finance lease liability and is recorded in Operating expenses in the Consolidated Statements of Operations.

Variable lease payments, which are primarily based on usage, are

recognized when the associated activity occurs.

With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability and is recorded in Operating expenses in the Consolidated Statements of Operations.

Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs.

We have elected to combine lease and non-lease components for all lease contracts where we are the lessee.

Additionally, for arrangements with lease terms of 12 months

or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.

Concentration of Credit Risk —We are subject to

concentrations of credit risk with respect to amounts due from customers.

We attempt to limit our credit risk by performing ongoing credit evaluations and, when deemed necessary, enter into collateral arrangements.

During the three and nine

months ended September 30, 2022, no customer accounted for more than 10% of total revenue.

During the three and nine months ended September 30, 2021, one customer in the Aviation Leasing segment accounted for approximately 14 % of total revenue in both periods.

As of September 30, 2022, there were two customers that represented 32 % and 14 % of total Accounts receivable, net.

As of December

31, 2021, there were two customers that represented 52 % and 19 % of total Accounts receivable, net.

We maintain cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial

institutions.

Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.

Concentration of Credit Risk — We are subject to concentrations of credit risk with respect to amounts due from customers.

We attempt to limit our credit risk by performing ongoing credit evaluations.

We earned 18 % and 10 % of our revenue from two customers in the Aviation Leasing segment during the three months ended March 31, 2023.

No single customer accounted for greater than 10% of total revenue during the three months ended March 31, 2022.

As of March 31, 2023, there was one customer in the Aviation Leasing segment that represented 15 % of total accounts receivable, net.

As of December 31, 2022, there were two customers in the Aviation Leasing segment that represented 20 % and 12 % of total accounts receivable, net.

We maintain cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions.

We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.

Allowance for Doubtful Accounts —We determine the

allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis.

The allowance for doubtful accounts was $ 54.7 million and $ 16.0 million as of September 30, 2022 and

December 31, 2021, respectively.

There was no provision for credit losses and $ 1.5 million of provision for credit losses for the three months ended September 30, 2022 and 2021, respectively.

There were provisions for credit losses of $ 47.1 million and $ 0.8 million for the

nine months ended September 30, 2022 and 2021, respectively, and is included in Operating expenses in the Consolidated Statements of Operations.

Economic sanctions and export controls against Russia and Russia’s aviation industry have been imposed due to its invasion of Ukraine during the

first quarter of 2022.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and recognized approximately $ 47.1 million in provision for credit losses during the nine months ended September 30, 2022.

Our allowance for doubtful accounts as of September 30, 2022 includes all accounts receivable exposure to Russian and

Ukrainian customers.

Expense Recognition —Expenses are recognized on an

accrual basis as incurred.

Acquisition and Transaction Expenses —Acquisition

and transaction expenses is comprised of indirect costs related to asset acquisitions, dispositions and terminated deal costs, including salaries, advisory, legal, accounting, valuation and other professional or consulting fees.

Foreign Currency —Our functional and reporting

currency is the U.S.

Purchases and sales of assets and income and expense items denominated in foreign currencies are translated into U.S.

dollar amounts on the respective dates of such transactions.

Income Taxes —The

Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed.

The Company is considered a Passive Foreign Investment Company for U.S.

income tax purposes and certain income taxes are imposed on our owners.

Taxable income or loss generated by our corporate subsidiaries is subject to U.S.

federal, state and foreign corporate income tax in locations where they conduct bu siness.

We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax

consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

A valuation allowance is established when management believes it is more likely than not

that a deferred tax asset will not be realized.

Allowance for Doubtful Accounts — We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis.

The allowance for doubtful accounts was $ 66.1 million and $ 65.6 million as of March 31, 2023 and December 31, 2022, respectively.

There was provision for credit losses of $ 0.5 million and $ 47.9 million for the three months ended March 31, 2023 and 2022, respectively, which is included in Operating expenses in the Consolidated Statements of Operations.

Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the first quarter of 2022.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful accounts at March 31, 2023 includes all accounts receivable exposure to Russian and Ukrainian customers.

Comprehensive Loss — Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners.

Our comprehensive loss represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for comprehensive loss related to cash flow hedges of our equity method investees of discontinued operations.

The cash flow impact of commodity derivatives held by our consolidated subsidiaries is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.

Other Assets— Other assets is primarily comprised of lease incentives of $ 43.0 million and $ 37.9 million, purchase deposits of $ 10.2 million and $ 6.7 million, notes receivable of $ 53.2 million and $ 49.2 million, operating lease right-of-use assets, net of $ 2.8 million and $ 3.0 million, finance leases, net of $ 5.9 million and $ 6.4 million, maintenance right assets of $ 8.8 million and $ 6.8 million and prepaid expenses of $ 1.5 million and $ 1.9 million as of March 31, 2023 and December 31, 2022, respectively.

Dividends— Dividends are recorded if and when declared by the Board of Directors.

For the three months ended March 31, 2023 and 2022, the Board of Directors declared cash dividends of $ 0.30 and $ 0.33 , per ordinary share, respectively.

Additionally, in the quarter ended March 31, 2023, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares of $ 0.52 , $ 0.50 and $ 0.52 per share, respectively.

Recent Accounting Pronouncements — The Company has evaluated all recent accounting pronouncements and none are expected to have a material impact on the Company’s consolidated financial statements.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

We file income tax returns in the U.S.

federal jurisdiction, various state jurisdictions and in certain foreign jurisdictions.

The income tax

returns filed by us and our subsidiaries are subject to examination by the U.S.

federal, state and foreign tax authorities.

We recognize tax benefits for uncertain tax positions only if it is more likely than not that the position is sustainable

based on its technical merits.

Interest and penalties on uncertain tax positions are included as a component of the provision for income taxes in the Consolidated Statements of Operations.

Other Assets— Other assets is primarily comprised of

lease incentives of $ 35.5 million and $ 46.2

million, purchase deposits of $ 28.6 million and $ 13.7 million, prepaid expenses of $ 0.7 million and $ 3.1 million, notes receivable of $ 56.0 million and $ 22.9 million, maintenance right assets of $ 12.4

million and $ 5.1 million, and operating lease right-of-use assets, net of $ 3.2 million and $ 2.3 million, as of September 30, 2022 and

December 31, 2021, respectively.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and recognized approximately $ 7.5 million in amortization for the remaining lease incentives during the nine months ended September 30, 2022.

Accounts Payable and Accrued Liabilities— Accounts

payable and accrued liabilities primarily include payables relating to aviation leasing equipment maintenance and aircraft engine modules, spare parts, used material inventory, accrued compensation and operating expenses.

Recent Accounting Pronouncements —In July 2021, the

FASB issued ASU 2021-05, Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments .

This ASU requires lessors to classify and account for a lease with variable lease payments that do not

depend on a reference index or a rate as an operating lease if (i) the lease would have been classified as a sales-type lease or a direct financing lease under Topic 842 and (ii) the lessor would have otherwise recognized a day-one loss.

standard is effective for all reporting periods beginning after December 15, 2021.

We adopted this guidance in the first quarter of 2022, which did not have a material impact on our consolidated financial statements.

DISCONTINUED OPERATIONS

FTAI Infrastructure Inc.

(“FTAI Infrastructure”) Spin-Off

On April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company’s infrastructure business held by FTAI Infrastructure (a wholly owned subsidiary of the Company).

The spin-off was effected as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company’s ordinary shares as of July 21, 2022.

The distribution was completed on August 1, 2022.

Under ASC 205-20, Presentation of Financial Statements – Discontinued Operations , the spin-off met the criteria to be reported as a discontinued operation.

Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company’s financial statements for the three months ended March 31, 2022.

FTAI Infrastructure is a corporation for U.S.

federal income tax purposes and holds, among other things, the Company’s previously held interests in the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business.

FTAI Infrastructure retained all related project-level debt of those businesses.

In connection with the spin-off, FTAI Infrastructure paid a dividend of $ 730.3 million to the Company.

The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $ 200.0 million of its 6.50 % senior unsecured notes due 2025, and approximately $ 175.0 million of the outstanding borrowings under its revolving credit facility.

FTAI LLC retained the aviation business and certain other assets, and FTAI LLC’s remaining outstanding corporate indebtedness.

In connection with the spin-off, the Company and the Manager assigned the Company’s then-existing management agreement to FTAI Infrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement.

The Company and certain of its subsidiaries executed a new management agreement with the Manager.

The new management agreement has an initial term of six years.

The Manager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements with the Manager, which were assigned to FTAI Infrastructure.

Prior to the Merger described below, our Manager remained entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they existed prior to spin-off.

Following the Merger, the Company entered into a Services and Profit Sharing Agreement (the “Services and Profit Sharing Agreement”), with a subsidiary of the Company and Fortress Worldwide Transportation and Infrastructure Master GP LLC (“Master GP”), pursuant to which Master GP is entitled to incentive payments on substantially similar terms as the previous arrangements.

Financial Information of Discontinued Operations

The following table presents the significant components of net loss from discontinued operations:

Three Months Ended

March 31, 2022

Total revenues $ 46,148

Operating expenses 38,067

General and administrative expenses 1,130

Acquisition and transaction expenses 3,751

Management fees and incentive allocation to affiliate 4,161

Depreciation and amortization 16,996

Interest expense 6,459

Total expenses 70,564

Equity in losses of unconsolidated entities ( 24,211 )

Other income 69

Total other expense ( 24,142 )

Loss before income taxes ( 48,558 )

Provision for income taxes 2,147

Net loss from discontinued operations, net of income taxes ( 50,705 )

Net loss attributable to non-controlling interests in consolidated subsidiaries ( 7,466 )

Net loss attributable to shareholders ( 43,239 )

The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the three months ended March 31, 2022.

