FTAI Aviation Ltd. 10-Q

Item 2. 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” or “us”). 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. Overview We own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our Manager’s expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. We are externally managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), which has a dedicated team of experienced professionals focused on the acquisition of transportation assets since 2002. As of March 31, 2024, we had total consolidated assets of $3.2 billion and total equity of $177.6 million . Impact of Russia’s Invasion of Ukraine 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. 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 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 did not expect to recover from Ukraine and Russia. As of March 31, 2024, eight aircraft and seventeen engines were still located in Russia. 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 or engine. 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 Russia is approximately $210.7 million. We intend to pursue all of 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. 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 and manufactures through a joint venture, and repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. 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. Our Manager On May 22, 2023, Fortress and Mubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital (“Mubadala”), announced that they have entered into definitive agreements pursuant to which, among other things, certain members of Fortress management and affiliates of Mubadala will acquire 100% of the equity of Fortress that is currently indirectly held by SoftBank Group Corp. (“SoftBank”). After the closing of the transaction, Fortress will continue to operate as an independent investment manager under the Fortress brand, with autonomy over investment processes and decision making, personnel and operations. 28 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. GAAP”). This performance measure provides the CODM with the information necessary to assess operational performance and 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, 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. Comparison of the three months ended March 31, 2024 and 2023 The following table presents our consolidated results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 53,161 $ 55,978 $ (2,817) Maintenance revenue 45,790 35,141 10,649 Asset sales revenue 38,607 108,691 (70,084) Aerospace products revenue 189,057 85,113 103,944 Other revenue 79 7,795 (7,716) Total revenues 326,694 292,718 33,976 Expenses Cost of sales 142,804 145,670 (2,866) Operating expenses 25,317 22,534 2,783 General and administrative 3,683 4,067 (384) Acquisition and transaction expenses 6,179 3,262 2,917 Management fees and incentive allocation to affiliate 4,895 2,997 1,898 Depreciation and amortization 49,920 40,926 8,994 Asset impairment 962 1,220 (258) Interest expense 47,707 39,292 8,415 Total expenses 281,467 259,968 21,499 Other (expense) income Equity in losses of unconsolidated entities (667) (1,335) 668 Other income 634 8 626 Total other expense (33) (1,327) 1,294 Income from before income taxes 45,194 31,423 13,771 Provision for income taxes 5,572 2,026 3,546 Net income 39,622 29,397 10,225 Less: Dividends on preferred shares 8,335 6,791 1,544 Net income attributable to shareholders $ 31,287 $ 22,606 $ 8,681 29 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net income attributable to shareholders $ 31,287 $ 22,606 $ 8,681 Add: Provision for income taxes 5,572 2,026 3,546 Add: Equity-based compensation expense 510 108 402 Add: Acquisition and transaction expenses 6,179 3,262 2,917 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges 962 1,220 (258) Add: Incentive allocations 4,308 2,942 1,366 Add: Depreciation and amortization expense (1) 59,122 48,770 10,352 Add: Interest expense and dividends on preferred shares 56,042 46,083 9,959 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (548) (696) 148 Less: Equity in losses of unconsolidated entities 667 1,335 (668) Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ 164,101 $ 127,656 $ 36,445 ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) depreciation and amortization expense of $49,920 and $40,926 , (ii) lease intangible amortization of $3,976 and $3,983 and (iii) amortization for lease incentives of $5,226 and $3,861 , respectively. (2) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net loss of $667 and $1,335 , (ii) depreciation and amortization expense of $119 and $400 , and (iii) acquisition and transaction expenses of $0 and $239, respectively. Revenues Comparison of the three months ended March 31, 2024 and 2023 Total revenues increased $34.0 million primarily due to an increase in Aerospace products revenue and Maintenance