What changed in this filing

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Item 1. Financial Statements

2024-08-09 compared with 2024-04-26 · 396 added, 161 removed, 605 unchanged (48% of the section changed)

3 unchanged sentences

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

Notes March 31, 2024 December 31, 2023

Notes June 30, 2024 December 31, 2023

Cash and cash equivalents 2 $ 169,485 $ 90,756

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2,000,000,000 shares authorized;

100,245,905 and 100,245,905 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)

102,211,402 and 100,245,905 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

$ 1,022 $ 1,002

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200,000,000 shares authorized;

15,920,000 and 15,920,000 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)

15,920,000 and 15,920,000 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

Additional paid in capital 330,419 255,973

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Notes 2024 2023 2024 2023

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Management fees and incentive allocation to affiliate 11 3,554 5,563 8,449 8,560

Internalization fee to affiliate 15 300,000 — 300,000 —

Depreciation and amortization 4, 6 56,691 38,514 106,611 79,440

4 unchanged sentences

Equity in losses of unconsolidated entities 5 ( 694 ) ( 380 ) ( 1,361 ) ( 1,715 )

Other income 634 8

Total other expense ( 33 ) ( 1,327 )

Income before income taxes 45,194 31,423

Provision for income taxes 10 5,572 2,026

Net income 39,622 29,397

Loss on extinguishment of debt ( 13,920 ) — ( 13,920 ) —

Other (expense) income ( 498 ) 408 136 416

Total other (expense) income ( 15,112 ) 28 ( 15,145 ) ( 1,299 )

(Loss) income before income taxes ( 232,903 ) 56,608 ( 187,709 ) 88,031

(Benefit from) provision for income taxes 10 ( 13,033 ) 1,855 ( 7,461 ) 3,881

Net (loss) income ( 219,870 ) 54,753 ( 180,248 ) 84,150

Dividends on preferred shares 8,335 8,335 16,670 15,126

Net income attributable to shareholders $ 31,287 $ 22,606

Earnings per share:

Net (loss) income attributable to shareholders $ ( 228,205 ) $ 46,418 $ ( 196,918 ) $ 69,024

(Loss) Earnings per share:

Basic $ ( 2.26 ) $ 0.47 $ ( 1.96 ) $ 0.69

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FTAI AVIATION LTD.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)

Three Months Ended March 31, 2024

Three and Six Months Ended June 30, 2024

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

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Equity - March 31, 2024 $ 1,002 $ 159 $ 218,074 $ ( 42,163 ) $ 534 $ 177,606

Three Months Ended March 31, 2023

Net loss ( 219,870 ) ( 219,870 )

Total comprehensive loss ( 219,870 ) ( 219,870 )

Purchase of non-controlling interest ( 534 ) ( 534 )

Dividends declared - ordinary shares ( 30,074 ) ( 30,074 )

Dividends declared - preferred shares ( 8,335 ) ( 8,335 )

Issuance of ordinary shares 20 150,116 150,136

Equity-based compensation 638 638

Equity - June 30, 2024 $ 1,022 $ 159 $ 330,419 $ ( 262,033 ) $ — $ 69,567

See accompanying notes to consolidated financial statements.

FTAI AVIATION LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)

Three and Six Months Ended June 30, 2023

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

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

Net income 54,753 54,753

Total comprehensive income 54,753 54,753

Contributions from non-controlling interest 10 10

Issuance of ordinary shares 159 159

Dividends declared - ordinary shares ( 29,935 ) ( 29,935 )

Dividends declared - preferred shares ( 8,335 ) ( 8,335 )

Equity-based compensation 510 510

Equity - June 30, 2023 $ 997 $ 159 $ 331,080 $ ( 241,452 ) $ 534 $ 91,318

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income $ 39,622 $ 29,397

Net (loss) income $ ( 180,248 ) $ 84,150

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

Equity in losses of unconsolidated entities 1,361 1,715

Gain on sale of leasing equipment, net ( 58,061 ) ( 31,657 )

Gain on sale of net assets ( 146,084 ) ( 75,960 )

Security deposits and maintenance claims included in earnings ( 5,298 ) ( 12,215 )

Loss on extinguishment of debt 13,920 —

Equity-based compensation 1,148 618

Non-cash termination fee to affiliate 150,000 —

Depreciation and amortization 106,611 79,440

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Acquisition of leasing equipment ( 436,180 ) ( 325,462 )

Investments in notes and financing receivable ( 19,750 ) —

Acquisition of property, plant and equipment ( 2,471 ) ( 2,298 )

Acquisition of lease intangibles 1,174 ( 10,795 )

Investment in promissory notes — ( 11,500 )

Purchase deposits for acquisitions ( 104,654 ) ( 11,200 )

Proceeds from sale of leasing equipment 128,384 153,679

Proceeds from sale of net assets 333,660 273,229

Proceeds for deposit on sale of aircraft and engine 4,580 1,817

Receipt of deposits for sale of aircraft and engine — 300

Return of purchase deposits 530 —

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(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from financing activities:

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Release of maintenance deposits ( 3,938 ) —