The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items from discontinued operations:

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Three Months Ended

March 31, 2022

Operating activities:

Equity in losses of unconsolidated entities $ 24,211

Depreciation and amortization 16,996

Equity-based compensation 709

Investing activities:

Acquisition of property, plant and equipment $ ( 52,546 )

Investment in unconsolidated entities ( 1,637 )

Proceeds from sale of property, plant and equipment 2,910

Non-cash change in equity method investment ( 94,779 )

The Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the three months ended March 31, 2022 included above, using the equity method of accounting.

Summarized financial data for Long Ridge Terminal LLC are shown in the following table.

Three Months Ended

Income Statement March 31, 2022

Total revenue $ 24,411

Operating expenses 12,447

Depreciation and amortization 12,544

Interest expense 12,861

Total expenses 37,852

Other expense ( 29,234 )

Net loss $ ( 42,675 )

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

LEASING EQUIPMENT, NET

Leasing equipment, net is summarized as follows:

September 30,

March 31, 2023 December 31, 2022

Leasing equipment $ 2,346,078 $ 2,413,230

1 unchanged sentence

Leasing equipment, net $ 1,849,662 $ 1,913,553

Economic sanctions and export controls against Russia and Russia’s aviation industry have been imposed due to its invasion of Ukraine during the

nine months ended September 30, 2022.

Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31, 2022.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines.

As of September 30, 2022, four aircraft and two engines were still located in Ukraine and eight aircraft and seventeen engines

were still located in Russia.

We determined that it is unlikely that we will regain possession of the aircraft and engines that have not yet been recovered from Ukraine and Russia.

As a result, we recognized an impairment charge totaling $ 120.0 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we do not expect to recover from

Ukraine and Russia.

We determined that it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered from Ukraine and Russia.

As a result, during the three months ended March 31, 2022, we recognized an impairment charge totaling $ 122.8 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia.

As of March 31, 2023, four aircraft and one engine were still located in Ukraine and eight aircraft and seventeen engines were still located in Russia.

Additionally, we identified certain assets in our leasing equipment portfolio with indicators of impairment.

As a result, we adjusted the carrying value of these assets to fair value and recognized transaction impairment charges

of $ 8.2 million, net of redelivery compensation during the nine months ended September 30, 2022.

The following table presents information related to acquisitions and dispositions of aviation leasing equipment during the nine months ended

September 30, 2022:

As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $ 1.2 million, net of redelivery compensation during the three months ended March 31, 2023.

The following table presents information related to our acquisitions and dispositions of aviation leasing equipment during the three months ended March 31, 2023:

Acquisitions:

Dispositions:

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Depreciation expense for leasing equipment is summarized as follows:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Depreciation expense for leasing equipment $ 40,766 $ 41,203

FINANCE LEASES, NET

Finance leases, net are summarized as follows:

September 30,

Finance leases

Unearned revenue

Finance leases, net

During the three months ended September 30, 2022, we entered into a 36 -month

sales-type lease arrangement for two airframes.

The following table presents the ownership interests and carrying values of our investments:

Carrying Value

Ownership Percentage

September 30,

Advanced Engine Repair JV

Equity method

Falcon MSN 177 LLC

Equity method

We did no t recognize any other-than-temporary

impairments for the three and nine months ended September 30, 2022 and 2021.

The following table presents our proportionate share of equity in losses:

Three Months Ended September 30,

Nine Months Ended September 30,

Investment Ownership Percentage March 31, 2023 December 31, 2022

Advanced Engine Repair JV Equity method 25 % $ 19,799 $ 20,207

Falcon MSN 177 LLC Equity method 50 % 1,731 1,830

Quick Turn Engine Center LLC Equity method 50 % 18,672 —

$ 40,202 $ 22,037

We did not recognize any other-than-temporary impairments for the three months ended March 31, 2023 and 2022.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table presents our proportionate share of equity in (losses) income:

Three Months Ended March 31,

Advanced Engine Repair JV $ ( 408 ) $ ( 354 )

Falcon MSN 177 LLC ( 99 ) 552

Quick Turn Engine Center LLC ( 828 ) —

Total $ ( 1,335 ) $ 198

Equity Method Investments

Advanced Engine Repair JV

In December 2016, we invested $ 15.0

million for a 25 % interest in an advanced engine repair joint venture.

We focus on developing new costs savings programs for engine

In December 2016, we invested $ 15 million for a 25 % interest in an advanced engine repair joint venture.

We focus on developing new cost savings programs for engine repairs.

We exercise significant influence over this investment and account for this investment as an equity method investment.

In August 2019, we expanded the scope of our joint venture and invested an additional $ 13.5 million and maintained a 25 % interest.

Falcon MSN 177 LLC

In November 2021, we invested $ 1.6 million for a 50 % interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000 aircraft.

Falcon MSN 177 LLC leases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts.

We account for our investment in Falcon as an equity method investment as we have significant influence through our interest.

Quick Turn Engine Center LLC

On January 4, 2023, we invested $ 19.5 million for a 50 % interest in Quick Turn Engine Center LLC or “Quick Turn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine.

We account for our investment in Quick Turn as an equity method investment as we have significant influence through our interest.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Falcon MSN 177 LLC

In November 2021, we invested $ 1.6

million for a 50 % interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000 aircraft.

Falcon MSN 177 LLC

leases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts.

We account for our investment in Falcon as an equity method investment as we have significant influence through our interest.

INTANGIBLE ASSETS AND LIABILITIES, NET

Our intangible assets and liabilities, net are summarized as follows:

September 30, 2022

December 31, 2021

Intangible assets and liabilities, net are summarized as follows:

March 31, 2023 December 31, 2022

Intangible assets

1 unchanged sentence

Accumulated amortization ( 14,785 ) ( 22,247 )

Total intangible assets, net

Acquired favorable lease intangibles, net $ 45,729 $ 41,955

Intangible liabilities

3 unchanged sentences

Intangible assets and liabilities are all held within the Aviation Leasing segment.

Intangible liabilities relate to unfavorable lease intangibles

and are included as a component of Other liabilities in the Consolidated Balance Sheets.

Intangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities in the Consolidated Balance Sheets.

Amortization of intangible assets and liabilities is as follows:

Classification in Consolidated

Statements of Operations

Three Months Ended

September 30,

Nine Months Ended

September 30,

Lease intangibles

As of September 30, 2022, estimated net annual amortization of intangible assets and liabilities is as follows:

Classification in Consolidated Statements of Operations Three Months Ended March 31,

Lease intangibles Lease income $ 3,983 $ 3,658

As of March 31, 2023, estimated net annual amortization of intangibles is as follows:

Remainder of 2023 $ 14,150

Thereafter 2,756

Total $ 43,754

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

LOANS PAYABLE TO AFFILIATE

FTAI CHR JV Promissory Note — On December 28, 2016, the Company entered into a Loan Agreement (the “Loan”) with Fortress Worldwide Transportation and Infrastructure General Partnership, an affiliate, pursuant to which it borrowed an initial

aggregate amount of $ 9.0 million in connection with its investment in the Advanced Engine Repair JV.

In 2019, the Company made

additional borrowings of $ 8.1 million.

Borrowings under the Loan are unsecured and bear payment-in-kind accrued interest at a rate of 10 % per year.

The outstanding loan amount, including payment-in-kind accrued interest, was $ 27.1 million and $ 25.2 million as of September 30, 2022 and December 31,

2021, respectively.

Interest expense on the Loan was $ 0.6 million, $ 0.6 million, $ 1.9 million, and $ 1.7 million for the three and nine months ended September 30, 2022 and 2021, respectively.

The maturity date of the loan, including payment-in-kind accrued interest, is December 26, 2026 .

Our debt, net is summarized as follows:

March 31, 2023 December 31, 2022

Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings

Loans payable

Revolving Credit Facility (1)

$ 75,000 (i) Base Rate + 1.75 %;

(ii) Adjusted Term SOFR Rate + 2.75 %

9/20/25 $ 150,000

Total loans payable 75,000 150,000

Bonds payable

Senior Notes due 2025 (2)

652,794 6.50 % 10/1/25 653,036

Senior Notes due 2027 400,000 9.75 % 8/1/27 400,000

Senior Notes due 2028 (3)

1,002,006 5.50 % 5/1/28 1,002,091

Total bonds payable 2,054,800 2,055,127

Debt 2,129,800 2,205,127

Debt issuance costs ( 27,893 ) ( 29,400 )

Total debt, net $ 2,101,907 $ 2,175,727

Total debt due within one year $ — $ —

________________________________________________________

(1) Requires a quarterly commitment fee at a rate of 0.50 % on the average daily unused portion, as well as customary letter of credit fees and agency fees.

(2) Includes an unamortized discount of $ 1,207 and $ 1,318 at March 31, 2023 and December 31, 2022, respectively, and an unamortized premium of $ 4,001 and $ 4,354 at March 31, 2023 and December 31, 2022, respectively.

(3) Includes an unamortized premium of $ 2,006 and $ 2,091 at March 31, 2023 and December 31, 2022, respectively.

We were in compliance with all debt covenants as of March 31, 2023.

FAIR VALUE MEASUREMENTS

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs

and minimize use of unobservable inputs.

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs.

These inputs are prioritized as follows:

6 unchanged sentences

• Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

Our cash and cash equivalents consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to

be highly liquid.

Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid.

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

The fair value of the loan payable to affiliate cannot be objectively determined due to the nature of the affiliate transaction.

Except as discussed below, our financial instruments other than cash and cash equivalents consist principally of accounts receivable, note

receivable, accounts payable and accrued liabilities, security deposits and maintenance deposits, whose fair value approximates their carrying value due to their short maturity profiles.

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

GAAP requires the application of fair value,

including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.