revenue, partially offset by decreases in Asset sales revenue, Lease income, and Other revenue. Aerospace products revenue increased $103.9 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2024. Maintenance reve nue increased $10.6 million p rimarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilizat ion. Asset sales reven ue decreased $70.1 million primarily due to a decrease in the sale of commercial aircraft and engines in our Aviation Leasing segment. Other revenue decreased $7.7 million primarily due to a decrease in end-of-lease redelivery compensation. Lease income decreased $2.8 million primarily due to a decrease in leasing income of the Offshore Energy business as one of our vessels was off-hire in 2024 compared to on-hire in 2023. Expenses Comparison of the three months ended March 31, 2024 and 2023 Total expenses increased $21.5 million, primarily due to higher (i) Depreciation and amortization expense, (ii) Interest expense, (iii) Acquisition and transaction expenses, (iv) Operating expenses and (v) M anagement fees and incentive allocation to affiliate, partially offset by lower (vi) Cost of sales. Depreciation and amortization increased $9.0 million primarily 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. Interest expense increased $8.4 million, which reflects an increase in the average debt outstanding of approximately $417.1 million primarily due to an increase in the (i) Senior Notes due 2030 of $496.8 million, which were issued in November 2023, partially offset by a decrease in the (ii) Revolving Credit Facility of $78.3 million. Acquisition and transaction expenses increased $2.9 million primarily due to higher professional fees related to strategic transactions. 30 Operating expenses increased $2.8 million primarily due to an increase in repairs and maintenance expense, professional fees and shipping an d storage fees, as well as increase in commission expenses due to the increase in sales from the used material program, partially offset by decreases in the Offshore Energy business in crew expenses, project costs and other operating expenses as one of our vessels was off-hire in 2024. Management fees and incentive allocation to affiliate increased $1.9 million primarily due to an increase in incentive fee due to the Manager driven by an increase in net income. Cost of sales decreased $2.9 million primarily as a result of a decrease in asset sales, partially offset by an increase in Aerospace Product sales. Other income (expense) Total other expense decreased $1.3 million primarily due to a decrease of $0.7 million in the proportionate share of unconsolidated entities’ net loss. Net income (loss) Net income increased $10.2 million primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBIT DA increased $36.4 million primarily due to the changes noted above. Aviation Leasing Segment As of March 31, 2024, in our Aviation Leasing segment, we own and manage 380 aviation assets, consisting of 103 commercial aircraft and 277 engines, including eight ai rcraft and seventeen engines that were still located in Russia. As of March 31, 2024, 82 of our commercial aircraft and 184 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 78% utilized during the three months ended March 31, 2024, 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 44 months, and our engines currently on-lease have an average remaining lease term of 19 months. The table below provides additional information on the assets in our Aviation Leasing segment: Aviation Assets Widebody Narrowbody Total Aircraft Assets at January 1, 2024 5 91 96 Purchases — 17 17 Sales — — — Transfers — (10) (10) Assets at March 31, 2024 5 98 103 Engines Assets at January 1, 2024 32 235 267 Purchases 2 23 25 Sales (4) — (4) Transfers — (11) (11) Assets at March 31, 2024 30 247 277 31 The following table presents our results of operations for our Aviation Leasing segment: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 50,846 $ 48,830 $ 2,016 Maintenance revenue 45,790 35,141 10,649 Asset sales revenue 38,607 108,691 (70,084) Other revenue 67 6,378 (6,311) Total revenues 135,310 199,040 (63,730) Expenses Cost of sales 31,889 92,234 (60,345) Operating expenses 8,207 7,088 1,119 Acquisition and transaction expenses 2,761 1,462 1,299 Depreciation and amortization 46,084 38,140 7,944 Asset impairment 962 1,220 (258) Total expenses 89,903 140,144 (50,241) Other income (expense) Equity in losses of unconsolidated entities (146) (99) (47) Other income 369 8 361 Total other income (expense) 223 (91) 314 Income before income taxes 45,630 58,805 (13,175) Provision for income taxes 3,033 995 2,038 Net income attributable to shareholders $ 42,597 $ 57,810 $ (15,213) 32 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net income attributable to shareholders $ 42,597 $ 57,810 $ (15,213) Add: Provision for (benefit from) income taxes 3,033 995 2,038 Add: Equity-based compensation expense 