Capital contributions from non-controlling interests ( 534 ) 10

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

1 unchanged sentence

Cash dividends - preferred shares ( 16,669 ) ( 15,126 )

Net cash provided by (used in) financing activities $ 144,026 $ ( 38,445 )

Net decrease in cash and cash equivalents and restricted cash ( 25,532 ) ( 12,071 )

Net cash provided by financing activities $ 485,748 $ 2,674

Net increase (decrease) in cash and cash equivalents and restricted cash 78,729 ( 31,931 )

Cash and cash equivalents and restricted cash, beginning of period 90,906 53,065

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Supplemental disclosure of non-cash investing and financing activities:

Acquisition of and transfers to leasing equipment $ ( 59,850 ) $ ( 18,539 )

Transfers from leasing equipment 73,297 51,607

Transfers from leasing equipment to inventory $ 70,897 $ ( 8,421 )

Transfers from inventory to leasing equipment ( 98,192 ) 73,329

Sale on and issuance of promissory notes 37,367 12,538

Acquisition of leasing equipment in accrued expenses ( 17,975 ) ( 3,100 )

Purchase deposits reclassified to leasing equipment ( 12,108 ) ( 6,371 )

Settled security deposits ( 4,077 ) ( 2,406 )

Settled maintenance deposits ( 24,536 ) ( 11,532 )

Issuance of ordinary shares — 230

See accompanying notes to consolidated financial statements.

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

Prior to May 28, 2024, FTAI Aviation Ltd.

operated under a management agreement (the “Management Agreement”) with FIG LLC (the “Former Manager”), and Fortress Worldwide Transportation and Infrastructure Master GP LLC (the “Master GP”), each an affiliate of Fortress Investment Group LLC (“Fortress”).

For their services, the Former Manager was entitled to management fees and the Master GP was entitled to certain incentive allocations, both defined in, and in accordance with the terms of, the Management Agreement.

On May 28, 2024, the Company entered into an Internalization Agreement with the Former Manager and the Master GP (the “Internalization Agreement”), pursuant to which the Management Agreement was terminated effective May 28, 2024 (the “Effective Date”), except that certain indemnification and other obligations survive, and the Company internalized its management functions (such transactions, the “Internalization”).

As a result of the Internalization, the Company ceased to be externally managed and operates as an internally managed company.

In connection with the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) $ 150.0 million (the “Cash Consideration”), the compensation accrued and payable, but not yet paid, under the Management Agreement, and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement;

(ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) 1,866,949 ordinary shares of the Company (the “Share Consideration”);

and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $ 30 .

In addition, the Former Manager will repay to the Company certain annual bonus payments due to certain employees of the Former Manager or its affiliates who provide services to the Company with respect to the 2024 calendar year on a pro rata basis.

The Company financed the cash payments through one or more debt financings, along with cash on hand.

On May 28, 2024, the Company also entered into a Transition Services Agreement (the “Transition Services Agreement”) with the Former Manager.

Under the Transition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the services provided by the Former Manager to the Company and its affiliates immediately prior to May 28, 2024 (the “Services”) for a transition period during which the Company will procure replacements for the Services.

The Services will be provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, plus a mark-up of ten percent ( 10 %).

Unless the Transition Services Agreement is terminated earlier or the Company elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to provide certain Services to the Company until October 31, 2024.

In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025.

The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty ( 30 ) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty ( 30 ) days.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Actual results could differ from those estimates.

Restructuring Charges — The termination of the Management Agreement was a material change in the management structure of the business and is accounted for under ASC 420, Exit or Disposal Cost Obligations .

The termination fee payment to the

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Former Manager under the Internalization Agreement is recorded within Internalization Fee to Affiliate in the Consolidated Statements of Operations.

See Note 15 for additional discussion of the restructuring charges related to the Internalization.

Reclassifications — Certain amounts from prior periods in the Company’s consolidated financial statements have been reclassified to align with the presentation in the current period.

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

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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.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance deposits.

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Revenue is recorded with corresponding costs of sales, presented on a gross basis.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Aerospace products revenue —Aerospace products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606.

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

No single customer accounted for greater than 10% of total revenue during the three months ended March 31, 2024.

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

As of March 31, 2024, there was one customer in the Aviation Leasing segment that represented 11 % of total accounts receivable, net.

We earned 19 % and 13 % of our revenue from one customer in the Aerospace Products segment during the three and six months ended June 30, 2024.

We earn ed 10 % and 11 % o f our revenue from one customer in the Aviation Leasing segment during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, there was one customer in the Aerospace Products segment that represented 11 % of total accounts receivable, net.

As of December 31, 2023, no single customer accounted for greater than 10% of total accounts receivable, net.

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Allowance for Doubtful Ac counts and Credit Losses — 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 $ 72.2 million as of March 31, 2024 and December 31, 2023.

The allowance for doubtful accounts was $ 72.2 million as of June 30, 2024 and December 31, 2023, respectively .

We determine the credit loss reserve for note receivables, receivables related to finance leases and inventory sales.