Assets subject to these measurements include intangible assets, property, plant and equipment and leasing equipment.

such assets at fair value when it is determined the carrying value may not be recoverable.

Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to

future cash flows from operation of the leasing and eventual sale of assets.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best

depicts the nature, amount, timing and uncertainty of our revenue.

Revenues are within the scope of ASC 842, Leases and ASC 606, Revenue from contracts with customers ,

unless otherwise noted.

We have elected to exclude sales and other similar taxes from revenues.

During the three months ended September 30, 2022, we updated our corporate strategy based on the opportunities available in the market such that

the sale of aircraft and engines is now an output of our recurring, ordinary activities.

As a result of this update, the transaction price allocated to the sale of assets is included in Revenues in the Consolidated Statement of Operations for the

three months ended September 30, 2022 and are accounted for in accordance with ASC 606.

The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations for the three months ended

September 30, 2022.

Sales transactions of aircraft and engines prior to the three months ended September 30, 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of

nonfinancial assets and were included in Gain on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets.

Generally, assets sold

were under leasing arrangements with customers prior to sales and are included in Leasing equipment, net, on the Consolidated Balance Sheets.

Three Months Ended September 30, 2022

Maintenance revenue

Finance lease income

Asset sales revenue

Aerospace products revenue

Other revenue

Total revenues

Three Months Ended September 30, 2021

Maintenance revenue

Finance lease income

Aerospace products revenue

Other revenue

Total revenues

Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable, accounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Nine Months Ended September 30, 2022

Maintenance revenue

Finance lease income

Asset sales revenue

Aerospace products revenue

Other revenue

Total revenues

Nine Months Ended September 30, 2021

Maintenance revenue

Finance lease income

Aerospace products revenue

Other revenue

Total revenues

Presented below are the contracted minimum future annual revenues to be received under existing operating and finance leases:

September 30, 2022

Remainder of 2022

The fair values of our bonds payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified as Level 2 within the fair value hierarchy:

March 31, 2023 December 31, 2022

Senior Notes due 2025 651,541 613,152

Senior Notes due 2027 421,516 402,032

Senior Notes due 2028 917,230 853,490

The fair values of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy.

The Company has contingent obligations under ASC 460, Guarantees , in connection with certain sales of aircraft on lease, which are measured at fair value.

The guarantees are valued at $ 6.3 million and $ 3.8 million as of March 31, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities on the Consolidated Balance Sheets.

The fair values of the guarantees are determined based on the estimated condition of the engines at the end of each lease term, the estimated cost of replacement and applicable discount rates, and are classified as Level 3.

During the three months ended March 31, 2023, the Company recorded a $ 4.3 million increase in guarantees related to the sale of six aircraft and a $ 1.8 million decrease related to the change in fair value, which is recorded as Asset sales revenue in the Consolidated Statements of Operations.

We measure the fair value of certain assets on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.

Assets subject to these measurements include intangible assets, property, plant and equipment, leasing equipment and inventory.

We record such assets at fair value when it is determined the carrying value may not be recoverable.

Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the l easing and eventual sale of assets.

EQUITY-BASED COMPENSATION

In 2015, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to grant equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors.

As of March 31, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares.

We account for equity-based compensation expense in accordance with ASC 718 Compensation-Stock Compensation and is reported within operating expenses and general and administrative in the Consolidated Statements of Operations.

The Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:

Three Months Ended March 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years)

Restricted Shares $ 108 $ — $ 8,663 3.8 years

In connection with our March 2023 offering of preferred shares (see Note 13), we granted options to the Manager related to 248,947 ordinary shares at an exercise price of $ 26.11 , which had a grant date fair value of $ 2.1 million.

The assumptions used in valuing the options were:

a 3.471 % risk-free rate, a 6.263 % dividend yield, a 37.879 % volatility and a ten -year term.

During the three months ended March 31, 2023, the Manager did not transfer any options to employees.

Restricted Shares

During the three months ended March 31, 2023, we issued restricted shares of the Company to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) that had a grant date fair value of $ 8.8 million and vest over 4.3 years.

These awards are subject to continued employment, and the compensation expense is recognized ratably over the vesting periods, with 50 % of the units vesting on June 30, 2026 and the remaining units vesting on June 30, 2027.

The fair value of these awards were calculated based on the closing price of FTAI Aviation Ltd.’s ordinary shares on grant date of March 13, 2023.

FTAI AVIATION LTD.

2 unchanged sentences

The current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cayman Islands $ — $ —

United States:

Federal 47 377

State and local 13 357

Total current (benefit) provision

Total current provision 334 1,027

Cayman Islands — —

United States:

Federal 233 —

State and local 444 —

Total deferred provision (benefit)

Total deferred provision 1,692 312

Provision for income taxes:

Continuing Operations 2,026 1,339

Discontinued operations — 2,147

Total $ 2,026 $ 3,486

The Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed.

The Company is considered a Passive Foreign Investment Company

The Company is considered a Passive Foreign Investment Company for U.S.

income tax purposes and certain income taxes are imposed on our owners.

Taxable income or loss generated by our corporate subsidiaries is subject to U.S.

federal, state and foreign corporate income tax in locations where they conduct

federal, state and foreign corporate income tax in locations where they conduct business.

Our effective tax rate differs from the U.S.

federal tax rate of 21% primarily due to a significant portion of our income not being subject to U.S.

corporate tax rates, or being deemed to be foreign sourced and thus either not taxable or taxable at

effectively lower tax rates.

As of and for the nine months ended September 30, 2022, we had not established a liability for uncertain tax positions as no such positions

corporate tax rates, or being deemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates.

As of and for the three months ended March 31, 2023, we had not established a liability for uncertain tax positions as no such positions existed.

In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S.

federal, state, local and foreign income tax examinations by tax authorities.

Generally, we are not subject to examination by taxing

authorities for tax years prior to 2018.

Generally, we are not subject to examination by taxing authorities for tax years prior to 2019.

We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date.

MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS

In connection with the Parent’s spin-off of its infrastructure business on August 1, 2022, the Parent assigned the then-existing management and

advisory agreement, dated as of May 20, 2015, with its Manager to FTAI Infrastructure Inc.

(the entity which holds the infrastructure business of the Parent).

On July 31, 2022, the Parent entered into a new management and advisory agreement (the

“Management Agreement”), by and among the Parent, and each of the subsidiaries that are party thereto and the Manager, with substantially similar terms and conditions as the existing management and advisory agreement between the Parent and the

The Company, as part of the Parent, is externally managed by the Manager.

The Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging

for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto.

In addition, the Manager may be reimbursed for various expenses

incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities.

Additionally, we have entered into certain incentive allocation arrangements with Master GP, which owns approximately 0.05 % of the Partnership and is the general partner of the Partnership.

In connection with the spin-off of FTAI Infrastructure on August 1, 2022, we assigned our then-existing management and advisory agreement, dated as of May 20, 2015, with our Manager to FTAI Infrastructure.

On July 31, 2022, we entered into a new management and advisory agreement (the “Management Agreement”), by and among FTAI LLC, FTAI Aviation Ltd., and each of the subsidiaries that are party thereto and the Manager, with substantially similar terms and conditions as the existing management and advisory agreement.

The Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto.

In addition, the Manager may be reimbursed for various expenses incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities.

Additionally, we have entered into certain incentive allocation arrangements with Master GP, which owns approximately 0.01 % of FTAI Aviation Holdco Ltd.

The Manager is entitled to a management fee and reimbursement of certain expenses.

The management fee is determined by taking the average value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S.

GAAP at the end of the two most recently completed months multiplied by an annual rate of 1.50 %, and is payable monthly in arrears in cash.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The Manager is entitled to a management fee, incentive allocations (comprised of Income Incentive Allocation and Capital Gains Incentive

Allocation, defined below) and reimbursement of certain expenses.

The management fee is determined by taking the average value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with U.S.

the end of the two most recently completed months multiplied by an annual rate of 1.5 % and is payable monthly in arrears in cash.

The income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the

immediately preceding calendar quarter (the “Income Incentive Allocation”).

For this purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in

accordance with U.S.

GAAP excluding the Parent’s pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by the Parent’s independent directors.

Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to the Master GP during the relevant quarter.

The Master GP is entitled to an Income Incentive Allocation with respect to its pre-incentive allocation net income in each calendar quarter as

(1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of

return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2 % for such quarter ( 8 % annualized);

(2) 100 % of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or

exceeds 2 % but does not exceed 2.2223 %

for such quarter;

Master GP is entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below).

The income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the immediately preceding calendar quarter (the “Income Incentive Allocation”).

For this purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with U.S.

GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors.

Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to Master GP during the relevant quarter.

One of our subsidiaries allocates and distributes to Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income in each calendar quarter as follows:

(1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2 % for such quarter ( 8 % annualized);

(2) 100 % of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2 % but does not exceed 2.2223 % for such quarter;

and (3) 10 % of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223 % for such quarter.

These calculations will be prorated for any period of less than three months.

Capital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10% of the

Parent’s pro rata share of cumulative realized gains from the date of the Parent’s IPO through the end of the applicable calendar year, net of the Parent’s pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion

of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to the Master GP.

A portion of the management fee, income incentive allocation, and capital gains incentive allocation that are attributable to the operations of

FTAI Aviation Ltd.

is recorded in the Management fees and incentive allocation to affiliate on the Consolidated Statement of Operations.

These amounts are allocated on the following basis:

Management fee—Management fee is allocated to FTAI Aviation Ltd.

from the Parent by applying the calculation methodology described above to the

equity of FTAI Aviation Ltd.

included in these consolidated financial statements.

Income Incentive Allocation and Capital Gains Incentive Allocation—The Income Incentive Allocation and Capital Gains Incentive Allocation are

allocated to FTAI Aviation Ltd., from the Parent, by applying the calculation methodology described above to FTAI Aviation Ltd.’s financial results in each respective period.

The following table summarizes the management fees and incentive allocations included in these consolidated financial statements:

Three Months Ended September 30,

Nine Months Ended September 30,

Capital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10 % of our pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to Master GP.

The following table summarizes the management fees, income incentive allocation and capital gains incentive allocation from continuing operations:

Three Months Ended March 31,

Management fees $ 55 $ 3

1 unchanged sentence

Capital gains incentive allocation — —

Total $ 2,997 $ 3

We pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement.

The expenses required to be paid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Manager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used by us, costs to obtain liability insurance to indemnify our directors and officers and the compensation and expenses of our transfer agent.

We will pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants.

The Manager is responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses;

we will not reimburse the Manager for these expenses.

The following table summarizes our reimbursements to the Manager from continuing operations:

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The Parent pays all of its operating expenses, except those specifically required to be borne by the Manager under the Management Agreement.

expenses required to be paid by the Parent include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of its assets, legal and auditing fees and expenses, the compensation and expenses of

the Parent’s independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of the Parent (including commitment fees, legal fees, closing costs, etc.), expenses associated with

other securities offerings of the Parent, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to the Parent’s shareholders, costs incurred by the

Manager or its affiliates for travel on the Parent’s behalf, costs associated with any computer software or hardware that is used by the Parent, costs to obtain liability insurance to indemnify the Parent’s directors and officers and the

compensation and expenses of the Parent’s transfer agent.

The Parent will pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services

that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants.

The Manager is responsible for all of its

other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses.

A portion of the Parent’s reimbursement to the Manager is

allocated to FTAI Aviation Ltd.

based on an estimate of time incurred by the Manager’s employees on activities related to our operations.

A portion of these reimbursable expenses that the Parent paid to the Manager and are attributable to FTAI Aviation Ltd.

are included in the

consolidated financial statements as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Classification in the Consolidated Statements of Operations:

General and administrative expenses

General and administrative $ 1,905 $ 1,748

Acquisition and transaction expenses 100 348

In addition to the above, the following corporate expenses, which were allocated from the Parent, are also included in the consolidated financial

Three Months Ended September 30,

Nine Months Ended September 30,

Classification in the Consolidated Statements of Operations:

General and administrative expenses

The following table summarizes amounts due to the Parent, which are included within Management fees payable to affiliate in the Consolidated

Balance Sheets:

September 30, 2022

December 31, 2021

Management fees payable to affiliate

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Total $ 2,005 $ 2,096

If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee.

The termination fee is equal to the amount of the management fee during the 12 months immediately preceding the date of the termination.

In addition, an Incentive Allocation Fair Value Amount will be distributable to Master GP if Master GP is removed due to the termination of the Management Agreement in certain specified circumstances.

The Incentive Allocation Fair Value Amount is an amount equal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to Master GP if our assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments).

Upon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we grant the Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering (or if the issuance relates to equity securities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a ordinary share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a ordinary share as of the date of the equity issuance if it relates to equity securities other than our ordinary shares).

Any ultimate purchaser of ordinary shares for which such options are granted may be an affiliate of the Manager.

The following table summarizes amounts due to the Manager, which are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets:

March 31, 2023 December 31, 2022

Accrued management fees $ 23 $ 53

Other payables 4,332 4,688

As of March 31, 2023 and December 31, 2022, there were no receivables from the Manager.

SEGMENT INFORMATION

During the third quarter of 2022, as a result of the Parent’s spin-off of its infrastructure business effective on August 1, 2022 and its

reevaluation of segments, the Company reevaluated its operating segments.

As a result of the spin-off of FTAI Infrastructure effective on August 1, 2022, the Company reevaluated its operating segments.

The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services.

Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products.

The Aviation Leasing segment owns and manages aviation assets, including

aircraft and aircraft engines, which it leases and sells to customers.

The Aerospace Products segment develops, manufactures, repairs, and sells aircraft engines and aftermarket components for aircraft engines.

The interim periods disclose the

reportable segments under this basis with prior periods restated to reflect the change in accordance with the requirements of ASC 280.

Corporate and Other primarily consists of debt, allocated corporate general and administrative expenses, shared services costs, and management

The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers.

The Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through exclusivity arrangements, aftermarket components for aircraft engines.

The interim period discloses the reportable segments on this basis, and prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting .

Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees.

Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies;

however, financial

information presented by segment includes the impact of intercompany eliminations.

however, financial information presented by segment includes the impact of intercompany eliminations.

Our Chief Executive Officer is our Chief Operating Decision Maker (“CODM”).

Segment information is presented in the same manner that our CODM reviews the operating

results in assessing performance and allocating resources.

Segment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources.

The CODM evaluates performance for each reportable segment primarily based on Adjusted EBITDA.

Historically, the CODM’s assessment of segment performance included asset information.

the third quarter of 2022, the CODM determined that segment asset information is not a key factor in measuring performance or allocating resources.

Therefore, segment asset information is not included in the tables below as it is not provided to or

reviewed by our CODM.

Adjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from)

income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment

charges, incentive allocations, depreciation and amortization expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated

entities and the non-controlling share of Adjusted EBITDA.

We believe that net income attributable to shareholders, as defined by GAAP, is the most appropriate earnings measurement with which to reconcile

Adjusted EBITDA.

Adjusted EBITDA should not be considered as an alternative to net income attributable to shareholders as determined in accordance with GAAP.

During the third quarter of 2022, the CODM determined that segment asset information is not a key factor in measuring performance or allocating resources.

Therefore, segment asset information is not included in the tables below as it is not provided to or reviewed by our CODM.

During the third quarter of 2022, the Company changed its measure of segment profit to include the add back of dividends on preferred shares in Adjusted EBITDA.

Prior period Adjusted EBITDA amounts and the reconciliation to net income (loss) attributable to shareholders from continuing operations have been recast to reflect this change in the measure of segment profit.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Adjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

We believe that net income (loss) attributable to shareholders from continuing operations, as defined by U.S.

GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted EBITDA.

Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with U.S.

The following tables set forth certain information for each reportable segment:

For the Three Months Ended September 30, 2022

Three Months Ended September 30, 2022

Operating expenses

For the Three Months Ended March 31, 2023

Three Months Ended March 31, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 48,830 $ — $ 7,148 $ 55,978

Maintenance revenue 35,141 — — 35,141

Asset sales revenue 108,691 — — 108,691

Aerospace products revenue — 85,113 — 85,113

Other revenue 6,378 — 1,417 7,795

Total revenues $ 199,040 $ 85,113 $ 8,565 $ 292,718

Cost of sales 92,234 53,436 — 145,670

Operating expenses 7,088 3,655 11,791 22,534

General and administrative — — 4,067 4,067

5 unchanged sentences

Total expenses 140,144 57,932 61,892 259,968

Other expense

Other income (expense)

Equity in losses of unconsolidated entities ( 99 ) ( 1,236 ) — ( 1,335 )

Other income 8 — — 8

Total other expense ( 91 ) ( 1,236 ) — ( 1,327 )

Income (loss) before income taxes

Provision for income taxes

Net income (loss) attributable to shareholders

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:

Three Months Ended September 30, 2022

Adjusted EBITDA

Equity in losses of unconsolidated entities

Pro-rata share of Adjusted EBITDA from unconsolidated entities

Interest expense

Depreciation and amortization expense

Asset impairment charges

Acquisition and transaction expenses

Provision for income taxes

Net income attributable to shareholders

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Three Months Ended September 30, 2022

North America

South America

Total revenues

For the Nine Months Ended September 30, 2022

Nine Months Ended September 30, 2022

Operating expenses

Cost of sales

General and administrative

Acquisition and transaction expenses

Management fees and incentive allocation to affiliate

Depreciation and amortization

Asset impairment

Interest expense

Total expenses

Other expense

Equity in earnings (losses) of unconsolidated entities

Gain on sale of assets, net

Total other income

Income (loss) before income taxes

Income (loss) from continuing operations before income taxes 58,805 25,945 ( 53,327 ) 31,423

Provision for income taxes 995 916 115 2,026

Net income (loss) attributable to shareholders

Net income (loss) from continuing operations 57,810 25,029 ( 53,442 ) 29,397

Net loss from continuing operations attributable to non-controlling interests in consolidated subsidiaries — — — —

Dividends on preferred shares — — 6,791 6,791

Net income (loss) attributable to shareholders from continuing operations $ 57,810 $ 25,029 $ ( 60,233 ) $ 22,606

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to

shareholders:

Nine Months Ended September 30, 2022

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:

Three Months Ended March 31, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 107,556 $ 27,377 $ ( 7,277 ) $ 127,656

Non-controlling share of Adjusted EBITDA —

Equity in losses of unconsolidated entities ( 1,335 )

Pro-rata share of Adjusted EBITDA from unconsolidated entities 696

Interest expense

Interest expense and dividends on preferred shares ( 46,083 )

Depreciation and amortization expense ( 48,770 )

Incentive allocations ( 2,942 )

Asset impairment charges ( 1,220 )

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations —

Acquisition and transaction expenses ( 3,262 )

Equity-based compensation expense ( 108 )

Provision for income taxes ( 2,026 )

Net income attributable to shareholders

Net income attributable to shareholders from continuing operations $ 22,606

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Africa $ — $ 875 $ — $ 875

Asia 17,766 — 8,565 26,331

Europe 52,365 25,966 — 78,331

North America 115,665 56,996 — 172,661

1 unchanged sentence

Total revenues $ 199,040 $ 85,113 $ 8,565 $ 292,718

Presented below are the contracted minimum future annual revenues to be received under existing operating leases as of March 31, 2023:

Operating Leases

Remainder of 2023 $ 120,738

Thereafter 59,959

Total $ 433,167

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

For the Three Months Ended September 30, 2021

Three Months Ended September 30, 2021

Operating expenses

For the Three Months Ended March 31, 2022

Three Months Ended March 31, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 33,958 $ — $ 5,367 $ 39,325

Maintenance revenue 36,732 — — 36,732

Aerospace products revenue — 14,313 — 14,313

Other revenue 22 — 1,299 1,321

Total revenues $ 70,712 $ 14,313 $ 6,666 $ 91,691

Cost of sales — 9,050 — 9,050

Operating expenses 54,472 1,623 5,704 61,799

General and administrative — — 4,561 4,561

6 unchanged sentences

Other income (expense)

Equity in losses of unconsolidated entities

Equity in earnings (losses) of unconsolidated entities 552 ( 354 ) — 198

Gain on sale of assets, net 6,587 9,701 — 16,288

Other expense

Total other income

Income (loss) before income taxes

Provision for (benefit from) income taxes

Net income (loss)

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to

shareholders:

Three Months Ended September 30, 2021

Adjusted EBITDA

Equity in losses of unconsolidated entities

Pro-rata share of Adjusted EBITDA from unconsolidated entities

Interest expense

Depreciation and amortization expense

Asset impairment charges

Acquisition and transaction expenses

Other income (expense) 165 — ( 37 ) 128

Total other income (expense) 7,304 9,347 ( 37 ) 16,614

(Loss) income from continuing operations before income taxes ( 138,683 ) 12,953 ( 51,885 ) ( 177,615 )

Provision for income taxes 986 71 282 1,339

Net income attributable to shareholders

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Three Months Ended September 30, 2021

North America

South America

Total revenues

For the Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Operating expenses

Cost of sales

General and administrative

Acquisition and transaction expenses

Management fees and incentive allocation to affiliate

Depreciation and amortization

Asset impairment

Interest expense

Total expenses

Other (expense) income

Equity in losses of unconsolidated entities

Gain on sale of assets, net

Other expense

Total other income

Income (loss) before income taxes

Provision (benefit from) for income taxes

Net income (loss) attributable to shareholders

Net (loss) income from continuing operations ( 139,669 ) 12,882 ( 52,167 ) ( 178,954 )

Net loss from continuing operations attributable to non-controlling interests in consolidated subsidiaries — — — —

Dividends on preferred shares — — 6,791 6,791

Net (loss) income attributable to shareholders from continuing operations $ ( 139,669 ) $ 12,882 $ ( 58,958 ) $ ( 185,745 )

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to

shareholders:

Nine Months Ended September 30, 2021

The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders:

Three Months Ended March 31, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 35,556 $ 13,043 $ ( 3,639 ) $ 44,960

Equity in losses of unconsolidated entities

Non-controlling share of Adjusted EBITDA —

Equity in earnings of unconsolidated entities 198

Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 254 )

Interest expense

Interest expense and dividends on preferred shares ( 50,930 )

Depreciation and amortization expense ( 53,317 )

Incentive allocations —

Asset impairment charges ( 122,790 )

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations —

Acquisition and transaction expenses ( 2,273 )

Equity-based compensation expense —

Provision for income taxes ( 1,339 )

Net income attributable to shareholders

Net loss attributable to shareholders from continuing operations $ ( 185,745 )

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Africa $ — $ 850 $ — $ 850

Asia 15,662 1,401 6,666 23,729

Europe 27,402 4,574 — 31,976

North America 18,284 7,488 — 25,772

South America 9,364 — — 9,364

Total revenues

Total $ 70,712 $ 14,313 $ 6,666 $ 91,691

Location of Long-Lived Assets

The following tables set forth summarized geographic location of leasing equipment, net:

September 30, 2022

Leasing equipment, net

North America

South America

Total leasing equipment, net

December 31, 2021

Leasing equipment, net

The following tables sets forth the geographic location of property, plant and equipment and leasing equipment, net:

March 31, 2023 December 31, 2022

Property, plant and equipment and leasing equipment, net

Africa $ — $ 7,952

Asia 375,595 383,378

Europe 871,581 821,840

North America 427,391 424,617

South America 186,533 285,780

Total leasing equipment, net

Total property, plant and equipment and leasing equipment, net $ 1,861,100 $ 1,923,567

EARNINGS PER SHARE AND EQUITY

Basic earnings per ordinary share (“EPS”) is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of ordinary shares outstanding, plus any participating securities.

Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding, plus any participating securities and potentially dilutive securities.

Potentially dilutive securities are calculated using the treasury stock method.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

EARNINGS PER SHARE AND EQUITY

Basic earnings per common share (“EPS”) is calculated by dividing net income attributable to shareholders by the weighted average number of common

shares outstanding, plus any participating securities.

Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding, plus any participating securities and potentially

dilutive securities.

Potentially dilutive securities are calculated using the treasury stock method.

The calculation of basic and diluted EPS is presented below:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands, except share data)

Net income attributable to shareholders

Weighted average shares outstanding:

Basic and Diluted Net earnings per share

Three Months Ended March 31,

(in thousands, except share and per share data) 2023 2022

Net income (loss) from continuing operations $ 29,397 $ ( 178,954 )

Net loss from discontinued operations, net of income taxes — ( 50,705 )

Net income (loss) $ 29,397 $ ( 229,659 )

Net loss attributable to non-controlling interests in consolidated subsidiaries:

Continuing operations — —

Discontinued operations — ( 7,466 )

Dividends on preferred shares 6,791 6,791

Net income (loss) attributable to shareholders $ 22,606 $ ( 228,984 )

Weighted Average Ordinary Shares Outstanding - Basic (1)

99,728,245 99,366,877

Weighted Average Ordinary Shares Outstanding - Diluted (1)

100,974,100 99,366,877

Earnings (loss) per share:

Continuing operations $ 0.23 $ ( 1.87 )

Discontinued operations $ — $ ( 0.43 )

Continuing operations $ 0.22 $ ( 1.87 )

Discontinued operations $ — $ ( 0.43 )

________________________________________________________

(1) Three months ended March 31, 2022 include participating securities which can be converted into a fixed amount of our shares.

For the three months ended March 31, 2023 and 2022, 57,175 and 771,689 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive.

During the three months ended March 31, 2023 and 2022, we issued 12,165 and 8,311 ordinary shares to certain directors as compensation.

Preferred Shares

In March 2023, in a public offering, we issued 2,600,000 shares of 9.50 % Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares (“Series D Preferred Shares”), par value $ 0.01 per share, with a liquidation preference of $ 25.00 per share for net proceeds before expenses of approximate ly $ 63.0 million .

See Note 9 for information related to options issued to the Manager in connection with such offering.

COMMITMENTS AND CONTINGENCIES

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of business.

September 30, 2022 and December 31, 2021, the Company was not subject to any material litigation and the Company was not aware of any material litigation.

Rent expense, primarily for the corporate office facilities, was $ 0.3 million and $ 0.8 million for the three and nine

months ended September 30, 2022 .

Rent expense, primarily for the corporate office facilities, was $ 0.2 million and $ 0.8 million for the three and nine months ended September 30, 2021.

As of September 30, 2022 , the Company is obligated under non-cancelable operating leases relating principally to the office

facilities in Miami and New York City for future minimum lease payments as follows:

September 30,

In the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications.

Within our offshore energy business, a lessee did not fulfill its obligation under its charter arrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $ 0.0 million to $ 3.3 million.

Our maximum exposure under other arrangements is unknown as no additional claims have been made.

We believe the risk of loss in connection with such arrangements is remote.

The Company has contingent obligations under ASC 460, Guarantees , in connection with certain sales of aircraft on lease.

Under the agreements, we provide certain guarantees at the end of the lease term for the condition of the aircraft engines that were sold to the buyer.

Given variability in the condition of the engines at the end of the lease terms, which range from 4 to 10 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at March 31, 2023 was $ 33.5 million, which is not reasonably expected.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

SUBSEQUENT EVENTS

Merger Transaction

On November 10, 2022,

pursuant to the Agreement and Plan of Merger dated August 12, 2022, by and among the Company, the Parent, and FTAI Aviation Merger Sub LLC, the Parent became a wholly-owned subsidiary of the Company.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand FTAI Aviation Ltd.

(the “Company,” “we,” “our”

Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

We own and acquire high quality aviation equipment that is essential for the transportation of goods and people globally.

We target assets that, on a combined basis, generate strong cash flows

with potential for earnings growth.

We believe that there is a large number of acquisition opportunities in our market, and that the Manager’s expertise and business and financing relationships, together with our Parent’s access to capital,

will allow us to take advantage of these opportunities.

Our Parent is externally managed by the Manager, an affiliate of Fortress, which has a dedicated team of experienced professionals focused on the acquisition of aviation assets since 2002.

As of September 30, 2022 we had total consolidated assets of $2.0 billion and total equity of $1.8 billion.

Our strategy permits us to acquire a broad array of aviation related assets where we believe there are meaningful opportunities to deploy capital to achieve attractive risk adjusted returns.

Commercial air travel and air freight activity have historically been long-term growth sectors and are tied to the underlying demand for passenger and freight movement.

We continue to see long-term demand for aviation related assets.

Impact of Russia invasion of Ukraine

Due to Russia’s invasion of Ukraine during the first quarter of 2022, the United States, European Union, United Kingdom, and others have imposed economic sanctions and export controls against

Russia and Russia’s aviation industry.

The sanctions include but are not limited to the ban on the export and sale or lease of all aircraft, engines, and equipment and on all related repair and maintenance services to Russia and Russian

We have complied, and will continue to comply, with all applicable sanctions and we have terminated the leases of all our aircraft and engines with Russian airlines.

As a result of the sanctions imposed on Russian airlines and related

lease terminations, we recognized approximately $47.1 million in provision for credit losses during the nine months ended September 30, 2022.

We continue to pursue efforts to remove and repossess all of our aircraft and engines from Russia and Ukraine.

As of September 30, 2022, four aircraft and two engines were still located in

Ukraine and eight aircraft and seventeen engines were still located in Russia.

We determined that it is unlikely that we will regain possession of the aircraft that had not been recovered from Ukraine and Russia during the first quarter of

As a result, we recognized an impairment charge totaling $120.0 million, net of maintenance deposits, to write-off the carrying value of leasing equipment assets that we have not recovered from Ukraine and Russia for the nine months ended

September 30, 2022.

Our lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in the event of a total loss of an aircraft

We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee’s policy fails to indemnify us.

The insured value of the aircraft and engines that remain in Ukraine

and Russia is approximately $294.0 million.

We are pursuing all our claims under these policies.

However, the timing and amount of any recoveries under these policies are uncertain.

The extent of the impact of Russia’s invasion of Ukraine and the related sanctions on our operational and financial performance, including the ability for us to recover our leasing equipment in

the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international governments, all of which remain uncertain.

Impact of COVID-19

Due to the outbreak of COVID-19, we have taken measures to protect the health and safety of our employees, including having employees work remotely, where possible.

Market conditions due to the

outbreak of COVID-19 resulted in asset impairment charges and a decline in our revenues during the years ended December 31, 2021 and 2020.

However, our revenues have continued to recover during the nine months ended September 30, 2022.

extent of the impact of the COVID-19 pandemic on our operational and financial performance will depend on future developments, including the duration, severity and spread of the pandemic, as well as additional waves of COVID-19 infections and

the ultimate impact of related restrictions imposed by the U.S.

and international governments, all of which remain uncertain.

For additional detail, see Liquidity and Capital Resources and Part II, Item 1A.

Risk Factors—“The COVID-19 pandemic

has severely disrupted the global economy and may have, and the emergence of similar crises could have, material adverse effects on our business, results of operations or financial condition.”

Operating Segments

During the third quarter of 2022, as a result of the Parent’s spin-off of the infrastructure business on August 1, 2022, and its reevaluation of segments, the Company reevaluated its operating

The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services.

Our two reportable segments are (i) Aviation Leasing and (ii)

Aerospace Products.

The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers.

The Aerospace Products segment develops, manufactures, repairs, and sells

aircraft engines and aftermarket components for aircraft engines.

The interim periods disclose the reportable segments under this basis with prior periods restated to reflect the change in accordance with the requirements of ASC 280.

Corporate and Other primarily consists of debt, allocated corporate general and administrative expenses, shared services costs, and management fees.

Results of Operations

Adjusted EBITDA (non-GAAP)

The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure.

Adjusted EBITDA is not a financial measure in accordance with U.S.

generally accepted

accounting principles (“U.S.

This performance measure provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation decisions.

We believe Adjusted EBITDA is a useful metric

for investors and analysts for similar purposes of assessing our operational performance.

Adjusted EBITDA is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based compensation expense,

acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation

and amortization expense, and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the

non-controlling share of Adjusted EBITDA.

Comparison of the three and nine months ended September 30, 2022 and 2021

The following table presents our consolidated results of operations:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Maintenance revenue

Finance lease income

Aerospace products revenue

Asset sales revenue

Other revenue

Total revenues

Operating expenses

Cost of sales

General and administrative

Acquisition and transaction expenses

Management fees and incentive allocation to affiliate

Depreciation and amortization

Asset impairment

Interest expense

Total expenses

Other (expense) income

Equity in losses of unconsolidated entities

Gain on sale of assets, net

Other income (expense)

Total other (expense) income

Income before income taxes

Provision for income taxes

Net income attributable to shareholders

The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Net income attributable to shareholders

Provision for income taxes

Acquisition and transaction expenses

Asset impairment charges

Depreciation and amortization expense (1)

Interest expense

Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)

Equity in losses of unconsolidated entities

Adjusted EBITDA (non-GAAP)

Includes the following items for the three months ended September 30, 2022 and 2021:

(i) depreciation and amortization expense of $32,877 and $34,825, (ii) lease intangible amortization

of $3,291 and $1,266 and (iii) amortization for lease incentives of $3,185 and $5,178, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) depreciation and amortization expense of

$106,567 and $102,194, (ii) lease intangible amortization of $10,259 and $3,216 and (iii) amortization for lease incentives of $20,034 and $18,133, respectively.

Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $358 and $369 and (ii) depreciation and amortization expense of $117 and $57,

respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $125 and $1,050 and (ii) depreciation and amortization expense of $290 and $144, respectively.

Presentation of assets sales

During the three months ended September 30, 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output

of our recurring, ordinary activities.

As a result of this update, the transaction price allocated to the sale of assets is included in Revenues in the Consolidated Statement of Operations for the three months ended September 30, 2022 and are

accounted for in accordance with ASC 606.

The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations for the three months ended September 30, 2022.

Sales transactions of

aircraft and engines prior to the three months ended September 30, 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included

in Gain on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets.

Generally, assets sold were under leasing arrangements with

customers prior to sales and are included in Leasing equipment, net, on the Consolidated Balance Sheets.

Comparison of the three months ended September 30, 2022 and 2021

Total revenues increased $124.3 million driven by an increase in (i) asset sales revenue and (ii) Aerospace Products revenue partially offset by decreases in (iii) lease income, (iv) maintenance

revenue and (v) other revenue.

Asset sales revenue increased $85.5 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation Leasing segment during 2022.

See above discussion regarding

presentation of asset sales.

Aerospace Products revenue increased $45.7 million driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as

operations continue to ramp-up in 2022.

See above discussion regarding presentation of asset sales.

Maintenance revenue decreased $4.7 million in the Aviation Leasing segment, primarily due to the early redelivery of aircraft and lower maintenance billings related to the early termination of

aircraft leases with Russian airlines as a result of the sanctions imposed on Russian airlines, partially offset by an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

Other revenue decreased $1.7 million in the Aviation Leasing segment due to lower end-of lease redelivery compensation.

Comparison of the nine months ended September 30, 2022 and 2021

Total revenues increased $183.7 million driven by an increase in (i) asset sales revenue, (ii) Aerospace Products revenue, (iii) maintenance revenue and (iv) other revenue, partially offset by a

decreases in (v) lease income.

Asset sales revenue increased $85.5 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation Leasing segment in 2022.

See above discussion regarding

presentation of asset sales.

Aerospace Products revenue increased $80.9 million driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as

operations continue to ramp-up in 2022.

See above discussion regarding presentation of asset sales.

Maintenance revenue increased $24.4 million in the Aviation Leasing segment, primarily due to an increase in the number of aircraft and engines placed on lease, higher aircraft and engine

utilization and higher end-of-lease return compensation, partially offset by a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft and lower maintenance billings related to the early termination of

aircraft leases with Russian airlines as a result of the sanctions imposed on Russian airlines.

Other revenue increased $2.9 million in the Aviation Leasing segment due to an increase in end-of lease redelivery compensation.

Lease income decreased $9.1 million, which primarily reflects a decrease of $9.1 million in the Aviation Leasing segment primarily due to the early termination of aircraft and engine leases as a

result of the sanctions imposed on Russian airlines.

Basic lease revenues from our owned aircraft and engines leased to Russian airlines would have been approximately $30.2 million for the nine months ended September 30, 2022.

This decrease is

partially offset by an increase in the number of aircraft and engines placed on lease.

Comparison of the three months ended September 30, 2022 and 2021

Total expenses increased $97.4 million, primarily due to higher (i) cost of sales, (ii) operating expenses (iii) asset impairment and (iv) acquisition and transaction expenses, partially offset

by lower (v) depreciation and amortization and (vi) management fees and incentive allocation to affiliate.

Cost of Sales increased $90.6 million primarily as a result of increased asset sales and the gross presentation of asset sales revenue and Aerospace Product revenues as described above.

Operating expenses increased $4.5 million which primarily reflects:

an increase of $3.3 million in the Aviation Leasing Segment primarily as a result of an increase in insurance expense, shipping and storage fees, professional fees and other operating expenses, partially offset by a decrease in

provision for credit losses.

an increase of $1.7 million in the Aerospace Products Segment primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in professional fees and other

operating expenses due to the ramp-up of Aerospace Products.

Asset impairment increased $3.6 million for the adjustment of the carrying value of leasing equipment to fair value in our Aviation Leasing segment.

See Note 3 to the consolidated financial

statements for additional information.

Acquisition and transaction expenses increased $1.7 million primarily driven by higher compensation and related costs associated with acquisitions and the merger with FTAI.

Depreciation and amortization decreased $1.9 million primarily due to an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

Management fees and incentive allocation to affiliate decreased $1.6 million driven by lower management fees allocated to the Company.

Comparison of the nine months ended September 30, 2022 and 2021

Total expenses increased $305.6 million, primarily due to higher (i) asset impairment charges, (ii) cost of sales, (iii) operating expenses, (iv) depreciation and amortization, partially offset

by lower (v) management fees and incentive allocation to affiliate.

Asset impairment increased $125.1 million primarily due to the write down of aircraft and engines located in Ukraine and Russia that may not be recoverable.

See Note 3 to the consolidated

financial statements for additional information.

Cost of sales increased $111.6 million primarily as a result of an increase in asset sales and the gross presentation of asset sales revenue and Aerospace Product revenues as described above.

Operating expenses increased $63.0 million which primarily reflects:

an increase of $58.0 million in the Aviation Leasing segment primarily as a result of an increase in provision for credit losses as a result of the sanctions imposed on Russian airlines, an increase in insurance expense, shipping and

storage fees, professional fees and repairs and maintenance expenses.

an increase of $4.6 million in the Aerospace Products segment primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in professional fees and other

operating expenses due to the ramp-up of Aerospace Products.

Depreciation and amortization increased $4.4 million primarily driven by an increase in the number of assets owned and on lease in the Aviation Leasing segment, partially offset by

an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

Management fees and incentive allocation to affiliate decreased $2.3 million driven by lower management fees allocated to the Company.

Other income (expense)

Total other income decreased $11.3 million during three months ended September 30, 2022 which primarily reflects a decrease of $12.7 million in gain on sale of assets, net in the Aviation Leasing

and Aerospace Products segments from less opportunistic asset sales.

See above discussion regarding presentation of asset sales.

Total other income increased $64.4 million during nine months ended September 30, 2022 which primarily reflects an increase of $62.5 million in gain on sale of assets, net in the Aviation

Leasing and Aerospace Products segments from opportunistic asset sales transactions.

See above discussion regarding presentation of asset sales.

Net income attributable to shareholders

Net income increased $12.3 million for the three months ended September 30, 2022 and decreased $63.7 million for the nine months ended September 30, 2022 as compared to the same periods during

the prior year primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $19.1 million and $83.0 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Aviation Leasing Segment

As of September 30, 2022, in our Aviation Leasing segment, we own and manage 325 aviation assets, consisting of 96 commercial aircraft and 229 engines,

including four aircraft and two engines that were still located in Ukraine and eight aircraft and seventeen engines that were still located in Russia.

As of September 30, 2022, 73 of our commercial aircraft and 124 of our engines were leased to operators or other third parties.

Aviation assets currently off lease are either undergoing repair

and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease.

Our aviation equipment was approximately 72% utilized during the three months ended September 30, 2022, based on the percent of days

on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes.

Our aircraft currently have a weighted average remaining lease term of 39 months, and our engines currently on-lease

have an average remaining lease term of 13 months.

The table below provides additional information on the assets in our Aviation Leasing segment:

Aviation Leasing Assets

Assets at January 1, 2022

Assets at September 30, 2022

Assets at January 1, 2022

Assets at September 30, 2022

The following table presents our results of operations:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Maintenance revenue

Finance lease income

Asset sales revenue

Other revenue

Total revenues

Operating expenses

Cost of sales

Acquisition and transaction expenses

Depreciation and amortization

Asset impairment

Total expenses

Other (expense) income

Equity in (losses) earnings of unconsolidated entities

Gain on sale of assets, net

Other income (expense)

Total other (expense) income

Income before income taxes

Provision for income taxes

Net income attributable to shareholders

The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:

Three Months Ended September 30,

Nine Months Ended

September 30,

(in thousands)

Net income attributable to shareholders

Provision for income taxes

Acquisition and transaction expenses

Asset impairment charges

Depreciation and amortization expense (1)

Pro-rata share of Adjusted EBITDA from unconsolidated entities (2)

Equity in (earnings) losses of unconsolidated entities

Adjusted EBITDA (non-GAAP)

Includes the following items for the three months ended September 30, 2022 and 2021:

(i) depreciation expense of $32,728 and $34,718, (ii) lease intangible

amortization of $3,291 and $1,266 and (iii) amortization for lease incentives of $3,185 and $5,178, respectively.

Includes the following items for the nine months ended September 30, 2022 and 2021:

(i) depreciation expense of $106,180

and $101,992, (ii) lease intangible amortization of $10,259 and $3,216 and (iii) amortization for lease incentives of $20,034 and $18,133, respectively.

Includes the following items for the three and nine months ended September 30, 2022:

(i) net loss of $45 and net income of $753 and (ii) depreciation and amortization of $61 and $122, respectively.

Comparison of the three months ended September 30, 2022 and 2021

Total revenue increased $78.6 million driven by an increase in asset sales revenue, partially offset by lower maintenance revenue and other revenue.

Asset sales revenue increased $85.5 million primarily due to an increase in the sale of commercial aircraft and engines during 2022.

See above discussion regarding presentation of asset sales.

Maintenance revenue decreased $4.7 million primarily due to the early redelivery of aircraft and lower maintenance billings related to the early termination of aircraft leases with Russian airlines as a result of the sanctions

imposed on Russian airlines, partially offset by an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

Other revenue decreased $1.7 million primarily due to lower end-of lease redelivery compensation.

Comparison of the nine months ended September 30, 2022 and 2021

Total revenue increased $102.8 million driven by an increase in asset sales revenue, maintenance revenue and other revenue, partially offset by a decrease in lease income.

Asset sales revenue increased $85.5 million primarily due to an increase in the sale of commercial aircraft and engines during 2022.

See above discussion regarding presentation of asset sales.

Maintenance revenue increased $24.4 million primarily due to an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation, partially offset by a

decrease in the recognition of maintenance deposits due to the early redelivery of aircraft and lower maintenance billings related to the early termination of aircraft leases with Russian airlines as a result of the sanctions imposed on

Russian airlines.

Other revenue increased $2.9 million primarily due to an increase in end-of lease redelivery compensation.

Lease income decreased $9.1 million primarily due to the early termination of aircraft and engine leases as a result of the sanctions imposed on Russian airlines.

Basic lease revenues from our owned aircraft and engines leased to

Russian airlines would have been approximately $30.2 million for the nine months ended September 30, 2022.

This decrease is partially offset by an increase in the number of aircraft and engines placed on lease.

Comparison of the three months ended September 30, 2022 and 2021

Total expenses increased $69.8 million primarily driven by an increase in the cost of sales, asset impairment and operating expenses, partially offset by a decrease in depreciation and

amortization expense.

Cost of sales increased $64.9 million primarily as a result of an increase in asset sales and the gross presentation of asset sales revenues and related cost of sales as described above.

Asset impairment increased $3.6 million for the adjustment of the carrying value of leasing equipment to fair value.

See Note 3 to the consolidated financial statements for additional information.

Operating expenses increased $3.3 million primarily as a result of an increase in insurance expense, shipping and storage fees, professional fees and other operating expenses, partially offset by a decrease in provision for credit

Depreciation and amortization expense decreased $2.0 million driven by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

Comparison of the nine months ended September 30, 2022 and 2021

Total expenses increased $251.9 million primarily driven by an increase in asset impairment, cost of sales, operating expenses and depreciation and amortization expense.

Asset impairment increased $125.1 million primarily due to the write down of aircraft and engines located in Ukraine and Russia that may not be recoverable.

See Note 3 to the consolidated financial statements for additional

Cost of sales increased $64.9 million primarily as a result of an increase in asset sales and the gross presentation of asset sales revenues and related costs of sales as described above.

Operating expenses increased $58.0 million primarily as a result of an increase in provision for credit losses as a result of the sanctions imposed on Russian airlines, an increase in insurance expense, shipping and storage fees,

professional fees, and repairs and maintenance expenses.

Depreciation and amortization expense increased $4.2 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine

leasing pool.

Other income (expense)

Total other income decreased $9.6 million during the three months ended September 30, 2022 primarily due to a decrease of $11.0 million in gain on sale of assets, net.

See above discussion

regarding presentation of asset sales.

Total other income increased $47.3 million during the nine months ended September 30, 2022 primarily due to (i) an increase of $45.6 million in gain on the sale of assets, net due to more

opportunistic sales transactions and (ii) an increase of $0.8 million in our proportionate share of unconsolidated entities’ net income.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $1.0 million and $36.4 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Aerospace Products Segment

The Aerospace Products segment develops, manufactures, repairs, and sells aircraft engines and aftermarket components primarily for the CFM56-7B and CFM56-5B commercial aircraft engines.

engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance center designed to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines.

Used serviceable material is sold through our

exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare parts from our CFM56 engine pool.

We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost

savings programs for engine repairs.

The following table presents our results of operations:

Three Months Ended September 30,

Nine Months Ended

September 30,

(in thousands)

Aerospace products revenue

Operating expenses

Cost of sales

Acquisition and transaction expenses

Depreciation and amortization

Total expenses

Other (expense) income

Equity in losses of unconsolidated entities

Gain on sale of assets, net

Total other (expense) income

Income before income taxes

Provision for (benefit from) income taxes

Net income attributable to shareholders

The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Net income attributable to shareholders

Provision for (benefit from) income taxes

Acquisition and transaction expenses

Depreciation and amortization expense

Pro-rata share of Adjusted EBITDA from unconsolidated entities (1)

Equity in losses of unconsolidated entities

Adjusted EBITDA (non-GAAP)

Includes the following items for the three months ended September 30, 2022 and 2021:

(i) net loss of $313 and $369 and (ii) depreciation and amortization of $56 and $57, respectively.

following items for the nine months ended September 30, 2022 and 2021:

(i) net loss of $878 and $1,050 and (ii) depreciation and amortization of $168 and $144, respectively.

Comparison of the three and nine months ended September 30, 2022 and 2021

Total Aerospace Products revenue increased $45.7 million during the three months ended September 30, 2022 driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine

modules, spare parts and used material inventory as operations continue to ramp-up in 2022.

See above discussion regarding presentation of asset sales.

Total Aerospace Products revenue increased $80.9 million during the nine months ended September 30, 2022 driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine

modules, spare parts and used material inventory as operations continue to ramp-up in 2022.

See above discussion regarding presentation of asset sales.

Comparison of the three months ended September 30, 2022 and 2021

Total expenses increased $27.5 million primarily due to an increase in costs of sales and operating expenses.

Cost of sales increased $25.7 million primarily as a result of an increase in Aerospace product revenues and the gross presentation described above.

Operating expenses increased $1.7 million primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in professional fees and other operating expenses due to

the ramp-up of Aerospace Products.

Comparison of the nine months ended September 30, 2022 and 2021

Total expenses increased $51.4 million primarily due to an increase in costs of sales and operating expenses.

Cost of sales increased $46.7 million primarily as a result of an increase in Aerospace product revenues and the gross presentation described above.

Operating expenses increased $4.6 million primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in professional fees and other operating expenses due to

the ramp-up of Aerospace Products.

Other income (expense)

Total other income decreased $1.7 million during three months ended September 30, 2022 which primarily reflects a decrease of $1.7 million in gain on sale of assets, net.

See above discussion

regarding presentation of asset sales.

Total other income increased $17.0 million during nine months ended September 30, 2022 which primarily reflects an increase of $16.8 million in gain on sale of assets, net due to an increase in

sales relating to the CFM56-7B and CFM56-5B engines as operations continue to ramp-up in 2022.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $16.6 million and $46.7 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Corporate and Other

The following table presents our results of operations:

Three Months Ended September 30,

Nine Months Ended

September 30,

(in thousands)

Operating expenses

General and administrative

Acquisition and transaction expenses

Management fees and incentive allocation to affiliate

Depreciation and amortization

Interest expense

Total expenses

Loss before income taxes

Provision for (benefit from) income taxes

Net loss attributable to shareholders

The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA:

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Net loss attributable to shareholders

Acquisition and transaction expenses

Depreciation and amortization expense

Interest expense

Adjusted EBITDA (non-GAAP)

Comparison of the three months ended September 30, 2022 and 2021

Total expenses increased $0.2 million primarily due to an increase in acquisition and transaction expenses driven by higher compensation and related costs associated with acquisitions and the merger with FTAI,

partially offset by a decrease in management fees and incentive allocation to affiliate driven by lower management fees allocated to the Company.

Comparison of the nine months ended September 30, 2022 and 2021

Total expenses increased $2.2 million primarily driven by an increase in general and administrative expenses and acquisition and transaction expenses driven by higher compensation and related

costs associated with acquisitions and the merger with FTAI, partially offset by a decrease in management fees and incentive allocation to affiliate driven by lower management fees allocated to the Company.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $1.6 million and decreased $0.1 million during the three and nine months ended September 30, 2022, respectively, primarily due to the changes noted above.

Liquidity and Capital Resources

The liquidity required to fund our working capital, capital expenditures and other cash needs is provided from a combination of internally generated cash flows, capital contributions from Parent

and loan financing.

We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can

continue to operate during these uncertain times.

This includes limiting discretionary spending across the organization and re-prioritizing our investments amid the COVID-19 pandemic and market volatility.

Our principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) capital distributions to Parent, (iii) release of maintenance and security deposits to

our lessees, and (iv) expenses associated with our operating activities.

Cash used for the purpose of making investments was $396.2 million and $321.2 million during the nine months ended September 30, 2022 and 2021, respectively.

Capital distributions to Parent were $294.2 million and $145.0 million during the nine months ended September 30, 2022 and 2021, respectively.

Release of maintenance and security deposits were $0.9 million and $19.6 million during the nine months ended September 30, 2022 and 2021, respectively.

Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities.

Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including finance lease collections and maintenance reserve collections)

net of operating expenses, (ii) capital contributions from Parent and (iii) proceeds from asset sales.

Cash flows provided by operating activities, plus the principal collections on finance leases and maintenance reserve collections were $191.1 million and $156.6 million during the nine months ended September 30, 2022 and 2021,

respectively.

Capital contributions from Parent were $242.1 million and $249.5 million during the nine months ended September 30, 2022 and 2021, respectively.

Proceeds from the sale of aviation equipment were $262.1 million and $78.5 million during the nine months ended September 30, 2022 and 2021, respectively.

We are currently evaluating several potential aviation transactions, which could occur within the next 12 months.

None of these potential transactions, negotiations, or financings are definitive

or included within our planned liquidity needs.

We cannot assure if or when any such transaction will be consummated or the terms of any such transaction.

Historical Cash Flow

Comparison of the nine months ended September 30, 2022 and 2021

The following table compares the historical cash flow for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

(in thousands)

Cash Flow Data:

Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by operating activities increased $19.5 million, which primarily reflects (i) a decrease in net income of $63.7 million, and certain adjustments to reconcile net income to cash

provided by operating activities including (ii) an increase in gain on sale of assets of $88.7 million, and (iii) changes in working capital of $18.0 million, and (iv) increases in asset impairment of $125.1 million.

Net cash used in investing activities decreased $115.3 million, primarily due to (i) higher proceeds from the sale of leasing equipment of $183.6 million and (ii) an increase in proceeds from the

sale of aircraft and engine of $7.2 million, partially offset by (iii) an increase in acquisition of leasing equipment of $61.7 million and (iv) an increase in purchase deposit for aircraft and engines of $14.8 million.

Net cash provided by financing activities decreased $122.0 million, primarily due to (i) an increase in capital contributions to Parent of $156.6 million, partially offset by (ii) an increase in

receipt of maintenance deposits of $14.5 million and a decrease in the release of maintenance deposits of $18.7 million.

Contractual Obligations

Our material cash requirements include the following contractual and other obligations:

Loan Obligations —As of September 30, 2022 and December 31, 2021, we had outstanding principal and

interest payment obligations of $27.1 million and $25.2 million, respectively, of which, $0.0 million and $0.0 million, respectively, are due in the next twelve months.

See Note 7 to the consolidated financial statements for additional

information about our loan obligations.

Lease Obligations —As of September 30, 2022 and December 31, 2021, we had outstanding operating and

finance lease obligations of $3.1 million and $2.4 million, of which, $0.8 million and $0.5 million is due in the next twelve months.

We expect to meet our future short-term liquidity requirements through cash on hand and net cash provided by our current operations.

We expect that our operating subsidiaries will generate

sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due.

We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities

through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future.

Management believes adequate capital and borrowings are available from various sources to fund our commitments to the

extent required.

Critical Accounting Estimates and Policies

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the

disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Note 2 to the

consolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Operating Leases — We lease equipment pursuant

to net operating leases.

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

Revenue is not recognized when collection is not reasonably assured.

collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the

end of the lease.

Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease.

These periodic maintenance payments accumulate over the term of

the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the amount paid by the lessee.

In the event the total cost of maintenance events over the term of a lease is less

than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.

Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets.

All excess maintenance payments received that we

do not expect to repay to the lessee are recorded as Maintenance revenues.

Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by

historical usage patterns and overall industry, market and economic conditions.

Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period.

For purchase and lease back transactions, we account for the transaction as a single arrangement.

We allocate the consideration paid based on the fair value of the aircraft and lease.

value of the lease may include a lease premium or discount.

Finance Leases —From time to time we enter into finance lease arrangements that include a lessee

obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased

equipment at the date of lease inception.

Net investment in finance lease represents the minimum lease payments due from lessee, net of unearned income.

The lease payments are segregated into principal and interest components similar to a

Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income.

The principal component of the lease payment is reflected as a reduction to the net investment in finance leases.

Revenue is not recognized when collection is not reasonably assured.

When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Maintenance Payments —Typically, under an operating lease of aircraft, the lessee is responsible for

performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine.

These maintenance payments are based on hours

or cycles of utilization or on calendar time, depending on the component, and are generally required to be made monthly in arrears.

If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee

for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the

relevant work.

We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the Consolidated Balance Sheets.

Reimbursements made to

the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability.

In certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions stipulated at the inception of the lease.

When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition.

recognize payments received as end-of-lease compensation adjustments, within lease revenue or as a reduction to the maintenance right asset, when payment is received or collectability is assured.

In the event we are required to make payments at

the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payment.

Property, Plant and Equipment, Leasing Equipment and Depreciation —Property, plant and equipment and

leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to estimated residual values which are summarized as follows:

Range of Estimated Useful Lives

Residual Value Estimates

25 years from date of manufacture

Generally not to exceed 15% of manufacturer’s list price when new

Aircraft engines

2 - 6 years, based on maintenance adjusted service life

Sum of engine core salvage value plus the estimated fair value of life limited parts

Aviation tooling and equipment

3 - 6 years from date of purchase

Scrap value at end of useful life

Furniture and fixtures

3 - 6 years from date of purchase

Impairment of Long-Lived Assets —We perform a recoverability assessment of each of our long-lived assets

whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable.

Indicators may include, but are not limited to, a significant lease restructuring or early

lease termination;

a significant change in market conditions;

or the introduction of newer technology aircraft or engines.

When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows

expected to be generated by the asset exceeds its net book value.

The undiscounted cash flows consist of cash flows from currently contracted leases, future projected leases, transition costs, estimated down time and estimated residual or

scrap values.

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

Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the global demand for a particular asset and

historical experience in the leasing markets, as well as information received from third party industry sources.

The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in

contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors.

Income Taxes —The Company is an exempted entity domiciled in the Cayman Islands where income taxes are

The Company is considered a Passive Foreign Investment Company for U.S.

income tax purposes and certain income taxes are imposed on our owners.

Taxable income or loss generated by our corporate subsidiaries is subject to U.S.

federal, state and foreign corporate income tax in locations where they conduct business.

We account for these taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between

the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

A valuation allowance is established when management believes it is more likely than not that a deferred tax asset will not be realized.

Recent Accounting Pronouncements

Please see Note 2 to our consolidated financial statements included elsewhere in this filing for recent accounting pronouncements.

Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates.

We believe that changes in these factors would

not cause significant fluctuations in our results of operations and cash flows.

On April 25, 2023, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $ 0.30 per share for the quarter ended March 31, 2023, payable on May 23, 2023 to the holders of record on May 12, 2023 .

Additionally, on April 25, 2023, our Board of Directors also declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares of $ 0.52 , $ 0.50 , $ 0.52 and $ 0.59 per share, respectively, payable on June 15, 2023 to the holders of record on June 1, 2023 .

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-Q

Item 1. Financial Statements