105 22 83 Add: Acquisition and transaction expenses 2,761 1,462 1,299 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges 962 1,220 (258) Add: Incentive allocations — — — Add: Depreciation and amortization expense (1) 55,286 45,984 9,302 Add: Interest expense and dividends on preferred shares — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) (83) (36) (47) Less: Equity in losses of unconsolidated entities 146 99 47 Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ 104,807 $ 107,556 $ (2,749) ________________________________________________________ (1) Includes the follo wing items for the three months ended March 31, 2024 and 2023: (i) depreciation expense of $46,084 and $38,140, (ii) lease intangible amortization of $3,976 and $3,983 and (iii) amortization for lease incentives of $5,226 and $3,861, respectively. (2) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net loss of $146 and $99 and (ii) depreciation and amortization of $63 and $63, respectively. Comparison of the three months ended March 31, 2024 and 2023 Revenues Total reven ue decreased $63.7 million driven by a decrease in asset sales revenue and other revenue, partially offset by an increase in maintenance revenue and lease income. • Asset sales revenue decreased $70.1 million primarily due to a decrease in the sale of commercial aircraft and engines. • Other revenu e decreased $6.3 million primarily due to a decrease in end-of-lease redelivery compensation. • Maintenance revenue increased $10.6 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization. • Leas e income increased $2.0 million primarily due to an increase in the number of aircraft and engines placed on lease during the year, partially offset by an increase in the number of aircraft and engines redelivered. Expenses Total exp enses decreased $50.2 million primarily driven by a decrease in cost of sales, partially offset by an increase in depreciation and amortization, acquisition and transaction expenses, and operating expenses. • Cost of sales decreased $60.3 million primarily as a result of a decrease in asset sales. • Depreciation and amor tization expense increased $7.9 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. • Acquisition and transaction expense s increased $1.3 million driven by higher compensation and related costs associated with the acquisition of aviation leasing equipment. • Operating exp enses increased $1.1 million driven by an increase in professional fees and repairs and maintenance expenses, partially offset by a decrease in shipping and storage fees and insurance expense. Other income (expense) Total other income increased $0.3 million primarily due to an increase in interest income, partially offset by an increase in Aviation Leasing’s proportionate share of unconsolidated entities’ net loss. Net income Net income decreased $15.2 million primarily due to the changes noted above. 33 Provision for income taxes The provision for income taxes increased $2.0 million primarily due to the Company reducing a portion of the deferred tax asset of $46.6 million in connection with a tax law change in Bermuda, which was recorded at December 31, 2023. See Note 10 to the consolidated financial statements for additional information. Adjusted EBITDA (Non-GAAP) Adjusted EBITD A decreased $2.7 million primarily due to the changes noted above. Aerospace Products Segment The Aerospace Products segment develops and manufactures through a joint venture, repairs and sells through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance program, designed to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. 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. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or “QuickTurn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 3 “Acquisition of QuickTurn”, for additional information. 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 March 31, Change (in thousands) 2024 2023 Aerospace products revenue 189,057 85,113 103,944 Expenses Cost of sales 110,915 53,436 57,479 Operating expenses 7,470 3,655 3,815 Acquisition and transaction expenses 246 755 (509) Depreciation and amortization 933 86 847 Total expenses 119,564 57,932 61,632 Other expense Equity in losses of unconsolidated entities (521) (1,236) 715 Total other expense (521) (1,236) 715 Income before income taxes 68,972 25,945 43,027 Provision for income taxes 2,539 916 1,623 Net income attributable to shareholders $ 66,433 $ 25,029 $ 41,404 34 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net income attributable to shareholders $ 66,433 $ 25,029 $ 41,404 Add: Provision for income taxes 2,539 916 1,623 Add: Equity-based compensation expense 70 15 55 Add: Acquisition and transaction expenses 246 755 (509) Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive allocations — — — Add: Depreciation and amortization expense 933 86 847 Add: Interest expense and dividends on preferred