There was no provision for credit losses for the three months ended March 31, 2024 and $ 0.5 million for the three months ended March 31, 2023, which is included in Operating expenses in the Consolidated Statements of Operations.

There was $ 0.1 million provision for credit losses for the three and six months ended June 30, 2024.

There was provision for credit losses of $ 0.6 million and $ 1.0 million for the three and six months ended June 30, 2023, which is included in Operating expenses in the Consolidated Statements of Operations.

Comprehensive Income — Comprehensive income 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 income represents net income, as presented in the Consolidated Statements of Operations.

Other Assets— Other assets is primarily comprised of lease incentives of $ 45.9 million and $ 43.5 million, purchase deposits of $ 37.1 million and $ 23.9 million, notes receivable of $ 130.5 million and $ 102.3 million, operating lease right-of-use assets, net of $ 3.4 million and $ 3.4 million, finance leases, net of $ 2.4 million and $ 3.0 million, maintenance right assets of $ 15.0 million and $ 16.3 million and prepaid expenses of $ 5.1 million and $ 7.8 million as of March 31, 2024 and December 31, 2023, respectively.

Other Assets— Other assets is primarily comprised of lease incentives of $ 57.7 million and $ 43.5 million, purchase deposits of $ 46.0 million and $ 23.9 million, notes receivable of $ 125.2 million and $ 102.3 million, operating lease right-of-use assets, net of $ 3.3 million and $ 3.4 million, finance leases, net of $ 1.4 million and $ 3.0 million, maintenance right assets of $ 14.0 million and $ 16.3 million and prepaid expenses of $ 77.4 million and $ 7.8 million as of June 30, 2024 and December 31, 2023, respectively.

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

For the three months ended March 31, 2024 and 2023, the Board of Directors declared cash dividends of $ 0.30 per ordinary share.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Additionally, in the quarter ended March 31, 2024, the Board of Directors 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.

For the three and six months ended June 30, 2024 and 2023, the Board of Directors declared cash dividends of $ 0.30 and $ 0.60 per ordinary share, respectively.

Additionally, in the quarter ended June 30, 2024, the Board of Directors 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.

Recent Accounting Pronouncements — In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures .

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We are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements.

18 unchanged sentences

and, (iv) other changes to assets and liabilities, including working capital accounts.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table summarizes the preliminary allocation of the Net assets acquired as presented in our Consolidated Balance Sheets:

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This goodwill is assigned to the Aerospace Products segment and is deductible for income tax purposes.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table presents the identifiable intangible assets and their estimated useful lives:

8 unchanged sentences

Total $ 30,559

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The financial information in the table below summarizes the combined results of operations of FTAI and QuickTurn on a pro forma basis.

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The following pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place as of January 1, 2023.

March 31, 2023

Three Months Ended Six Months Ended

June 30, 2023 June 30, 2023

Total revenue $ 281,545 $ 578,586

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Leasing equipment, net is summarized as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Leasing equipment $ 2,802,983 $ 2,574,394

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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 transactional impairment charges of $ 1.0 million and $ 1.2 million, net of redelivery compensation during the three months ended March 31, 2024 and March 31, 2023, respectively.

As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $ 0.0 million and $ 1.0 million, net of redelivery compensation, for the three and six months ended June 30, 2024, respectively.

In comparison, for the three and six months ended June 30, 2023, respectively, the Company recognized transactional impairment charges of $ 0.0 million and $ 1.2 million, net of redelivery compensation.

Depreciation expense for leasing equipment is summarized as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Depreciation expense for leasing equipment $ 55,658 $ 38,336 104,560 79,102

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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

Carrying Value

Investment Ownership Percentage March 31, 2024 December 31, 2023

Investment Ownership Percentage June 30, 2024 December 31, 2023

Advanced Engine Repair JV Equity method 25 % $ 19,886 $ 21,040

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* 45 % pro rata distribution of income until return of JV partner's initial investment

We did not recognize any other-than-temporary impairments for the three months ended March 31, 2024 and 2023.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We did not recognize any other-than-temporary impairments for the three and six months ended June 30, 2024 and 2023.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Advanced Engine Repair JV $ ( 633 ) $ 681 $ ( 1,154 ) $ 273

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

On May 3, 2024, we purchased the remaining interest from S7 Aerospace for total cash consideration of $ 0.8 million and obtained full ownership of the aircraft with a 100 % equity interest.

On the acquisition date, the Company accounted for the Falcon investment on a consolidated basis and derecognized it as an equity method investment.

Quick Turn Engine Center LLC

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Intangible assets and liabilities, net are summarized as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Intangible assets

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Acquired unfavorable lease intangibles, net $ 2,338 $ 1,762

Intangible assets and liabilities are all held within the Aviation Leasing and Aerospace Products segments.

Intangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities.

Amortization of intangible assets and liabilities is recorded as follows:

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

Classification in Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Lease intangibles Lease income $ 3,786 $ 3,616 $ 7,762 $ 7,599

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Total $ 3,881 3,616 $ 7,974 7,599

As of March 31, 2024, estimated net annual amortization of intangibles is as follows:

As of June 30, 2024, estimated net annual amortization of intangibles is as follows:

Remainder of 2024 $ 7,603

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Our debt, net is summarized as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings

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496,884 7.88 % 12/1/30 496,704

Senior Notes due 2031 700,000 7.00 % 5/1/31 —

Senior Notes due 2032 800,000 7.00 % 6/15/32 —

Total bonds payable 3,129,358 2,550,493

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(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 $ 748 and $ 866 at March 31, 2024 and December 31, 2023, respectively, and an unamortized premium of $ 2,532 and $ 2,908 at March 31, 2024 and December 31, 2023, respectively.

(3) Includes an unamortized premium of $ 1,657 and $ 1,746 at March 31, 2024 and December 31, 2023, respectively.

(4) Includes unamortized discount of $ 3,207 and $ 3,296 at March 31, 2024 and December 31, 2023, respectively.

We were in compliance with all debt covenants as of March 31, 2024.

(2) Includes an unamortized discount of $ 866 at December 31, 2023 and an unamortized premium of $ 2,908 at December 31, 2023.

(3) Includes an unamortized premium of $ 1,567 and $ 1,746 at June 30, 2024 and December 31, 2023, respectively.

(4) Includes unamortized discount of $ 3,116 and $ 3,296 at June 30, 2024 and December 31, 2023, respectively.

Revolving Credit Facility — On May 23, 2024, the Company amended and restated its Revolving Credit Facility by executing a Third Amended and Restated Credit Agreement (the “Amendment”) to the Second Amended and Restated Credit Agreement, dated as of September 20, 2022.

The Amendment provides for revolving loans to be made available to the Company in an aggregate principal amount of up to $ 400.0 million, of which up to $ 25.0 million may be utilized for the issuance of letters of credit.

Senior Notes due 2031 — On April 11, 2024, we issued $ 700.0 million aggregate principal amount of senior unsecured notes due 2031 (the “Senior Notes due 2031”).

The Senior Notes due 2031 bear interest at a rate of 7.00 % per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2024.

Using a portion of the net proceeds, the Company completed a cash tender offer for $ 324.6 million aggregate principal amount of 2025 Notes validly tendered on April 11, 2024.

Holders whose notes were accepted for purchase received equal consideration per $1,000 principal amount of 2025 Notes, plus accrued and unpaid interest to, but not including, April 11, 2024.

The Company used the remaining net proceeds to redeem the remaining $ 325.4 million aggregate principal amount of Senior Notes due 2025, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $ 2.7 million .

The remaining net proceeds were used for general corporate purposes, including the funding of acquisitions and investments.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Senior Notes due 2032 — On June 17, 2024, we issued $ 800.0 million aggregate principal amount of senior unsecured notes due 2032 (the “Senior Notes due 2032”).

These notes bear interest at a rate of 7.00 % per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2024.

The Company utilized the net proceeds from the issuance for several purposes:

(i) to fully repay outstanding amounts under our Revolving Credit Facility provided under the Third Amended and Restated Credit Agreement, dated as of May 23, 2024, without reduction in commitments, (ii) to fund the cash termination fee for the previously announced management Internalization described in Note 11, (iii) to complete a cash tender offer for up to $ 300.0 million in aggregate principal amount of 2027 Notes validly tendered on June 18, 2024, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $ 11.2 million .

Holders whose notes were accepted for purchase received $30.00 per $1,000 principal amount of 2027 Notes, plus accrued and unpaid interest to, but not including, June 21, 2024, (iv) to cover fees and expenses related to the aforementioned transactions, and (v) for general corporate purposes.

We were in compliance with all debt covenants as of June 30, 2024.

FAIR VALUE MEASUREMENTS

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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.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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.

The fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Senior Notes due 2025 $ — $ 649,383

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Senior Notes due 2030 524,610 521,440

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

Senior Notes due 2031 715,582 —

Senior Notes due 2032 812,664 —

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 $ 7.1 million and $ 6.8 million as of March 31, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.

The guarantees are valued at $ 7.8 million and $ 6.8 million as of June 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.

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

During the three months ended March 31, 2024, the Company recorded a $ 0.3 million increase related to the change in fair value, which is recorded as Asset sales revenue.

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.

During the three months ended March 31, 2024 and 2023, there were no significant transfers into or out of Level 3.

During the three and six months ended June 30, 2024, the Company recorded a $ 0.8 million and $ 1.0 million increase related to the change in fair value, which is recorded as Asset sales revenue.

During the six months ended June 30, 2023, the Company recorded a $ 4.9 million increase in guarantees related to the sale of seven aircrafts and a $ 1.9 million decrease related to the change in fair value, which is recorded as Asset sales revenue.

During the three and six months ended June 30, 2024 and 2023, there were no significant transfers into or out of Level 3 .

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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

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We have a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to award equity compensation awards in the form of stock options 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, 2024, the Incentive Plan provides for the issuance of up to 29.8 million shares.

As of June 30, 2024, 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.

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)

Three Months Ended June 30, Six Months Ended June 30, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years)

2024 2023 2024 2023

Stock Options $ 42 $ — $ 42 $ — $ 2,032 4.0 years

Restricted Shares 596 510 1,106 618 17,013 3.1 years

During the three months ended March 31, 2024, FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC, transferred 49,790 of its options to certain of the Manager’s employees.

Total $ 638 $ 510 $ 1,148 $ 618 $ 19,045

During the six months ended June 30, 2024, the Former Manager transferred 37,343 of its options to certain of the Former Manager’s employees.

Additionally, the Company granted options to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) related to 60,000 ordinary shares at an exercise price of $ 79.13 , which had a grant date fair value of $ 2.1 million.

The assumptions used in valuing the options were:

a 4.52 % risk-free rate, a 1.50 % dividend yield, a 43.00 % volatility and a 6.8 year term.

Restricted Shares

During the six months ended June 30, 2024, we issued restricted shares of the Company to select employees of FTAI Aviation LLC that had a grant date fair value of $ 5.7 million and vest over 4.0 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, 2027 and the remaining units vesting on June 30, 2028.

The fair value of these awards were calculated based on the closing price of FTAI Aviation Ltd.’s ordinary shares on grant date of May 30, 2024.

Additionally, we issued restricted shares of the Company to select officers of FTAI Aviation LLC that had a grant date fair value of $ 5.5 million and vest over 3.0 years.

These awards are subject to continued employment, and the compensation expense is recognized ratably over the three-year vesting period.

The fair value of these awards were calculated based on the closing price of FTAI Aviation Ltd.’s ordinary shares on grant date of May 28, 2024.

FTAI AVIATION LTD.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Cayman Islands $ — $ — $ — $ —

Bermuda — — — —

United States:

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State and local ( 289 ) ( 32 ) 289 ( 19 )

643 544 789 818

Total current provision 1,238 420 2,262 754

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State and local 625 54 267 498

( 4,174 ) 791 ( 3,475 ) 1,806

Total deferred provision ( 14,271 ) 1,435 ( 9,723 ) 3,127

Total provision for income taxes $ 5,572 $ 2,026

Total (benefit from) provision for income taxes $ ( 13,033 ) $ 1,855 $ ( 7,461 ) $ 3,881

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

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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.

Taxable income or loss generated by our corporate subsidiaries is subject to corporate income tax in locations where they conduct business.

Historically, the Company’s Bermuda operations have not been subject to Bermuda income tax.

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For the year ended December 31, 2023, we recorded a deferred tax asset of $ 72.2 million in connection with the Bermuda law change.

A portion of the deferred tax asset will not be available to offset future taxable income due to reductions in the tax bases of the underlying assets and liabilities.

As such, for the three months ended March 31, 2024, the Company recorded a tax provision of $ 3.4 million to reduce its Bermuda deferred tax asset.

As of June 30, 2024, we project the Bermuda subsidiaries to generate a net operating loss for the year ended December 31, 2024.

As such, the Company recorded a tax benefit of $ 7.8 million to increase its Bermuda deferred tax asset.

Our effective tax rate differs from the U.S.

1 unchanged sentence

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, 2024, we had not established a liability for uncertain tax positions as no such positions existed.

As of and for the six months ended June 30, 2024, 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.

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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 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, FTAI Finance Holdco Ltd.

(a wholly owned subsidiary of the Company), 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.

AFFILIATE TRANSACTIONS

On May 28, 2024, the Company entered into definitive agreements with the Former Manager and Master GP to internalize the Company’s management function.

As part of the termination of the Management Agreement, the Company (i) paid the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement;

(ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration;

and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $ 30 .

Following the Internalization, the Company no longer pays management fees or incentive distributions to the Former Manager and Master GP.

FTAI AVIATION LTD.

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(Dollars in tables in thousands, unless otherwise noted)

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 (a wholly owned subsidiary of the Company).

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.

In connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager.

Under the Transition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the Services for a transition period during which the Company will procure replacements for the Services.

The Services will be provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, plus a mark-up of ten percent ( 10 %).

The Company incurred $ 3.4 million in costs for Transition Services during the three and six months ended June 30, 2024, and these costs are reported in Acquisition and transaction expenses in the Consolidated Statements of Operations.

Prior to the Internalization, the Former Manager was 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 Former Manager was reimbursed for various expenses incurred by the Former Manager on our behalf, including the costs of legal, accounting and other administrative activities.

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

(a wholly owned subsidiary of the Company).

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

The management fee was 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.

Fortress Worldwide Transportation and Infrastructure Master GP LLC (“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”).

Prior to the Internalization and the termination of the Management Agreement on May 28, 2024, Master GP, was entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below).

The income incentive allocation was 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:

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

Prior to the Internalization, one of our subsidiaries allocated and distributed 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);

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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 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:

Three Months Ended March 31,

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

Prior to the Internalization, Capital Gains Incentive Allocation was calculated and distributable in arrears as of the end of each calendar year and was 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 prior to the Internalization on May 28, 2024:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Management fees $ 405 $ 239 $ 992 $ 294

Income incentive allocation 3,148 5,324 7,456 8,266

Capital gains incentive allocation — —

Total $ 3,553 $ 5,563 $ 8,448 $ 8,560

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.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The following table summarizes our reimbursements to the Manager:

Three Months Ended March 31,

We pay all of our operating expenses, except those specifically required to be borne by the Former 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 Former Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Former 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 paid or reimbursed the Former 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 Former Manager was responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Former Manager’s employees, rent for facilities and other “overhead” expenses;

we did not reimburse the Former Manager for these expenses.

The following table summarizes our reimbursements to the Former Manager:

Three Months Ended June 30, Six Months Ended June 30,

2024 2023 2024 2023

Classification in the Consolidated Statements of Operations:

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Total $ 1,978 $ 1,708 $ 4,245 $ 3,713

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

Pursuant to the terms of the Management Agreement, 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, 2024 December 31, 2023

Upon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we granted the Former 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 have been an affiliate of the Former Manager.

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

June 30, 2024 December 31, 2023

Accrued management fees $ — $ 224

Other payables 250 6,200

As of March 31, 2024 and December 31, 2023, there were no receivables from the Manager.

As of June 30, 2024 and December 31, 2023, there were no receivables from the Former Manager.

SEGMENT INFORMATION

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See Note 2 for additional information.

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

Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, internalization fee and management fees and incentive compensation pursuant to the Management Agreement prior to the Internalization effective May 28, 2024.

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.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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

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

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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.

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, internalization fee to affiliate, (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, as defined by U.S.

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

For the Three Months Ended March 31, 2024

Three Months Ended March 31, 2024

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

For the Three Months Ended June 30, 2024

Three Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

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Management fees and incentive allocation to affiliate — — 3,554 3,554

Internalization fee to affiliate — — 300,000 300,000

Depreciation and amortization 52,672 938 3,081 56,691

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Total expenses 122,392 154,774 384,219 661,385

Other expense

Equity in losses of unconsolidated entities ( 61 ) ( 633 ) — ( 694 )

Loss on extinguishment of debt — — ( 13,920 ) ( 13,920 )

Other (expense) income ( 911 ) — 413 ( 498 )

Total other expense ( 972 ) ( 633 ) ( 13,507 ) ( 15,112 )

Income (loss) before income taxes 61,073 89,793 ( 383,769 ) ( 232,903 )

Provision for (benefit from) income taxes 8,293 4,918 ( 26,244 ) ( 13,033 )

Net income (loss) 52,780 84,875 ( 357,525 ) ( 219,870 )

Dividends on preferred shares — — 8,335 8,335

Net income (loss) attributable to shareholders $ 52,780 $ 84,875 $ ( 365,860 ) $ ( 228,205 )

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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

Three Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 124,981 $ 91,240 $ ( 2,317 ) $ 213,904

Non-controlling share of Adjusted EBITDA —

Equity in losses of unconsolidated entities ( 694 )

Pro-rata share of Adjusted EBITDA from unconsolidated entities 617

Internalization fee to affiliate ( 300,000 )

Interest expense and dividends on preferred shares ( 63,531 )

Depreciation and amortization expense ( 65,809 )

Incentive allocations ( 3,148 )

Asset impairment charges —

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations ( 13,920 )

Acquisition and transaction expenses ( 8,019 )

Equity-based compensation expense ( 638 )

Benefit from income taxes 13,033

Net loss attributable to shareholders $ ( 228,205 )

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

Three Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

Africa $ 1,255 $ 2,585 $ — $ 3,840

Asia 33,642 28,530 13,957 $ 76,129

Europe 107,573 104,900 — $ 212,473

North America 26,162 105,770 — $ 131,932

South America 15,805 3,415 — $ 19,220

Total revenues $ 184,437 $ 245,200 $ 13,957 $ 443,594

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

For the Six Months Ended June 30, 2024

Six Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 111,605 $ — $ 12,310 $ 123,915

Maintenance revenue 96,977 — — 96,977

Asset sales revenue 111,040 — — 111,040

Aerospace products revenue — 434,257 — 434,257

Other revenue 125 — 3,974 4,099

Total revenues $ 319,747 $ 434,257 $ 16,284 $ 770,288

Cost of sales 90,858 257,803 — 348,661

Operating expenses 16,989 13,893 23,534 54,416

General and administrative — — 6,652 6,652

Acquisition and transaction expenses 4,730 771 8,697 14,198

Management fees and incentive allocation to affiliate — — 8,449 8,449

Internalization fee to affiliate — — 300,000 300,000

Depreciation and amortization 98,756 1,871 5,984 106,611

Asset impairment 962 — — 962

Interest expense — — 102,903 102,903

Total expenses 212,295 274,338 456,219 942,852

Other expense

Equity in losses of unconsolidated entities ( 207 ) ( 1,154 ) — ( 1,361 )

Loss on extinguishment of debt — — ( 13,920 ) ( 13,920 )

Other (expense) income ( 542 ) — 678 136

Total other expense ( 749 ) ( 1,154 ) ( 13,242 ) ( 15,145 )

Income (loss) before income taxes 106,703 158,765 ( 453,177 ) ( 187,709 )

Provision for (benefit from) income taxes 11,326 7,457 ( 26,244 ) ( 7,461 )

Net income (loss) 95,377 151,308 ( 426,933 ) ( 180,248 )

Dividends on preferred shares — — 16,670 16,670

Net income (loss) attributable to shareholders $ 95,377 $ 151,308 $ ( 443,603 ) $ ( 196,918 )

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

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

Six Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 229,788 $ 161,517 $ ( 13,300 ) $ 378,005

Non-controlling share of Adjusted EBITDA —

Equity in losses of unconsolidated entities ( 1,361 )

Pro-rata share of Adjusted EBITDA from unconsolidated entities 1,165

Internalization fee to affiliate ( 300,000 )

Interest expense and dividends on preferred shares ( 119,573 )

Depreciation and amortization expense ( 124,931 )

Incentive allocations ( 7,456 )

Asset impairment charges ( 962 )

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations ( 13,920 )

Acquisition and transaction expenses ( 14,198 )

Equity-based compensation expense ( 1,148 )

Benefit from income taxes 7,461

Net loss attributable to shareholders $ ( 196,918 )

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

Six Months Ended June 30, 2024

Aviation Leasing Aerospace Products Corporate and Other Total

Africa $ 2,123 $ 8,271 $ — $ 10,394

Asia 58,761 57,030 16,284 $ 132,075

Europe 178,617 172,616 — $ 351,233

North America 47,009 187,142 — $ 234,151

South America 33,237 9,198 — $ 42,435

Total revenues $ 319,747 $ 434,257 $ 16,284 $ 770,288

Presented below are the contracted minimum future annual revenues to be received under existing operating leases as of June 30, 2024:

Operating Leases

Remainder of 2024 $ 124,660

Thereafter 86,416

Total $ 720,960

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

For the Three Months Ended June 30, 2023

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 48,167 $ — $ 11,374 $ 59,541

Maintenance revenue 42,065 — — 42,065

Asset sales revenue 76,836 — — 76,836

Aerospace products revenue — 92,725 — 92,725

Other revenue 313 — 2,865 3,178

Total revenues $ 167,381 $ 92,725 $ 14,239 $ 274,345

Cost of sales 49,598 54,934 — 104,532

Operating expenses 7,578 3,236 13,983 24,797

General and administrative — — 3,188 3,188

Acquisition and transaction expenses 1,169 272 1,231 2,672

Management fees and incentive allocation to affiliate — — 5,563 5,563

Depreciation and amortization 35,713 97 2,704 38,514

Interest expense — — 38,499 38,499

Total expenses 94,058 58,539 65,168 217,765

Other income (expense)

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(Dollars in tables in thousands, unless otherwise noted)

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

Three Months Ended March 31, 2024

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

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

3 unchanged sentences

Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 150 )

Internalization fee to affiliate —

Interest expense and dividends on preferred shares ( 46,834 )

9 unchanged sentences

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

Three Months Ended March 31, 2024

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

4 unchanged sentences

South America 6,940 3,170 — 10,110

Total revenues $ 135,310 $ 189,057 $ 2,327 $ 326,694

Presented below are the contracted minimum future annual revenues to be received under existing operating leases as of March 31, 2024:

Operating Leases

Remainder of 2024 $ 166,744

Thereafter 65,948

Total $ 167,381 $ 92,725 $ 14,239 $ 274,345

2 unchanged sentences

(Dollars in tables in thousands, unless otherwise noted)

For the Three Months Ended March 31, 2023

Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2023

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

17 unchanged sentences

Other income 416 — — 416

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

Total other income (expense) 282 ( 1,581 ) — ( 1,299 )

Income (loss) before income taxes 132,501 59,786 ( 104,256 ) 88,031

1 unchanged sentence

Net income (loss) 130,419 58,286 ( 104,555 ) 84,150

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

Dividends on preferred shares — — 15,126 15,126

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

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

3 unchanged sentences

Pro-rata share of Adjusted EBITDA from unconsolidated entities 546

Internalization fee to affiliate —

Interest expense and dividends on preferred shares ( 92,917 )

9 unchanged sentences

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

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

7 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Property, plant and equipment and leasing equipment, net

5 unchanged sentences

Total property, plant and equipment and leasing equipment, net $ 2,235,944 $ 2,077,588

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

EARNINGS PER SHARE AND EQUITY

2 unchanged sentences

Potentially dilutive securities are calculated using the treasury stock method.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The calculation of basic and diluted EPS is presented below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except share and per share data) 2024 2023 2024 2023

Net income $ 39,622 $ 29,397

Net income attributable to non-controlling interests in consolidated subsidiaries — —

Net (loss) income $ ( 219,870 ) $ 54,753 $ ( 180,248 ) $ 84,150

Dividends on preferred shares 8,335 8,335 16,670 15,126

Net income attributable to shareholders $ 31,287 $ 22,606

Net (loss) income attributable to shareholders $ ( 228,205 ) $ 46,418 $ ( 196,918 ) $ 69,024

Weighted Average Ordinary Shares Outstanding - Basic 100,958,524 99,732,179 100,602,214 99,730,223

Weighted Average Ordinary Shares Outstanding - Diluted 100,958,524 100,462,277 100,602,214 100,314,508

Earnings per share:

(Loss) Earnings per share:

Basic $ ( 2.26 ) $ 0.47 $ ( 1.96 ) $ 0.69

Diluted $ ( 2.26 ) $ 0.46 $ ( 1.96 ) $ 0.69

For the three months ended March 31, 2024 and 2023, 0 and 57,175 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, 2024 and 2023, we issued 0 and 12,165 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 .

For both the three months ended June 30, 2024 and 2023, zero shares and for the six months ended June 30, 2024 and 2023, 0 and 1,245 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive.

During the six months ended June 30, 2024 and 2023, we issued 4,370 and 18,457 ordinary shares to certain directors as compensation.

COMMITMENTS AND CONTINGENCIES

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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.

The guarantees are valued at $ 7.1 million and $ 6.8 million as of March 31, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.

Given variability in the condition of the engines at the end of the lease terms, which range from 4 to 9 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at March 31, 2024 was $ 34.7 million, which is not reasonably expected.

SUBSEQUENT EVENTS

Senior Notes due 2031

On April 11, 2024, we issued $ 700 million aggregate principal amount of senior unsecured notes due 2031 (the “Senior Notes due 2031”).

The Senior Notes due 2031 bear interest at a rate of 7.00 % per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2024.

Using a portion of the net proceeds, the Company completed a cash tender offer for $ 324.6 million aggregate principal amount of 2025 Notes validly tendered on April 11, 2024.

Holders whose notes were accepted for purchase received equal consideration per $1,000 principal amount of 2025 Notes, plus accrued and unpaid interest to, but not including, April 11, 2024.

The Company used the remaining net proceeds to redeem the remaining $ 325.4 million aggregate principal amount of 2025 Notes, plus accrued and unpaid interest, and for general corporate purposes.

On April 25, 2024, 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, 2024, payable on May 21, 2024 to the holders of record on May 10, 2024.

The guarantees are valued at $ 7.8 million and $ 6.8 million as of June 30, 2024 and December 31, 2023, respectively, and are reflected as a component of Other liabilities.

Given variability in the condition of the engines at the end of the lease terms, which range from 4 to 9 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at June 30, 2024 was $ 37.2 million, which is not reasonably expected.

Internalization — During the second quarter of 2024, the Company entered into the Internalization Agreement with the Former Manager and Master GP.

Pursuant to the Internalization Agreement, the Management Agreement was terminated effective May 28, 2024, except that certain indemnification and other obligations survive, and the Company was no longer required to pay management fees or incentive distributions with respect to any period thereafter.

As a result of the Internalization, the Company ceased to be externally managed and operates as an internally managed company.

In connection with the termination of the Management Agreement, the Company (i) agreed to pay the Former Manager (for itself and on behalf of the Master GP, as applicable) the Cash Consideration, the compensation accrued and payable, but not yet paid, under the Management Agreement and the expenses that were reimbursable, but not yet reimbursed, under the Management Agreement;

(ii) issued to the Former Manager (for itself and on behalf of the Master GP, as applicable) the Share Consideration;

and (iii) purchased from Master GP all of its partnership interests in FTAI Aviation Holdco Ltd., a subsidiary of the Company, in exchange for $ 30 .

Letter Agreements — Prior to May 28, 2024, the Company’s Chief Executive Officer and Chief Financial Officer were provided by its Former Manager under the terms of the Management Agreement.

In addition, the Company relied on employees of its Former Manager and affiliates to conduct the Company’s operations.

Since May 28, 2024, the Company entered into letter agreements with the Chief Executive Officer and Chief Financial Officer and is hiring certain employees of the Former Manager that serve in key roles at the Company, including, but not limited to, those who support the Company’s investment, legal, accounting, tax and treasury operations.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Additionally, on April 25, 2024, 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, pa yable on June 14, 2024 to the holders of record on June 3, 2024 .

RESTRUCTURING CHARGES

In connection with the Internalization and termination of the Management Agreement, the Company agreed to pay a total of $ 300.0 million to its Former Manager (for itself and on behalf of the Master GP, as applicable).

At closing, the Company issued 1,866,949 ordinary shares valued at $ 150.0 million.

The remaining balance was paid in cash on June 17, 2024.

The restructuring charge paid in connection with the Internalization and termination of the Management Agreement is reflected in Internalization Fee to Affiliate expense in the Consolidated Statements of Operations for the three and six months ended June 30, 2024.

See Note 11 for additional discussion.

There were no restructuring charges recorded for the three and six months ended June 30, 2023.

SUBSEQUENT EVENTS

On July 23, 2024, 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 June 30, 2024, payable on August 20, 2024 to the holders of record on August 12, 2024.

Additionally, on July 23, 2024, 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 September 16, 2024 to the holders of record on September 6, 2024.

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