shares — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) (465) (660) 195 Less: Equity in losses of unconsolidated entities 521 1,236 (715) Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ 70,277 $ 27,377 $ 42,900 ________________________________________________________ (1) Includes the following items for the three months ended March 31, 2024 and 2023: (i) net loss of $521 and $1,236, (ii) depreciation and amortization expense of $56 and $337, and (iii) acquisition and transaction expenses o f $0 and $239, respectively. Comparison of the three months ended March 31, 2024 and 2023 Revenues Tot al Aerospace Products revenue increased $103.9 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2024. Expenses Tota l expenses increased $61.6 million primarily due to an increase in costs of sales, operating expenses and depreciation and amortization. • Cost of sale s increased $57.5 million primarily as a result of an increase in Aerospace Product sales. • Op erating expenses increased $3.8 million primarily driven by an increase in commission expenses due to the increase in sales from the used material program as well as increases in shipping and storage fees, professional fees and other operating expenses. Other expense Total other expense decreased $0.7 million due to a decrease in our proportionate share of unconsolidated entities’ net loss. Net income Net income increased $41.4 million primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITD A increased $42.9 million primarily due to the changes noted above. 35 Corporate and Other The following table presents our results of operations: Three Months Ended March 31, Change (in thousands) 2024 2023 Revenues Lease income $ 2,315 $ 7,148 $ (4,833) Other revenue 12 1,417 (1,405) Total revenues 2,327 8,565 (6,238) Expenses Operating expenses 9,640 11,791 (2,151) General and administrative 3,683 4,067 (384) Acquisition and transaction expenses 3,172 1,045 2,127 Management fees and incentive allocation to affiliate 4,895 2,997 1,898 Depreciation and amortization 2,903 2,700 203 Interest expense 47,707 39,292 8,415 Total expenses 72,000 61,892 10,108 Other income Other income 265 — 265 Total other income 265 — 265 Loss before income taxes (69,408) (53,327) (16,081) Provision for income taxes — 115 (115) Net loss (69,408) (53,442) (15,966) Less: Dividends on preferred shares 8,335 6,791 1,544 Net loss attributable to shareholders $ (77,743) $ (60,233) $ (17,510) The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA: Three Months Ended March 31, Change (in thousands) 2024 2023 Net loss attributable to shareholders $ (77,743) $ (60,233) $ (17,510) Add: Provision for income taxes — 115 (115) Add: Equity-based compensation expense 335 71 264 Add: Acquisition and transaction expenses 3,172 1,045 2,127 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — Add: Changes in fair value of non-hedge derivative instruments — — — Add: Asset impairment charges — — — Add: Incentive allocations 4,308 2,942 1,366 Add: Depreciation and amortization expense 2,903 2,700 203 Add: Interest expense and dividends on preferred shares 56,042 46,083 9,959 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — Less: Equity in losses (earnings) of unconsolidated entities — — — Less: Non-controlling share of Adjusted EBITDA — — — Adjusted EBITDA (non-GAAP) $ (10,983) $ (7,277) $ (3,706) Comparison of the three months ended March 31, 2024 and 2023 Revenues Total revenues decreased $6.2 million primarily due to a decrease in the Offshore Energy business as one of our vessels was off-hire in 2024 compared to on-hire in 2023. 36 Expenses Total expenses increa sed $10.1 million primarily due to higher (i) Interest expense, (ii) Acquisition and transaction expenses, (iii) Management fees and incentive allocation to affiliate, partially offset by lower (iv) Operating expenses. • Interest expense i ncreased $8.4 million, which reflects an increase in the average debt outstanding of approximately $417.1 million primarily due to an increase in the (i) Senior Notes due 2030 of $496.8 million, which were issued in November 2023, partially offset by a decrease in the (ii) Revolving Credit Facility of $78.3 million. • Acquisition and transaction expense increased $2.1 million primarily due to higher professional fees related to strategic transactions. • Management fees and incentive allocation to affiliate increased $1.9 million primarily due to an increase in incentive fee due to the Manager driven by an increase in net income. • Operating expenses decreased $2.2 million primarily due to decreases in the Offshore Energy business in crew expenses, project costs and other operating expenses as one of our vessels was off-hire in 2024. Other income Total other income increased $0.3 million which primarily reflects an increase in bank fees and expenses. Net loss Net loss increased $16.0 million primarily due to the changes noted above. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $3.7 million primarily due to the changes noted above. Liquidity and Capital Resources 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 various environments. This includes limiting discretionary spending across the organization and re-prioritizing our investments as necessary. Our principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments. • Cash used for the purpose of making investments was $303.0 million and $167.0 million during the three months ended March 31, 2024 and 2023, respectively. • Distributions to shareholders, including cash dividends, were $38.4 million and $36.7 million during the three months ended March 31, 2024 and 2023, respectively. • Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our debt obligations are captured in our cash flows from financing activities. Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales. • Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $9.4 million and $48.8 million during the three months ended March 31, 2024 and 2023, respectively. • During the three months ended March 31, 2024, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $210.0 million and $35.0 million, respectively. During the three months ended March 31, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $145.0 million and $220.0 million, respectively. • Proceeds from the sale of assets were $128.4 million and $153.7 million during the three months ended March 31, 2024 and 2023, respectively. • Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs, were $61.7 million during the three months ended March 31, 2023. We are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional debt and equity financings, 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 or related financing. 37 Historical Cash Flow Comparison of the three months ended March 31, 2024 and 2023 The following table compares the historical cash flow for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, (in thousands) 2024 2023 Cash Flow Data: Net cash (used in) provided by operating activities $ (345) $ 38,697 Net cash used in investing activities (169,213) (12,323) Net cash provided by (used in) financing activities 144,026 (38,445) Net cash provided by operating activities decreased $39.0 million, which primarily reflects certain adjustments to reconcile net income to cash provided by operating activities including (i) Changes in net working capital of $44.7 million and an increase in (ii) Gain on sale of assets, net of $26.4 million, partially offset by an increase in (iii) Depreciation and amortization of $9.0 million, a decrease in (iv) Security deposits and maintenance claims included in earnings of $7.4 million, and increases in (v) net income of $10.2 million, (vi) Change in deferred income taxes of $2.9 million, and (vii) Change in fair value of guarantees of $1.5 million. Net cash used in investing activities increased $156.9 million, primarily due to (i) an increase in Acquisitions of leasing equipment of $149.5 million, (ii) lower Proceeds from the sale of leasing equipment of $25.3 million, (iii) higher Purchase deposits for acquisitions of $15.6 million, partially offset by (iv) a decrease in Investment in unconsolidated entities of $19.5 million and (v) a decrease in Acquisitions of lease intangibles of $9.5 million. Net cash provided by financing activities increased $182.5 million, primarily due to (i) a decrease in Repayment of debt of $185.0 million and (ii) an increase in Proceeds from debt of $65.0 million, partially offset by (iii) a decrease in proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million and (iv) and increase in Release of maintenance deposits of $3.1 million. Contractual Obligations Our material cash requirements include the following contractual and other obligations: Debt Obligations — As of March 31, 2024, we had outstanding principal and interest payment obligations of $2.7 billion and $0.7 billion, respectively, of which only interest payments of $191.6 million are due in the next twelve months. See Note 7 to the consolidated financial statements for additional information about our debt obligations. Lease Obligations —As of March 31, 2024, we had outstanding operating and finance lease obligations of $2.2 million, of which $0.9 million is due in the next twelve months. Other Cash Requirements —In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to change at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.0 million and $33.3 million on our ordinary shares and preferred shares, respectively. We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings 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 There were no material changes to our critical accounting estimates described in our Annual Report on Form 10-K for the year ended December 31, 2023. Recent Accounting Pronouncements See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements.