FTAI Aviation Ltd. 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements: Consolidated Financial Statements of FTAI Aviation Ltd.: Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 53 Consolidated Balance Sheets as of December 31, 2024 and 2023 55 Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022 56 Consolidated Statements of Comprehensive Income (loss) for the years ended December 31, 2024, 2023 and 2022 57 Consolidated Statement of Changes in Equity for the years ended December 31, 2024, 2023 and 2022 58 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 59 Notes to Consolidated Financial Statements 61 52 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of FTAI Aviation Ltd. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of FTAI Aviation Ltd. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 3, 2025 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Recognition of Maintenance Revenue for Aircraft Leases Description of the Matter As described in Note 2 to the consolidated financial statements, the Company recognizes maintenance revenue for aircraft leases related to the portion of maintenance payments received from lessees that are not expected to be reimbursed for major maintenance events. Maintenance revenue totaled $200.8 million for the year ended December 31, 2024, a portion of which relates to maintenance revenue for aircraft leases. Auditing maintenance revenue for aircraft leases was challenging due to the estimation involved in the Company’s complex modeling process. The estimation is sensitive to certain assumptions in the model such as the mean time between removal (MTBR) and forecasted utilization of the aircraft, which are affected by historical usage patterns and market conditions. Significant changes to the MTBR assumption could have a material effect on the amount of maintenance revenue on lease aircraft recognized in the period. 53 How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for recognizing maintenance revenue for aircraft leases, including controls over management’s review of the estimated timing of major maintenance events as described above. To test maintenance revenue for aircraft leases, we performed audit procedures that included, among others, assessing the Company’s revenue recognition methodology and testing the MTBR assumption described above for a sample of aircraft. For example, we compared the MTBR assumption to data provided by a third-party specialist, assessed the accuracy of the historical usage patterns and the calculation of the forecasted utilization, and assessed the Company’s retrospective review of timing of estimated maintenance events to actual results to assess the historical accuracy of the MTBR assumption. We also involved our valuation specialists to assist in our evaluation of the appropriateness of the market conditions used in developing the MTBR assumption. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. New York, New York March 3, 2025 54 FTAI AVIATION LTD. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) Notes December 31, 2024 2023 Assets Current Assets Cash and cash equivalents 2 $ 115,116 $ 90,756 Accounts receivable, net 150,823 115,156 Inventory, net 2 551,156 316,637 Other current assets 2 408,923 148,885 Total current assets 1,226,018 671,434 Leasing equipment, net 6 2,373,730 2,032,413 Property, plant, and equipment, net 107,451 45,175 Investments 7 19,048 22,722 Intangible assets, net 8 42,205 50,590 Goodwill 5 61,070 4,630 Other non-current assets 2 208,430 137,721 Total assets $ 4,037,952 $ 2,964,685 Liabilities Current Liabilities Accounts payable $ 69,119 $ 41,590 Accrued liabilities 96,910 71,317 Current maintenance deposits 2 62,552 39,455 Current security deposits 2 18,100 17,735 Other current liabilities 100,565 11,746 Total current liabilities 347,246 181,843 Long-term debt, net 9 3,440,478 2,517,343 Non-current maintenance deposits 2 44,179 25,932 Non-current security deposits 2 26,830 23,330 Other non-current liabilities 97,851 40,354 Total liabilities $ 3,956,584 $ 2,788,802 Commitments and contingencies 16 Equity Ordinary shares ($ 0.01 par value per share; 2,000,000,000 shares authorized; 102,550,975 and 100,245,905 shares issued and outstanding as of December 31, 2024 and 2023, respectively) $ 1,026 $ 1,002 Preferred shares ($ 0.01 par value per share; 200,000,000 shares authorized; 11,740,000 and 15,920,000 shares issued and outstanding as of December 31, 2024 and 2023, respectively) 117 159 Additional paid in capital 153,328 255,973 Accumulated deficit ( 73,103 ) ( 81,785 ) Shareholders' equity 81,368 175,349 Non-controlling interest in equity of consolidated subsidiaries — 534 Total equity $ 81,368 $ 175,883 Total liabilities and equity $ 4,037,952 $ 2,964,685 See accompanying notes to consolidated financial statements. 55 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share data) Year Ended December 31, Notes 2024 2023 2022 Revenues Lease income $ 255,338 $ 207,936 $ 179,314 Maintenance revenue 200,809 191,347 148,846 Asset sales revenue 192,176 303,141 183,535 Aerospace products revenue 1,079,821 454,970 178,515 Other revenue 6,757 13,502 18,201 Total revenues 1,734,901 1,170,896 708,411 Expenses Cost of sales 825,884 502,132 248,385 Operating expenses 115,861 110,163 132,264 General and administrative 14,263 13,700 14,164 Acquisition and transaction expenses 32,296 15,194 13,207 Management fees and incentive allocation to affiliate 13 8,449 18,037 3,562 Internalization fee to affiliate 17 300,000 — — Depreciation and amortization 6, 8 218,064 169,877 152,917 Asset impairment 962 2,121 137,219 Gain on sale of assets, net ( 18,705 ) — ( 77,211 ) Total expenses 1,497,074 831,224 624,507 Other income (expense) Equity in losses of unconsolidated entities 7 ( 2,200 ) ( 1,606 ) ( 369 ) Interest expense ( 221,721 ) ( 161,639 ) ( 169,194 ) Loss on extinguishment of debt ( 17,101 ) — ( 19,859 ) Other income 17,364 7,590 207 Total other expense ( 223,658 ) ( 155,655 ) ( 189,215 ) Income (loss) from continuing operations before income taxes 14,169 184,017 ( 105,311 ) Provision for (benefit from) income taxes 12 5,487 ( 59,800 ) 5,300 Net income (loss) from continuing operations 8,682 243,817 ( 110,611 ) Net loss from discontinued operations, net of income taxes 3 — — ( 101,416 ) Net income (loss) 8,682 243,817 ( 212,027 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries: Discontinued operations 3 — — ( 18,817 ) Less: Dividends on preferred shares 32,763 31,795 27,164 Less: Loss on redemption of preferred shares 7,998 — — Net (loss) income attributable to shareholders $ ( 32,079 ) $ 212,022 $ ( 220,374 ) (Loss) earnings per share: Basic 15 Continuing operations $ ( 0.32 ) $ 2.12 $ ( 1.39 ) Discontinued operations $ — $ — $ ( 0.83 ) Diluted 15 Continuing operations $ ( 0.32 ) $ 2.11 $ ( 1.39 ) Discontinued operations $ — $ — $ ( 0.83 ) Weighted average shares outstanding: Basic 101,538,835 99,908,214 99,421,008 Diluted 101,538,835 100,425,777 99,421,008 See accompanying notes to consolidated financial statements. 56 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Dollars in thousands) Year Ended December 31, 2024 2023 2022 Net income (loss) $ 8,682 $ 243,817 $ ( 212,027 ) Other comprehensive loss: Other comprehensive loss related to equity method investees, net in discontinued operations — — ( 182,963 ) Comprehensive income (loss) 8,682 243,817 ( 394,990 ) Comprehensive loss attributable to non-controlling interest: Discontinued operations — — ( 18,817 ) Comprehensive income (loss) attributable to shareholders $ 8,682 $ 243,817 $ ( 376,173 ) See accompanying notes to consolidated financial statements. 57 FTAI AVIATION LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Dollars in thousands) Ordinary Shares (1) Preferred Shares (1) Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2021 $ 992 $ 133 $ 1,411,940 $ ( 132,392 ) $ ( 156,381 ) $ ( 192 ) $ 1,124,100 Net loss ( 193,210 ) ( 18,817 ) ( 212,027 ) Other comprehensive loss ( 182,963 ) ( 182,963 ) Total comprehensive loss ( 193,210 ) ( 182,963 ) ( 18,817 ) ( 394,990 ) Spin-off of FTAI Infrastructure, Inc., net of distributions ( 913,342 ) 339,344 12,817 ( 561,181 ) Acquisition of consolidated subsidiary 3,054 3,054 Settlement of equity-based compensation ( 148 ) ( 148 ) Contributions from non-controlling interest 1,187 1,187 Issuance of ordinary shares 5 399 404 Dividends declared - ordinary shares ( 128,483 ) ( 128,483 ) Dividends declared - preferred shares ( 27,164 ) ( 27,164 ) Equity-based compensation 2,623 2,623 Equity - December 31, 2022 $ 997 $ 133 $ 343,350 $ ( 325,602 ) $ — $ 524 $ 19,402 Net income 243,817 243,817 Total comprehensive loss 243,817 243,817 Contributions from non-controlling interest 10 10 Issuance of ordinary shares 5 924 929 Dividends declared - ordinary shares ( 119,847 ) ( 119,847 ) Issuance of preferred shares 26 61,703 61,729 Dividends declared - preferred shares ( 31,795 ) ( 31,795 ) Equity-based compensation 1,638 1,638 Equity - December 31, 2023 $ 1,002 $ 159 $ 255,973 $ ( 81,785 ) $ — $ 534 $ 175,883 Net income 8,682 — 8,682 Total comprehensive income 8,682 — — 8,682 Purchase of non-controlling interest ( 534 ) ( 534 ) Redemption of preferred shares ( 42 ) ( 97,313 ) ( 97,355 ) Loss on redemption of preferred shares ( 7,998 ) ( 7,998 ) Dividends declared - ordinary shares ( 121,577 ) ( 121,577 ) Dividends declared - preferred shares ( 32,763 ) ( 32,763 ) Issuance of ordinary shares 24 151,000 151,024 Equity-based compensation 6,006 6,006 Equity - December 31, 2024 $ 1,026 $ 117 $ 153,328 $ ( 73,103 ) $ — $ — $ 81,368 ________________________________________________ (1) Common and Preferred Shares of Fortress Transportation and Infrastructure Investors LLC were exchanged for Ordinary and Preferred Shares of FTAI Aviation Ltd. when the Merger was completed on November 10, 2022. See accompanying notes to consolidated financial statements. 58 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) $ 8,682 $ 243,817 $ ( 212,027 ) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Equity in losses of unconsolidated entities 2,200 1,606 46,971 Gain on sale of assets ( 377,909 ) ( 160,742 ) ( 141,677 ) Security deposits and maintenance claims included in earnings ( 16,783 ) ( 40,535 ) ( 41,845 ) Loss on extinguishment of debt 17,101 — 19,859 Equity-based compensation 6,006 1,638 2,623 Non-cash termination fee to affiliate (issuance of ordinary shares) 150,000 — — Depreciation and amortization 218,064 169,877 193,236 Asset impairment 962 2,121 137,219 Deferred income taxes ( 1,878 ) ( 63,626 ) 2,161 Change in fair value of non-hedge derivatives — — ( 1,567 ) Change in fair value of guarantees 2,086 ( 1,807 ) — Amortization of lease intangibles and incentives 43,967 43,764 37,135 Amortization of deferred financing costs 11,458 8,860 19,018 Bad debt expense 2,784 6,583 47,975 Other ( 273 ) ( 6,646 ) ( 1,010 ) Change in: Accounts receivable ( 41,196 ) ( 40,357 ) ( 65,969 ) Inventory ( 206,880 ) ( 31,884 ) ( 23,267 ) Other assets ( 14,372 ) ( 5,627 ) ( 23,037 ) Accounts payable and accrued liabilities 15,886 1,254 ( 19,599 ) Management fees payable to affiliate ( 5,507 ) 1,683 804 Other liabilities ( 2,354 ) ( 997 ) 2,340 Net cash (used in) provided by operating activities ( 187,956 ) 128,982 ( 20,657 ) Cash flows from investing activities: Investment in unconsolidated entities — ( 19,500 ) ( 7,344 ) Principal collections on finance leases 2,157 3,638 2,227 Principal collections on notes receivable 4,930 4,875 — Acquisition of business, net of cash acquired ( 147,624 ) ( 29,632 ) ( 3,819 ) Acquisition of leasing equipment ( 1,147,341 ) ( 749,780 ) ( 638,329 ) Investments in financing receivables ( 66,858 ) — — Acquisition of property, plant and equipment ( 9,220 ) ( 6,148 ) ( 144,196 ) Acquisition of lease intangibles 3,168 ( 20,964 ) ( 31,127 ) Investment in promissory notes — ( 11,500 ) — Deposits for acquisitions of leasing equipment ( 158,297 ) ( 23,937 ) ( 6,671 ) Proceeds from sale of assets 969,280 477,886 408,937 Proceeds from sale of property, plant and equipment — — 5,289 Proceeds from deposits on sale of leasing equipment 79,777 1,413 3,780 Return of deposits for acquisition of leasing equipment 530 300 — Net cash used in investing activities $ ( 469,498 ) $ ( 373,349 ) $ ( 411,253 ) See accompanying notes to consolidated financial statements. 59 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Year Ended December 31, 2024 2023 2022 Cash flows from financing activities: Proceeds from debt $ 2,581,819 $ 951,665 $ 813,980 Repayment of debt ( 1,672,304 ) ( 605,000 ) ( 1,144,529 ) Payment of deferred financing costs ( 17,356 ) ( 12,180 ) ( 18,607 ) Receipt of security deposits under operating lease agreements 8,104 9,927 3,882 Return of security deposits under operating lease agreements ( 421 ) ( 2,385 ) ( 2,141 ) Receipt of maintenance deposits under operating lease agreements 49,333 30,354 47,846 Release of maintenance deposits under operating lease agreements ( 7,134 ) ( 275 ) ( 1,471 ) Proceeds from issuance of ordinary shares, net of underwriter's discount — 5 — Redemption of preferred shares ( 105,353 ) — — Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs — 61,729 — Capital contributions from non-controlling interests — 10 1,187 Dividend from spin-off of FTAI Infrastructure, net of cash transferred — — 500,562 Settlement of equity-based compensation — — ( 148 ) Purchase of non-controlling interest shares ( 534 ) — — Cash dividends - ordinary shares ( 121,577 ) ( 119,847 ) ( 128,483 ) Cash dividends - preferred shares ( 32,763 ) ( 31,795 ) ( 27,164 ) Net cash provided by financing activities 681,814 282,208 44,914 Net increase (decrease) in cash and cash equivalents and restricted cash 24,360 37,841 ( 386,996 ) Cash and cash equivalents and restricted cash, beginning of period 90,906 53,065 440,061 Cash and cash equivalents and restricted cash, end of period $ 115,266 $ 90,906 $ 53,065 Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest $ 222,122 $ 150,622 $ 185,144 Cash paid for taxes 5,655 1,393 3,279 Supplemental disclosure of non-cash investing and financing activities (see Note 2 for additional non-cash information): Receipt of notes receivable in connection with the sale of leasing equipment $ 88,271 46,654 16,463 Acquisition of leasing equipment in accrued liabilities ( 22,119 ) ( 8,962 ) ( 15,570 ) Receipt of leasing equipment in settlement of accounts receivable — ( 14,250 ) — Purchase deposits reclassified to leasing equipment from other assets upon acquisition ( 19,608 ) ( 6,371 ) ( 13,658 ) Decrease in leasing equipment for engines provided to aircraft lessees in lieu of cash reimbursements of maintenance deposits — 10,970 6,108 Accounts receivable settled with security deposits ( 4,808 ) ( 6,050 ) ( 13,461 ) Accounts receivable settled with maintenance deposits ( 45,719 ) ( 1,856 ) ( 9,358 ) Non-cash change in equity method investment — — ( 182,963 ) Conversion of interests in unconsolidated entities — — ( 21,302 ) See accompanying notes to consolidated financial statements. 60 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 1. ORGANIZATION FTAI Aviation Ltd. (“we”, “us”, “our” or the “Company”) is a Cayman Islands exempted company which through its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through our maintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines. We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 14). 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 thousand. In addition, the Former Manager repaid 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 was 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 until October 31, 2024, during which the Company procured replacements for the Services. The Services were 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 %). 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting —The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of us and our subsidiaries. Principles of Consolidation —We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions. The ownership interest of other investors in the Company’s consolidated subsidiaries is recorded as non-controlling interest. We use the equity method of accounting for investments in entities in which we exercise significant influence, but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive income (loss). Use of Estimates —The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 Former Manager under the Internalization Agreement is recorded within Internalization Fee to Affiliate. See Note 17 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. 61 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Risks and Uncertainties —In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are denominated in U.S. dollars. Cash and Cash Equivalents —We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Inventory, net —We hold aircraft engines, engine modules, spare parts and used material inventory for sale. Additionally, at time inventory is transferred to leasing equipment in connection with a rebuilt engine or engine repair. Inventory is carried at the lower of cost or net realizable value on our consolidated balance sheets. Property, Plant and Equipment, Leasing Equipment and Depreciation — Prop erty, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over its estimated useful lives, to estimated residual values which are summarized as follows: Asset Range of Estimated Useful Lives Residual Value Estimates Aircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer’s list price when new Aircraft engines 2 - 6 years, based on maintenance adjusted service life Sum of engine core salvage value plus the estimated fair value of life limited parts Aviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life Buildings and improvements 40 to 50 years Scrap value at end of useful life Machinery and equipment 6 - 23 years Scrap value at end of useful life Furniture and fixtures 3 - 6 years from date of purchase None Computer hardware and software 2 - 5 years from date of purchase None Land N/A N/A Construction in progress N/A N/A Other 5 - 7 years N/A Major improvements and modifications incurred in connection with the acquisition of property, plant and equipment and leasing equipment that are required to get the asset ready for initial service are capitalized and depreciated over the remaining life of the asset. Project costs of major additions and betterments, including capitalizable engineering costs and other costs directly related to the development or construction of a project, are capitalized and depreciation commences once it is placed into service for leasing equipment and once it is ready for service for property, plant and equipment. Interest costs directly related to and incurred during the construction period of property, plant and equipment are capitalized. We review our depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment, or the assigned residual values is warranted. For planned major maintenance or component overhaul activities for aviation equipment off lease, the cost of such major maintenance or component overhaul event is capitalized and depreciated on a straight-line basis over the period until the next maintenance or component overhaul event is required. Major maintenance and overhauls of the Company’s maintenance repair facilities and related equipment that extend the life of the asset are capitalized and depreciated over the expected period until the next anticipated major maintenance or overhaul. Upon retirement or disposal of property, plant and equipment, the cost and related accumulated depreciation are removed from the account, and the resulting gains or losses, if any, are recorded. In accounting for leasing equipment, we make estimates about the expected useful lives, residual values and the fair value of acquired in-place leases and acquired maintenance liabilities (for aviation equipment). In making these estimates, we rely upon observable market data for the same or similar types of equipment and, in the case of aviation equipment, our own estimates with respect to a lessee’s anticipated utilization of the aircraft or engine. When we acquire leasing equipment subject to an in-place lease, determining the fair value of the in-place lease requires us to make assumptions regarding the current fair values of leases for identical or similar equipment, in order to determine if the in-place lease is within a fair value range of current lease 62 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease. Capitalized Interest —The interest cost associated with major development and construction projects are capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. We capitalized interest of $ 0.2 million, $ 0.7 million and $ 2.7 million during the years ended December 31, 2024, 2023 and 2022, respectively. Repairs and Maintenance —Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. Our repairs and maintenance expense was $ 9.8 million, $ 7.7 million and $ 7.2 million during the years ended December 31, 2024, 2023 and 2022, respectively, and are included in Operating expenses. Impairment of Long-Lived Assets —We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination; significant traffic decline; a significant change in market conditions; the introduction of newer technology and the length of time an asset is off lease related to leasing equipment, engines or for manufacturing equipment; a significant decrease in market value; adverse changes in use or condition; legal or regulatory changes; or cash flow reductions. If a quantitative recoverability assessment is determined to be needed, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows of the asset or asset group. For long lived assets, the undiscounted cash flows consist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down time and estimated residual or scrap values for leasing equipment or operating cash flows for manufacturing equipment, and maintenance and operating costs. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge. Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the global demand for a particular asset and historical experience in the leasing markets, information received from third party industry sources, usage assumptions, asset lifespan for leasing equipment, and expected operating income and costs associated with operating and maintaining the manufacturing asset. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors, expected income and operating costs, maintenance and repairs, capital expenditures, and duration of the cash flows. Recoverability of Goodwill —Goodwill is not amortized but rather is tested at least annually during the fourth quarter for impairment, or more often if events or circumstances indicate the carrying value of an asset may not be recoverable. We assess the recoverability of goodwill using a qualitative evaluation or a quantitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. The determination of fair value requires management to make assumptions and to apply judgment to estimate industry and economic factors and the profitability of future business strategies. The Company conducts impairment testing based on current business strategy in light of present industry and economic conditions, as well as future expectations. We performed a qualitative assessment for our goodwill impairment test for the year ended December 31, 2024. No impairment was recorded as a result of these tests for the years ended December 31, 2024, 2023 and 2022, respectively. Security Deposits —Our operating leases generally require the lessee to pay a security deposit or provide a letter of credit. Security deposits are held until specified return dates stipulated in the lease or lease expiration. Maintenance Payments —Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the relevant work. We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the Consolidated Balance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability. 63 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) In certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition. We recognize payments received as end-of-lease compensation adjustments, within lease income or as a reduction to the maintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payments. Lease Incentives and Amortization —Lease incentives, which include lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs, are capitalized and amortized as a reduction of lease income over the primary term of the lease, assuming no lease renewals. Intangibles and amortization —Intangibles include the value of acquired favorable and unfavorable leases and are included in Intangible assets, net. In accounting for acquired leasing equipment, we make estimates about the fair value of the acquired leases. In determining the fair value of these leases, we make assumptions regarding the current fair values of leases for identical or similar equipment in order to determine if the acquired lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease. Acquired lease intangibles are amortized on a straight-line basis over the remaining lease terms, which collectively had a weighted-average remaining amortization period of approximately 45 months as of December 31, 2024, and are recorded as a component of revenues. Deferred Financing Costs —Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of $ 55.5 million and $ 33.2 million as of December 31, 2024 and 2023, respectively, are included in Long-term debt, net. We also have unamortized deferred revolver fees related to our revolving debt o f $ 8.2 million and $ 5.1 million as of December 31, 2024 and 2023, respectively, which are included in Other non-current assets. Amortization expense was $ 11.5 million, $ 8.9 million and $ 17.0 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included in Interest expense. Discontinued Operations — A disposal of an entity or component of an entity is reported in discontinued operations if the disposal represents a strategic shift that has or will have a material impact on our operations and financial results. See Note 3 for additional information related to our discontinued operations. Revenues — Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers, unless otherwise noted. We have elected to exclude sales and other similar taxes from revenues. During the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in Asset sales revenue beginning in the third quarter of 2022 and are accounted for in accordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain on sale of assets, net, as we were previously only occasionally selling these assets. Generally, assets sold were under leasing arrangements prior to sales and are included in Leasing equipment, net. Operating Leases —We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the lessee is placed on non-accrual status and revenue is recognized when cash payments are received. Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee. Maintenance payments received for which we expect to repay to the lessee are presented as current and non-current Maintenance deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenue on our Consolidated Statements of Operations. Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period. 64 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Finance Leases —From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the date of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the lessee is placed on non-accrual status and revenue is recognized when cash payments are received. Asset sales revenue —Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized gross when a performance obligation is satisfied by transferring control over an asset to a customer along with corresponding costs of sales. Aerospace products revenue —Aerospace products revenue primarily consists of the transaction price related to the sale of 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. Revenue is recognized gross when a performance obligation is satisfied by transferring control over the related asset to a customer along with corresponding costs of sales. Aerospace products revenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to customers as they become unserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred. Leasing Arrangements — At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets are included in Other non-current assets and lease liabilities are included in Other current and non-current liabilities. Finance lease ROU assets are recognized in Other non-current assets and lease liabilities are recognized in Other current and non-current liabilities. All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. Operating lease ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method. Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability and is recorded in Operating expenses. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs. We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred. Concentration of Credit Risk —We are subject to concentrations of credit risk with respect to amounts due from customers and lessees. We attempt to limit our credit risk by performing ongoing credit evaluations. No single customer or lessee accounted for greater than 10% of total revenue during the years ended December 31, 2024, 2023 and 2022. As of December 31, 2024 and 2023 no single customer or lessee accounted for greater than 10% of total accounts receivable, net. We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts. Allowance for Doubtful Accounts —We determine the allowance for doubtful accounts based on our assessment of the collectability of our leasing receivables on a lessee-by-lessee basis. Bad debt expense is included in Operating expenses. Receivables are written off after all reasonable means to collect the full amount have been exhausted. The activity in the allowance for doubtful accounts is as follows: 65 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) December 31, 2024 2023 2022 Allowance at beginning of period $ 72,163 $ 65,580 $ 17,703 Bad debt expense 2,784 6,583 47,877 Allowance at end of period $ 74,947 $ 72,163 $ 65,580 Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the first quarter of 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful accounts at December 31, 2024 includes all accounts receivable exposure to Russian and Ukrainian lessees. Comprehensive Income (Loss) — Our comprehensive income (loss) represents net income (loss) adjusted for comprehensive loss related to cash flow hedges of our equity method investees of discontinued operations. Other Current Assets — Other current assets are summarized as follows: December 31, 2024 2023 Notes receivable $ 165,338 $ 102,304 Prepaid expenses including prepayments for maintenance that has not yet been incurred 87,323 7,617 Purchase deposits 83,229 23,937 Financing receivable resulting from failed sale-leaseback transactions 32,486 — Maintenance right assets — 6,716 Other 40,547 8,311 Other current assets $ 408,923 $ 148,885 Other Non-Current Assets — Other non-current assets are summarized as follows: December 31, 2024 2023 Lease incentives $ 56,812 $ 43,453 Deferred tax assets 42,893 72,185 Financing receivable resulting from failed sale-leaseback transactions 28,412 — Maintenance right assets 25,907 9,628 Other 54,406 12,455 Other non-current assets $ 208,430 $ 137,721 Dividends — Dividends are recorded if and when declared by the Board of Directors. The Board of Directors declared cash dividends of $ 1.20 , $ 1.20 and $ 1.26 per ordinary share during each of the years ended December 31, 2024, 2023 and 2022, respectively. Additionally, the Board of Directors declared cash dividends on the Series A Preferred Shares of $ 1.55 , $ 2.06 and $ 2.06 per share for the years ended December 31, 2024, 2023, and 2022, respectively, the Series B Preferred Shares of $ 2.00 , $ 2.00 and $ 2.00 per share for the years ended December 31, 2024, 2023 and 2022, respectively, the Series C Preferred Shares of $ 2.06 , $ 2.06 , $ 2.06 per share for the year ended December 31, 2024, 2022 and 2021, respectively, and the Series D Preferred Shares of $ 2.38 and $ 1.78 per share for the year ended December 31, 2024 and 2023. Cash Flow Presentation— Included in net cash (used in) provided by operating activities are inflows from the sale of engine modules and parts that were on engines originally purchased and reported as Leasing equipment. The purchase of the original engine was reported as an outflow in net cash used in investing activities at the time of purchase through the Acquisition of leasing equipment line item. As part of the Aerospace products business, the Company breaks down generally unserviceable engines with the intent to manufacture modules and parts for creation and sale of new assets. To manufacture the modules and parts and bring them into a salable condition, the Company spends significant costs, often over multiple reporting periods, for new inventory and capitalizable labor (e.g., engineering) that are included in net cash (used in) provided by operating activities as components of the changes in the related working capital accounts. Therefore, when the costs to manufacture the assets are greater than (predominant to) the estimated value transferred from Leasing equipment into inventory, the related cash receipt has been recorded as an inflow in net cash (used in) provided by operating activities. 66 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Additionally, the Company buys inventory from third parties with the intent to use the parts in the manufacturing of the items discussed above, which is reported as an outflow in net cash (used in) provided by operating activities. When rebuilding whole engines for resale, for which the cash inflow upon sale is reported as a cash inflow from investing activities, the Company will transfer modules and parts needed (those purchased from third parties as well as parts from engines previously transferred to inventory from leasing equipment and rebuilt as discussed above) in the rebuild from inventory to leasing equipment. With respect to purchases of aircraft and engines, when the expected predominant source of cash inflows from the acquired leasing equipment at the time of acquisition is from leasing activities, the related cash outflow is reported as outflows in net cash used in investing activities. When the expected predominant source of cash inflows is from sales transactions, the related cash outflow is reported as outflows in net cash (used in) provided by operating activities. The cash and noncash related activities described above during the years ended December 31, 2024, 2023 and 2022 are detailed below: Year Ended December 31, (in thousands) 2024 2023 2022 Cost of modules and parts sold sourced from engines originally within leasing equipment $ 38,300 $ 41,167 $ 36,946 Transfers of engines from leasing equipment to inventory for manufacturing and sale 239,462 178,740 127,349 Transfers of inventory to leasing equipment for rebuilding and sale of engines ( 223,129 ) ( 78,788 ) ( 89,041 ) Total outflows related to manufacturing modules and parts - included in net cash (used in) provided by operating activities ( 345,821 ) ( 138,045 ) ( 101,249 ) Cash received for assets sold sourced from leasing equipment - inflow included in cash (used in) provided by operating activities 76,157 94,222 43,859 Cash received for sales of leasing equipment that include components sourced from inventory - inflow included in cash used in investing activities 436,217 79,474 118,735 Cash paid for engine and aircraft inventory - outflow included in cash provided by (used in) operating activities ( 8,280 ) — — Recent Accounting Pronouncements —In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures . This ASU modifies the disclosure and presentation requirements of reportable segments. The new guidance requires the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. In addition, the new guidance enhances interim disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, provides new segment disclosure requirements for entities with a single reportable segment, and contains other disclosure requirements. This standard is effective retrospectively for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We adopted this guidance in the fourth quarter of 2024, and it did not have a material impact on our consolidated financial statements and related disclosures. Unadopted Accounting Pronouncements — In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures . This ASU enhances the transparency and decision usefulness of income tax disclosures by expanding the disclosures of an entity’s income tax rate reconciliation and disaggregation of income taxes paid and income tax expense. Under the new guidance, public business entities must annually disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate. This standard is effective prospectively for all public entities for annual periods beginning after December 15, 2024, with early adoption and retrospective application permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures. In March 2024, the FASB issued ASU 2024-02, Codification Improvements - Amendments to Remove References to the Concept Statements. This ASU amends the Codification to remove references to various concepts statements and impacts a variety of topics in the Codification. The amendments apply to all reporting entities within the scope of the affected accounting guidance. Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities. ASU 2024-02 is effective January 1, 2025 and we are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . In January 2025, the FASB issued Clarifying the Effective Date (“ASU 2025-01”) to add some clarity around the effective date of the guidance. This ASU requires disaggregated information for specified categories of expenses, including inventory purchases, employee compensation, depreciation, amortization, and depletion, to be presented in certain expense captions on the face of the income statement. This standard is effective for annual periods beginning after December 15, 2026, and interim periods beginning after 67 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) December 15, 2027, with early adoption and either prospective or retrospective application permitted. We are currently assessing the impact this guidance will have on our consolidated financial statements and related disclosures. 3. DISCONTINUED OPERATIONS FTAI Infrastructure Inc. (“FTAI Infrastructure”) Spin-Off On April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company’s infrastructure business held by FTAI Infrastructure (a wholly owned subsidiary of the Company). The spin-off was effected as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company’s ordinary shares as of July 21, 2022. The distribution was completed on August 1, 2022. Under ASC 205-20, Presentation of Financial Statements – Discontinued Operations , the spin-off met the criteria to be reported as a discontinued operation. Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company’s financial statements for all periods prior to August 1, 2022. FTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company’s previously held interests in the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-level debt of those businesses. In connection with the spin-off, FTAI Infrastructure paid a dividend of $ 730.3 million to the Company. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $ 200.0 million of its 6.50 % senior unsecured notes due 2025, and approximately $ 175.0 million of the outstanding borrowings under its revolving credit facility. FTAI retained the aviation business and certain other assets, and FTAI’s remaining outstanding corporate indebtedness. In connection with the spin-off, the Company and the Former Manager assigned the Company’s then-existing management agreement to FTAI Infrastructure, and FTAI Infrastructure and the Former Manager executed an amended and restated agreement. Critical Accounting Policies Revenue Recognition Revenues of discontinued operations consist of the following revenue streams: Terminal Services Revenues —Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. The Company’s performance of service and right to invoice corresponds with the value delivered to our customers. Revenues are typically invoiced and paid on a monthly basis. Rail Revenues —Rail revenues generally consist of the following performance obligations: industrial switching, interline services, demurrage and storage. Switching revenues are derived from the performance of switching services, which involve the movement of cars from one point to another within the limits of an individual plant, industrial area, or a rail yard. Switching revenues are recognized as the services are performed, and the services are generally completed on the same day they are initiated. Interline revenues are derived from transportation services for railcars that originate or terminate at our railroads and involve one or more other carriers. We record revenue related to interline traffic for transportation service segments provided by carriers along railroads that are not owned or controlled by us on a net basis. Interline revenues are recognized as the transportation movements occur. Ancillary services revenue primarily relates to demurrage and storage services. Demurrage represents charges assessed by railroads for the detention of cars by shippers or receivers of freight beyond a specified free time and is recognized on a per day basis. Storage services revenue is earned for the provision of storage of shippers’ railcars and is generally recognized on a per day, per car basis, as the storage services are provided. Lease Income —Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement. Other Revenue —Other revenue primarily consists of revenue related to the handling, storage and sale of raw materials. Revenues for the handling and storage of raw materials relate to performance obligations that are recognized over time using the right to invoice practical expedient, i.e., invoiced as the services are rendered and the customer simultaneously receives and consumes the benefit over the contract term. Our performance of service and right to invoice corresponds with the value delivered to our customers. Revenues for the sale of raw materials relate to contracts that contain performance obligations to deliver the product over the term of the contract. The revenues are recognized when the control of the product is transferred to the customer, based on the volume delivered and the price within the contract. Other revenues are typically invoiced and paid on a monthly basis. 68 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Additionally, other revenue consists of revenue related to derivative trading activities and also includes revenue related to providing roadside assistance services to customers in the intermodal and over-the-road trucking industries. Revenue is recognized when a performance obligation is satisfied by completing a repair service at a point in time. Revenues are typically invoiced for each repair and generally have 30-day payment terms. Intangibles and amortization Intangibles included the value of existing customer relationships acquired in connection with the acquisition of Jefferson Terminal and Transtar. Customer relationship intangible assets were amortized on a straight-line basis over their useful lives as the pattern in which the asset’s economic benefits are consumed cannot reliably be determined. Customer relationship intangible assets have useful lives ranging from 5 to 15 years, no estimated residual value, and amortization was recorded as a component of Depreciation and amortization. Financial Information of Discontinued Operations The following table presents the significant components of net loss from discontinued operations: Year Ended December 31, 2022 Revenues Total revenues $ 140,009 Expenses Cost of sales 12,732 Operating expense 92,478 General and administrative expenses 2,694 Acquisition and transaction expenses 13,971 Management fees and incentive allocation to affiliate 8,134 Depreciation and amortization 40,319 Interest expense 15,105 Total expenses 185,433 Equity in losses of unconsolidated entities ( 46,600 ) Gain on sale of assets, net 258 Other (expense) income ( 1,423 ) Total other expense ( 47,765 ) Loss before income taxes ( 93,189 ) Provision for (benefit from) income taxes 8,227 Net loss from discontinued operations, net of income taxes ( 101,416 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries ( 18,817 ) Net loss attributable to shareholders $ ( 82,599 ) The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the year ended December 31, 2022. The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items of discontinued operations for each period presented: 69 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Year Ended December 31, 2022 Operating activities: Equity in losses of unconsolidated entities $ 46,601 Depreciation and amortization 40,319 Equity-based compensation 2,623 Investing activities: Acquisition of property, plant and equipment $ ( 129,920 ) Acquisition of business, net of cash acquired ( 3,819 ) Investment in unconsolidated entities ( 7,954 ) Proceeds from sale of property, plant and equipment 5,289 Non-cash change in equity method investment ( 182,963 ) Conversion of interests in unconsolidated entities ( 21,302 ) The Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the year ended December 31, 2022 included above, using the equity method of accounting. Summarized financial data for Long Ridge Terminal LLC are shown in the following table. Income Statement 2022 Total revenues $ 15,199 Expenses Operating expenses 36,693 Depreciation and amortization 29,381 Interest expense 30,622 Total expenses 96,696 Total other expense ( 234 ) Net loss $ ( 81,731 ) 4. ACQUISITION OF LOCKHEED MARTIN COMMERCIAL ENGINE SOLUTIONS On September 9, 2024, the Company, through its subsidiary FTAIC Aviation Inc. (“FTAIC”) created on April 25, 2024, acquired certain assets and assumed certain liabilities of Lockheed Martin Commercial Engine Solutions (“LMCES”) from Lockheed Martin Canada for total consideration of $ 170.0 million. LMCES is a 526,000 -square-foot aircraft engine maintenance repair facility located in Montréal, Quebec. We acquired LMCES to further enhance our Maintenance, Repair, and Exchange business and establish permanent engine and module manufacturing capabilities in Canada. The facility operates within our Aerospace Products segment, providing extensive engine and piece-part repair capabilities for the CFM56 engines. See Note 14 for additional information. The results of operations of LMCES have been included in the Company’s results since the effective date of the acquisition. In connection with the acquisition, we record ed $ 6.9 million of acquisition and transaction expense during the year ended December 31, 2024. The acquisition of LMCES was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and liabilities assumed based on the Company’s estimates and assumptions and are preliminary. The significant assumptions used to estimate the fair values of the property, plant, and equipment and inventory included replacement cost estimates and market data for similar assets where available. The consideration paid and final valuation and related allocation of the purchase price is subject to change as additional information is received and will be completed no later than 12 months after the closing date. The final acquisition accounting adjustments may be materially different and may include (i) changes in fair values of property, plant and equipment and associated salvage values; (ii) changes in fair values of inventory; (iii) changes in goodwill; (iv) changes due to net working capital adjustments; and (v) changes to other assets and other liabilities. 70 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Subsequent to the acquisition, in the quarter ended December 31, 2024, measurement period adjustments as of the acquisition date were made to decrease accounts receivable by $ 1.5 million, decrease inventory by $ 21.5 million, increase other current assets by $ 4.1 million, increase property, plant and equipment by $ 1.0 million, increase other non-current assets by $ 0.1 million, decrease accounts payable by $ 0.4 million, decrease accrued liabilities by $ 0.1 million, decrease other current liabilities by $ 5.0 million, increase other non-current liabilities by $ 1.5 million an increase in total consideration transferred of $ 15.8 million. These adjustments resulted in an increase to good will of $ 29.6 million. The following table summarizes the preliminary allocation of the net assets acquired: September 9, 2024 Fair value of assets acquired: Current Assets Accounts receivable $ 10,758 Inventory 25,947 Other current assets 6,795 Total current assets 43,500 Property, plant, and equipment 72,414 Leasing equipment 5,675 Other non-current assets 10,270 Total assets 131,859 Fair value of liabilities assumed: Current Liabilities Accounts payable 7,669 Accrued liabilities 1,692 Other current liabilities 5,130 Total current liabilities 14,491 Other non-current liabilities 14,347 Total liabilities 28,838 Goodwill (1) 56,476 Net assets acquired (2) $ 159,497 ________________________________________________________ (1) Goodwill is primarily attributable to the assembled workforce of FTAIC and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products segment and is deductible for income tax purposes. (2) Total consideration is calculated as cash paid, adjusted for the settlement of pre-existing relationships. Cash consideration is also preliminary, as it is subject to net working capital adjustments. 71 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The following table presents preliminary fair values of the components of property, plant and equipment acquired and their estimated useful lives: Estimated useful life in years Estimated Fair value Buildings and improvements 25 $ 40,953 Machinery and equipment 2 - 21 30,660 Other N/A 801 Total $ 72,414 The unaudited financial information in the table below summarizes the combined results of operations of FTAI and LMCES on a pro forma basis. These pro forma results were based on estimates and assumptions which we believe are reasonable. The pro forma adjustments are primarily comprised of the following: • The allocation of the purchase price and related adjustments, including adjustments to depreciation and amortization expense related to the fair value of property, plant and equipment; • Associated tax-related impacts of adjustments. The following unaudited 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. Year ended December 31, 2024 2023 Total revenue $ 1,782,339 $ 1,257,302 Net (loss) income attributable to shareholders $ ( 35,850 ) $ 211,582 5. ACQUISITION OF QUICKTURN On December 1, 2023, we completed the acquisition of the remaining equity interest of Quick Turn Engine Center LLC (“QuickTurn”) from Unical Aviation Inc. (“Unical”) for total cash consideratio n of $ 30.3 million to obtain full ownership. We acquired QuickTurn to better position the Company to have tighter integration over the development and delivery of aerospace products. QuickTurn is a hospital maintenance and testing facility dedicated to the CFM56 engine located in Miami, Florida that operates within our Aerospace Products segment. The results of operations at QuickTurn have been included in the Consolidated Statements of Operations beginning on the acquisition date. The acquisition of QuickTurn was accounted for as a business combination and, as such, the following fair values were assigned to assets acquired and liabilities assumed based on management’s estimates and assumptions. The significant assumptions used to estimate the fair value of the property, plant, and equipment included replacement cost estimates and market data for similar assets where available. The significant assumptions used to estimate the value of the customer relationship intangible assets included the discount rate and future revenues and operating expenses. 72 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The following table summarizes the allocation of the net assets acquired: December 1, 2023 Fair value of assets acquired: Current Assets Cash and cash equivalents $ 518 Restricted cash 150 Accounts receivable 5,133 Inventory 9,332 Other current assets 2,889 Total current assets 18,022 Property, plant, and equipment 30,559 Intangible assets 2,377 Other non-current assets 1,412 Total assets 52,370 Fair value of liabilities assumed: Current Liabilities Accounts payable 3,424 Accrued liabilities 571 Other current liabilities 1,475 Total current liabilities 5,470 Other non-current liabilities 934 Total liabilities 6,404 Goodwill (1) 4,630 Net assets acquired $ 50,596 ________________________________________________________ (1) Goodwill is primarily attributable to the assembled workforce of QuickTurn and the synergies expected to be achieved. This goodwill is assigned to the Aerospace Products segment and is deductible for income tax purposes. 6. LEASING EQUIPMENT, NET Leasing equipment, net is summarized as follows: December 31, 2024 2023 Leasing equipment $ 2,963,452 $ 2,574,394 Less: Accumulated depreciation ( 589,722 ) ( 541,981 ) Leasing equipment, net $ 2,373,730 $ 2,032,413 Due to specific transactions, 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 $ 2.1 million , net of redelivery compensation, for the years ended December 31, 2024 and 2023, respectively. 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 during the year ended December 31, 2022. In the fourth quarter of 2024, the Company completed the sale of the two vessels included within Corporate and Other. We sold the two offshore vessels for total proceeds of $ 142.6 million and the book value was $ 123.9 million. This transaction resulted in a gain of $ 18.7 million and is reflected in the Gain on sale of assets, net, for the year ended December 31, 2024. Depreciation expense for leasing equipment is summarized as follows: Year Ended December 31, 2024 2023 2022 Depreciation expense for leasing equipment $ 211,047 $ 168,901 $ 152,378 73 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 7. INVESTMENTS The following table presents the ownership interests and carrying values of our investments: Carrying Value Investment Ownership Percentage December 31, 2024 December 31, 2023 Advanced Engine Repair JV Equity method 25 % $ 19,048 $ 21,040 Falcon MSN 177 LLC Equity method 50 % — 1,682 $ 19,048 $ 22,722 We did not recognize any other-than-temporary impairments for the year ended December 31, 2024. The following table presents our proportionate share of equity in (losses) income: Year Ended December 31, 2024 2023 2022 Advanced Engine Repair JV $ ( 1,993 ) $ 833 $ ( 1,110 ) Falcon MSN 177 LLC ( 207 ) ( 148 ) 741 Quick Turn Engine Center LLC — ( 2,291 ) — Total $ ( 2,200 ) $ ( 1,606 ) $ ( 369 ) Equity Method Investments Advanced Engine Repair JV In December 2016, we invested $ 15 million for a 25 % interest in an advanced engine repair joint venture. This joint venture is focused on developing new cost savings programs for engine repairs. In August 2019, we expanded the scope of our joint venture and invested an additional $ 13.5 million and maintained a 25 % interest. We exercise significant influence over this investment and account for this investment as an equity method investment. Falcon MSN 177 LLC Since November 2021, we owned a 50 % interest in Falcon MSN 177 LLC (“Falcon”), an entity that consists of one Dassault Falcon 2000 aircraft. Falcon leases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts. We accounted 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 it is now a consolidated subsidiary. Quick Turn Engine Center LLC On January 4, 2023, we invested $ 19.5 million for a 50 % interest ( 45 % pro rata distribution of income until return of the JV partner’s initial investment) in Quick Turn Engine Center LLC (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. We account for our investment in QuickTurn as an equity method investment as we have significant influence through our interest. On December 1, 2023, we purchased the remaining interest in QuickTurn. 74 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 8. INTANGIBLE ASSETS AND LIABILITIES, NET Our intangible assets and liabilities, net are summarized as follows: December 31, 2024 December 31, 2023 Intangible assets Acquired favorable lease intangibles $ 70,375 $ 68,041 Less: Accumulated amortization ( 29,664 ) ( 19,347 ) Acquired favorable lease intangibles, net 40,711 48,694 Acquired customer relationships 1,907 1,907 Less: Accumulated amortization ( 413 ) ( 11 ) Acquired customer relationships, net 1,494 1,896 Total intangible assets, net $ 42,205 $ 50,590 Intangible liabilities Acquired unfavorable lease intangibles $ 13,767 $ 3,151 Less: Accumulated amortization ( 1,259 ) ( 1,389 ) Acquired unfavorable lease intangibles, net $ 12,508 $ 1,762 Intangible liabilities relate to unfavorable lease intangibles and are included as a component of Other non-current liabilities. Amortization of intangible assets and liabilities is recorded as follows: Classification in Consolidated Statements of Operations Year Ended December 31, 2024 2023 2022 Lease intangibles Lease income $ 15,597 $ 15,126 $ 13,913 Customer relationships Depreciation and amortization 403 11 — Total $ 16,000 $ 15,137 $ 13,913 As of December 31, 2024, estimated net annual amortization of intangibles is as follows: 2025 $ 12,278 2026 8,643 2027 3,599 2028 3,947 2029 899 Thereafter 331 Total $ 29,697 75 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 9. DEBT, NET Our debt, net is summarized as follows: December 31, 2024 December 31, 2023 Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings Loans payable Revolving Credit Facility (1) — (i) Base Rate + 1.75 %; or (ii) Adjusted Term SOFR Rate + 2.75 % 5/22/27 — Total loans payable — — Bonds payable Senior Notes due 2025 (2) — 6.50 % 10/1/25 652,043 Senior Notes due 2027 — 9.75 % 8/1/27 400,000 Senior Notes due 2028 (3) 1,001,382 5.50 % 5/1/28 1,001,746 Senior Notes due 2030 (4) 497,071 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 — Senior Notes due 2033 (5) 497,551 5.88 % 4/15/33 — Total bonds payable 3,496,004 2,550,493 Debt 3,496,004 2,550,493 Less: Debt issuance costs ( 55,526 ) ( 33,150 ) Total debt, net $ 3,440,478 $ 2,517,343 Total debt due within one year $ — $ — ______________________________________________________________________________________ (1) Requires a quarterly commitment fee at a rate of 0.50 % on the average daily unused portion, as well as customary letter of credit fees and agency fees. (2) Includes an unamortized discount of $ 866 at December 31, 2023 and an unamortized premium of $ 2,908 at December 31, 2023. (3) Includes an unamortized premium of $ 1,382 and $ 1,746 at December 31, 2024 and 2023, respectively. (4) Includes unamortized discount of $ 2,929 and $ 3,296 at December 31, 2024 and 2023, respectively. (5) Includes an unamortized discount of $ 2,449 at December 31, 2024. 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 “Revolver Amendment”). The Revolver 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. 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 Revolver Amendment, without reduction in commitments, (ii) to fund the cash termination fee for the previously announced management Internalization described in Note 12, (iii) to complete a cash tender offer for up to $ 300.0 million in aggregate principal amount of Senior Notes due 2027 validly tendered on June 18, 2024, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $ 11.2 million , (iv) to cover fees and expenses related to the aforementioned transactions, and (v) for general corporate purposes. 76 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Senior Notes due 2033— On October 9, 2024, we issued $ 500.0 million aggregate principal amount of senior unsecured notes due 2033 (the “Senior Notes due 2033”). The Senior Notes due 2033 bear interest at a rate of 5.875 % per annum, payable semi-annually in arrears on April 15 and October 15 of each year, commencing on April 15, 2025. Using a portion of the net proceeds, the Company redeemed the remaining $ 130.5 million aggregate principal amount of Senior Notes due 2027, plus accrued and unpaid interest, and recognized a loss on extinguishment of debt of $ 3.2 million. The Company used the remaining net proceeds to pay down in full the Company’s Revolving Credit Facility, with any excess proceeds intended for general corporate purposes, including funding acquisitions and investments. We were in compliance with all debt covenants as of December 31, 2024. As of December 31, 2024, scheduled principal repayments under our debt agreements for the next five years and thereafter are summarized as follows: 2025 2026 2027 2028 2029 Thereafter Total Revolving Credit Facility — — — — — — — Senior Notes due 2025 — — — — — — — Senior Notes due 2027 — — — — — — — Senior Notes due 2028 — — — 1,000,000 — — 1,000,000 Senior Notes due 2030 — — — — — 500,000 500,000 Senior Notes due 2031 — — — — — 700,000 700,000 Senior Notes due 2032 — — — — — 800,000 800,000 Senior Notes due 2033 — — — — — 500,000 500,000 Total principal payments on loans and bonds payable $ — $ — $ — $ 1,000,000 $ — $ 2,500,000 $ 3,500,000 10. FAIR VALUE MEASUREMENTS Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows: • Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities. • Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs. • Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability. The valuation techniques that may be used to measure fair value are as follows: • Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. • Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts. • Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy. 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, 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, which are classified on the balance sheet. 77 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy: December 31, 2024 Senior Notes due 2025 — Senior Notes due 2027 — Senior Notes due 2028 980,140 Senior Notes due 2030 526,380 Senior Notes due 2031 713,923 Senior Notes due 2032 816,904 Senior Notes due 2033 483,100 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 a t $ 8.9 million and $ 6.8 million as of December 31, 2024 and December 31, 2023, respectively, and are reflected as a component of Other non-current liabilities. The fair values of the guarantees, which were first recorded in 2022, are determined based on the estimated condition of the e ngines 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 year ended December 31, 2024, the Company recorded a $ 2.1 million increase related to the change in fair value, which is recorded in Asset sales revenue. During the year ended December 31, 2023, the Company recorded a $ 4.8 million increase in guarantees related to the sale of seven aircraft and a $ 1.8 million decrease related to the change in fair value, which is recorded in Asset sales revenue. During the year ended December 31, 2022, the Company recorded $ 3.8 million in guarantees related to the sale of four aircraft, which is recorded in Asset sale revenue. During the years ended December 31, 2024, 2023 and 2022, there were no significant transfers into or out of Level 3. Given variability in the condition of the engines at the end of the lease terms, which range from 3 to 8 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at December 31, 2024 was $ 37.2 million , which is not reasonably expected. We measure the fair value of certain assets on a non-recurring basis when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the leasing and eventual sale of assets. 11. EQUITY-BASED COMPENSATION 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 December 31, 2024, the Incentive Plan provides for the issuance of up to 28.3 million shares. Equity-based compensation expense is reported within Operating expenses in the Consolidated Statements of Operations. Unvested equity-based awards are subject to forfeiture. The Company’s accounting policy is to record the impact of forfeitures when they occur. Stock Options In connection with our equity offerings (see Note 15 for details), we granted options to the Former Manager related to ordinary shares. The fair value of these options were recorded as an increase in equity with an offsetting reduction of capital proceeds received. 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. The following table presents information related to the options granted related to our shares: 78 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Year Ended December 31, 2024 2023 2022 Number of options 60,000 248,947 — Fair value ($ millions) $ 2.1 $ 2.1 $ — Ranges Expected volatility The expected share volatility is based on an assessment of the volatility of our publicly traded ordinary shares 43.00 % - 43.00 % 37.88 % - 37.88 % — % - — % Risk free interest rate The risk-free rate is determined using the implied yield currently available on U.S. government bonds with a term consistent with the expected term on the date of grant. 4.52 % - 4.52 % 3.47 % - 3.47 % — % - — % Expected dividend yield The expected dividend yield is based on management’s current expected dividend rate. 1.50 % - 1.50 % 6.26 % - 6.26 % — % - — % Expected term Expected term used represents the period of time the options granted are expected to be outstanding. 6.8 years 10 years 0 years Restricted Shares During the year ended December 31, 2024 we issued the following restricted shares of the Company to select employees and officers of FTAI Aviation LLC: In May 2024, we issued restricted shares to (i) select officers with a grant date fair value of $ 5.5 million, vesting over 3.0 years and (ii) select employees with a grant date fair value of $ 5.7 million, vesting over 4.0 years. In September 2024, we issued restricted shares to select employees with a grant date fair value of $ 0.8 million, vesting over 3.0 years. All awards are subject to continued employment, with compensation expense recognized ratably over the vesting periods. The fair value was based on the closing price of FTAI Aviation Ltd.’s ordinary shares on the respective grant dates. The unrecognized compensation expense of restricted shares is expected to be recognized over a weighted-average period of 2.6 years. Performance Shares In November 2024, we granted up to 1,000,000 shares of performance shares to certain employees of the Company for which the ultimate number of units that will vest are determined based on the achievement of market conditions at the end of the stated performance period. The awards which are to be earned is based on the “Performance Level” of the Company’s Compound Annualized Total Shareholder Return (“CAGR”) for the Performance Period. The Performance Period is measured from November 5, 2024 through November 5, 2027. The number of shares earned could range from 0 % to a maximum of 100 %. The Earned Units from the Performance-based Awards become exercisable in three equal installments over a two-year period beginning with the completion of the Performance Period. The three equal installments of Earned Units vest on (i) November 5, 2027, (ii) November 5, 2028, and (iii) November 5, 2029. Compensation expense for the units is based on the estimated value of the awards on the grant date, and is recognized over the period from the grant date through the expected vest dates of each vesting condition. The grant date fair value was $ 48.1 million and was determined using the Monte Carlo simulation, assuming a Geometric Brownian Motion (GBM) to model various simulation paths, which relies on highly subjective assumptions, including simulated share prices and simulated vesting percentages to simulate payoff paths. Key assumptions in this method include the historical and implied equity volatility, an implied volatility weight, and the risk-free rate of returns. The valuation model assumes dividends are immediately reinvested. As of December 31, 2024, there was $ 46.2 million in unrecognized compensation cost related to unvested performance shares. This cost is expected to be recognized over a weighted-average period of 3.8 years. 79 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The Consolidated Statements of Operations includes the following expense related to our equity-based compensation arrangements which are recorded in Operating expenses: December 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met 2024 2023 2022 Stock options $ 296 $ — $ — $ 1,778 Performance shares 1,954 — — 46,156 Restricted shares 3,756 1,638 — 14,766 Total $ 6,006 $ 1,638 $ — $ 62,700 The tables below provide details on our stock options, performance shares, and restricted shares: Stock Options Performance Shares Restricted Shares Options Weighted Average Exercise/Issuance Price Shares Weighted Average Grant date fair value Shares Weighted Average Issuance Price Outstanding as of December 31, 2023 616,177 $ 23.78 — — 365,000 24.03 Granted 60,000 79.13 1,000,000 48.11 141,138 84.94 Less: exercised / vested 563,834 23.20 — — — Less: forfeited and canceled — — — 25,000 24.03 Outstanding as of December 31, 2024 112,343 1,000,000 481,138 Stock Options Performance Shares Restricted Shares As of December 31, 2024: Weighted average exercise / issuance price (per share) $ 52.70 48.11 $ 41.90 Aggregate intrinsic value (in thousands) $ 10,262 N/A $ 20,159 Weighted average remaining contractual term (in years) 4.8 3.8 2.6 80 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 12. INCOME TAXES The domestic and foreign components of the Company’s pre-tax income (loss) are as follows: Year Ended December 31, 2024 2023 2022 Pre-tax book income (loss) Domestic $ ( 259 ) $ ( 282 ) $ ( 247 ) Foreign 14,428 184,299 ( 105,064 ) Total $ 14,169 $ 184,017 $ ( 105,311 ) The current and deferred components of the provision for (benefit from) income taxes are as follows: Year Ended December 31, 2024 2023 2022 Current: Cayman Islands $ — $ — $ — Bermuda — — — United States: Federal 847 935 522 State and local 1,158 1,176 1,687 Other Non-U.S. 1,604 1,715 443 Total current provision 3,609 3,826 2,652 Deferred: Cayman Islands — — — Bermuda 2,320 ( 72,185 ) — United States: Federal 6,020 3,943 1,305 State and local ( 616 ) ( 2 ) 242 Other Non-U.S. ( 5,846 ) 4,618 1,101 Total deferred (benefit) provision 1,878 ( 63,626 ) 2,648 Provision for (benefit from) income taxes: Continuing operations 5,487 ( 59,800 ) 5,300 Discontinued operations — — 8,227 Total $ 5,487 $ ( 59,800 ) $ 13,527 The Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company is considered a Passive Foreign Investment Company for U.S. income tax purposes and certain income taxes are imposed on our owners. Taxable income or loss generated by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business. Historically, the Company’s Bermuda operations have not been subject to Bermuda income tax. However, on December 27, 2023, the Government of Bermuda enac ted a 15% corporate income tax regime (the “Bermuda CIT”) that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the exemption of certain of the Company’s Bermuda subsidiaries from Bermuda corporate income taxes will cease in 2025. The Company recorded the impact of this enactment in their provision for the year ended December 31, 2023. The difference between our reported income tax rate and the Cayman Islands st atutory rate of 0% is as f ollows: 81 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Year Ended December 31, 2024 2023 2022 Income subject to tax in the United States 53.0 % 3.3 % ( 6.9 ) % Foreign taxes 80.1 % ( 30.9 ) % 13.5 % Change in valuation allowance ( 94.4 ) % ( 4.9 ) % ( 11.6 ) % Income tax rate 38.7 % ( 32.5 ) % ( 5.0 ) % Significant components of our deferred tax assets and liabilities are as follows: December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 34,097 $ 38,911 Interest expense 2,187 1,861 Investment in partnerships — 963 Inventory 2,704 16,985 Customer relationship intangibles 28,500 28,500 Other 4,250 — Total deferred tax assets 71,738 87,220 Less valuation allowance ( 5,228 ) ( 18,599 ) Net deferred tax assets 66,510 68,621 Deferred tax liabilities: Fixed assets and goodwill ( 32,545 ) ( 8,186 ) Other ( 2,377 ) ( 63 ) Net deferred tax asset $ 31,588 $ 60,372 Deferred tax assets and liabilities are reported net in Other non-current assets or Other non-current liabilities. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. We have analyzed our deferred tax assets and have determined, based on the weight of available evidence, that it is more likely than not that a significant portion will not be realized. Accordingly, valuation allowances have been recognized as of December 31, 2024, 2023 and 2022 of $ 5.2 million , $ 18.6 million and $ 27.6 million, res pectively, related to certain deductible temporary differences and net operating loss carryforwards. A summary of the changes in the valuation allowance is as follows: December 31, 2024 2023 2022 Valuation allowance at beginning of period $ 18,599 $ 27,565 $ 9,142 Change due to current year losses 885 855 22,094 Change due to current year releases ( 14,256 ) ( 9,821 ) ( 3,671 ) Valuation allowance at end of period $ 5,228 $ 18,599 $ 27,565 82 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) As of December 31, 2024, certain of our corporate subsidiaries had U.S. federal net operating loss carryforwards of $ 6.0 million which can be carried forward indefinitely against future business income. As of December 31, 2024, we also had net operating loss carryforwards for Irish income tax purposes of $ 249.9 million, which can be carried forward indefinitely against future business income, $ 1.8 million of net operating loss carryforwards for Malaysian income tax purposes, which will begin to expire in the year 2030, $ 1.3 million of net operating loss carryforward for Singaporean income tax purpose, which can be carried forward indefinitely against the future business income and $ 2.5 million of net operating loss carryforward for Canadian income tax purpose, which will begin to expire in the year 2044. The utilization of the net operating loss carryforwards to reduce future income taxes will depend on the relevant corporate subsidiary's ability to generate sufficient taxable income prior to the expiration of the carryforward period, if any. In addition, the maximum annual use of net operating loss carryforwards may be limited after certain changes in share ownership. The Organization for Economic Cooperation and Development (“OECD”) is coordinating negotiations among more than 140 countries with the goal of achieving consensus around substantial changes to international tax policies, including the implementation of a minimum global effective tax rate of 15%. While certain jurisdictions in which the Company operates have adopted the relevant legislation effective for tax years beginning on or after January 1, 2024, the Company was not subject to any changes in their income tax provision for the year ended December 31, 2024. For the period ended December 31, 2025, the Company expects to be subject to a minimum global effective tax rate in certain jurisdictions. The Company continues to monitor developments and evaluate the impacts of these new rules and will present any impacts in the December 31, 2025 financial statements. As of December 31, 2024, the Company has not accrued taxes on $ 44.8 million of foreign earnings which are permanently reinvested outside the domicile. The Company expects that taxes associated with any future repatriation of these earnings to be $ 2.2 million. As of and for the period ended December 31, 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. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to 2020. 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. 13. 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 thousand. Following the Internalization, the Company no longer pays management fees or incentive distributions to the Former Manager and Master GP. 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 was required to continue to provide the Company and its affiliates with all of the Services for a transition period through October 31, 2024, during which the Company procured replacements for the Services. The Services were 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 %). 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. 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 %, which was payable monthly in arrears in cash. 83 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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 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); (2) 100 % of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2 % but does not exceed 2.2223 % for such quarter; and (3) 10 % of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223 % for such quarter. These calculations 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: Year Ended December 31, 2024 2023 2022 Management fees $ 993 $ 921 $ 73 Income incentive allocation 7,456 17,116 3,489 Total $ 8,449 $ 18,037 $ 3,562 We paid 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 included, but were 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 was 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 were 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: Year Ended December 31, 2024 2023 2022 Classification in the Consolidated Statements of Operations: General and administrative $ 6,788 $ 7,137 $ 6,891 Acquisition and transaction expenses 2,137 678 1,144 Total $ 8,925 $ 7,815 $ 8,035 84 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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. 14. SEGMENT INFORMATION 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 lessees. The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include 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 . See Note 2 for additional information. Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, 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 results from an offshore energy business, which consists of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases. We sold the two offshore vessels in 2024. The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations. Our Chief Executive Officer is our Chief Operating Decision Maker (“CODM”). Segment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources. The CODM evaluates performance for each reportable segment based on net income (loss) attributable to shareholders and is used to monitor budget vs. actual results. The CODM determined that segment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the tables below as it is not provided to or reviewed by our CODM. The following tables set forth certain information, which include all significant expenses reviewed by the CODM, for each reportable segment: 85 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) I. For the Year Ended December 31, 2024 Year Ended December 31, 2024 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 234,411 $ — $ 20,927 $ 255,338 Maintenance revenue 200,809 — — 200,809 Asset sales revenue 192,176 — — 192,176 Aerospace products revenue — 1,079,821 — 1,079,821 Other revenue 1,041 — 5,716 6,757 Total revenues 628,437 1,079,821 26,643 1,734,901 Expenses Cost of sales 151,977 673,907 — 825,884 Operating expenses 35,495 23,818 56,548 115,861 General and administrative — — 14,263 14,263 Acquisition and transaction expenses 9,740 4,906 17,650 32,296 Management fees and incentive allocation to affiliate — — 8,449 8,449 Internalization fee to affiliate — — 300,000 300,000 Depreciation and amortization 201,497 6,630 9,937 218,064 Asset impairment 962 — — 962 Gain on sale of assets, net — — ( 18,705 ) ( 18,705 ) Total expenses 399,671 709,261 388,142 1,497,074 Other income (expense) Equity in losses of unconsolidated entities ( 207 ) ( 1,993 ) — ( 2,200 ) Interest expense — — ( 221,721 ) ( 221,721 ) Loss on extinguishment of debt — — ( 17,101 ) ( 17,101 ) Other income 14,669 — 2,695 17,364 Total other income (expense) 14,462 ( 1,993 ) ( 236,127 ) ( 223,658 ) Income (loss) from continuing operations before income taxes 243,228 368,567 ( 597,626 ) 14,169 Provision for (benefit from) income taxes 32,979 22,221 ( 49,713 ) 5,487 Net income (loss) from continuing operations 210,249 346,346 ( 547,913 ) 8,682 Less: Dividends on preferred shares — — 32,763 32,763 Less: Loss on redemption of preferred shares — — 7,998 7,998 Net income (loss) attributable to shareholders from continuing operations $ 210,249 $ 346,346 $ ( 588,674 ) $ ( 32,079 ) 86 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows: Year Ended December 31, 2024 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 4,643 $ 8,271 $ — $ 12,914 Asia 135,579 178,252 26,643 340,474 Europe 324,327 364,384 — 688,711 North America 108,426 504,936 — 613,362 South America 55,462 23,978 — 79,440 Total revenues (1) $ 628,437 $ 1,079,821 $ 26,643 $ 1,734,901 ______________________________________________________ (1) The United States, included in North America, and Ireland, included in Europe, represent 31 % and 16 % of total revenues, respectively, based on the location of our lessees. No other country represents more than 10% of total revenues. Presented below are the contracted minimum future annual revenues to be received under existing operating leases as of December 31, 2024: December 31, 2024 2025 $ 238,141 2026 181,835 2027 141,750 2028 123,447 2029 79,469 Thereafter 94,634 Total $ 859,276 87 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) II. For the Year Ended December 31, 2023 Year Ended December 31, 2023 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 179,704 $ — $ 28,232 207,936 Maintenance revenue 191,347 — — 191,347 Asset sales revenue 303,141 — — 303,141 Aerospace products revenue — 454,970 — 454,970 Other revenue 7,419 — 6,083 13,502 Total revenues 681,611 454,970 34,315 1,170,896 Expenses Cost of sales 221,852 280,280 — 502,132 Operating expenses 37,876 20,459 51,828 110,163 General and administrative — — 13,700 13,700 Acquisition and transaction expenses 7,150 1,722 6,322 15,194 Management fees and incentive allocation to affiliate — — 18,037 18,037 Depreciation and amortization 158,354 661 10,862 169,877 Asset impairment 2,121 — — 2,121 Total expenses 427,353 303,122 100,749 831,224 Other income (expense) Equity in losses of unconsolidated entities ( 148 ) ( 1,458 ) — ( 1,606 ) Interest expense — — ( 161,639 ) ( 161,639 ) Other income 1,300 5,347 943 7,590 Total other income (expense) 1,152 3,889 ( 160,696 ) ( 155,655 ) Income (loss) from continuing operations before income taxes 255,410 155,737 ( 227,130 ) 184,017 (Benefit from) provision for income taxes ( 36,193 ) ( 24,440 ) 833 ( 59,800 ) Net income (loss) from continuing operations 291,603 180,177 ( 227,963 ) 243,817 Less: Dividends on preferred shares — — 31,795 31,795 Net income (loss) attributable to shareholders from continuing operations $ 291,603 $ 180,177 $ ( 259,758 ) $ 212,022 Summary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows: Year Ended December 31, 2023 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 822 $ 875 $ — $ 1,697 Asia 101,305 18,364 34,315 153,984 Europe 244,055 120,439 — 364,494 North America 285,421 301,633 — 587,054 South America 50,008 13,659 — 63,667 Total revenues (1) $ 681,611 $ 454,970 $ 34,315 $ 1,170,896 ______________________________________________________ (1) The United States, included in North America, represents 47 % of total revenues based on the location of our lessees. No other country represents more than 10% of total revenues. 88 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) III. For the Year Ended December 31, 2022 Year Ended December 31, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Lease income $ 159,068 $ — $ 20,246 $ 179,314 Maintenance revenue 148,846 — — $ 148,846 Asset sales revenue 183,535 — — $ 183,535 Aerospace products revenue — 178,515 — $ 178,515 Other revenue 11,499 — 6,702 $ 18,201 Total revenues 502,948 178,515 26,948 708,411 Expenses Cost of sales 138,904 109,481 — 248,385 Operating expenses 81,232 11,967 39,065 132,264 General and administrative — — 14,164 14,164 Acquisition and transaction expenses 1,923 243 11,041 13,207 Management fees and incentive allocation to affiliate — — 3,562 3,562 Depreciation and amortization 144,258 258 8,401 152,917 Asset impairment 137,219 — — 137,219 Gain on sale of assets, net ( 59,048 ) ( 18,163 ) — ( 77,211 ) Total expenses 444,488 103,786 76,233 624,507 Other income (expense) Equity in earnings (losses) of unconsolidated entities 740 ( 1,109 ) — ( 369 ) Interest expense — — ( 169,194 ) ( 169,194 ) Loss on extinguishment of debt — — ( 19,859 ) ( 19,859 ) Other income (expense) 246 — ( 39 ) 207 Total other income (expense) 986 ( 1,109 ) ( 189,092 ) ( 189,215 ) Income (loss) from continuing operations before income taxes 59,446 73,620 ( 238,377 ) ( 105,311 ) Provision for (benefit from) income taxes 2,502 2,961 ( 163 ) 5,300 Net income (loss) from continuing operations 56,944 70,659 ( 238,214 ) ( 110,611 ) Less: Dividends on preferred shares — — 27,164 27,164 Net income (loss) attributable to shareholders from continuing operations $ 56,944 $ 70,659 $ ( 265,378 ) $ ( 137,775 ) Summary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows: 89 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Year Ended December 31, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 250 $ 1,615 $ — $ 1,865 Asia 84,953 12,731 26,948 124,632 Europe 130,128 37,495 — 167,623 North America 245,549 126,597 — 372,146 South America 42,068 77 — 42,145 Total revenues (1) $ 502,948 $ 178,515 $ 26,948 $ 708,411 ________________________________________________________ (1) The United States, included in North America, represents 44 % of total revenues based on the location of our lessees. No other country represents more than 10% of total revenues. IV. Location of long-lived assets The following tables sets forth summarized geographic location of property, plant and equipment and leasing equipment, net: December 31, 2024 December 31, 2023 Property, plant and equipment and leasing equipment, net Africa $ 37,369 $ 18,380 Asia 596,547 478,120 Europe 1,038,176 934,817 North America 592,675 416,811 South America 216,414 229,460 Total property, plant and equipment and leasing equipment, net $ 2,481,181 $ 2,077,588 ________________________________________________________ (1) The United States, included in North America, and Italy, included in Europe, represent 17 % and 12 % of property, plant and equipment and leasing equipment, net as of December 31, 2024 and 2023, respectively. No other country represents more than 10% of property, plant and equipment and leasing equipment, net. 90 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 15. EARNINGS PER SHARE AND EQUITY Basic earnings per ordinary share (“EPS”) is calculated by dividing net income (loss) attributable to shareholders by the weighted average number of ordinary shares outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income attributable to shareholders by the weighted average number of ordinary shares outstanding, plus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method. The calculation of basic and diluted EPS is presented below. Year Ended December 31, (in thousands, except share and per share data) 2024 2023 2022 Net income (loss) from continuing operations $ 8,682 $ 243,817 $ ( 110,611 ) Net loss from discontinued operations, net of income taxes — — ( 101,416 ) Net income (loss) 8,682 243,817 ( 212,027 ) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries: Continuing operations — — — Discontinued operations — — ( 18,817 ) Less: Dividends on preferred shares 32,763 31,795 27,164 Less: Loss on redemption of preferred shares 7,998 — — Net (loss) income attributable to shareholders $ ( 32,079 ) $ 212,022 $ ( 220,374 ) Weighted Average Ordinary Shares Outstanding - Basic 101,538,835 99,908,214 99,421,008 Weighted Average Ordinary Shares Outstanding - Diluted 101,538,835 100,425,777 99,421,008 (Loss) earnings per share: Basic Continuing operations $ ( 0.32 ) $ 2.12 $ ( 1.39 ) Discontinued operations $ — $ — $ ( 0.83 ) Diluted Continuing operations $ ( 0.32 ) $ 2.11 $ ( 1.39 ) Discontinued operations $ — $ — $ ( 0.83 ) The calculation of Diluted EPS excludes 0 , 0 and 582,200 shares for the years ended December 31, 2024, 2023 and 2022, respectively, because the impact would be anti-dilutive. Ordinary shares issued to certain directors as compensation were 6,148 , 26,287 and 19,811 for the years ended December 31, 2024, 2023 and 2022, respectively. Ordinary Shares In May 2024, in connection with the Internalization and termination of the Management Agreement, the Company issued 1,866,949 ordinary shares, par value $ 0.01 per share, at a price of $ 80.34 per share, to its Former Manager. 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 $ 63.0 million . In October 2024, the Company redeemed in full the outstanding 4,180,000 8.25 % Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares at a redemption price equal to $ 25.00 per share in cash, plus $ 1.6 million of accumulated and unpaid distributions thereon to, but not including, the redemption date of October 29, 2024. 91 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 16. COMMITMENTS AND CONTINGENCIES In the normal course of business, the Company and its subsidiaries may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. Within our offshore energy business, a lessee did not fulfill its obligation under its charter arrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $ 0.0 million to $ 3.3 million. Our maximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is remote. 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 thousand. 17. 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 year ended December 31, 2024. See Note 13 for additional discussion. There were no restructuring charges recorded for the years ended December 31, 2023 and 2022. 18. SUBSEQUENT EVENTS Strategic Capital Initiative On December 30, 2024, the Company announced the launch of Strategic Capital Initiative, a new investment focused on acquiring 737NG and A320ceo aircraft, allowing the Company to maintain an asset-light business model while the partnerships actively acquire on-lease narrowbody aircraft. The initial capital call for this fund was made on December 31, 2024. As of December 31, 2024, no funds have been transferred under this capital call. Series B Shares On January 17, 2025, the Company issued the notice to redeem in full the outstanding 4,940,000 8.00 % Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares at a redemption price equal to $ 25.00 per share in cash, plus $ 2.4 million of accumulated and unpaid distributions thereon to, but not including, the redemption date of February 16, 2025. Dividends On Febru ary 26, 2025, 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 December 31, 2024, payable on March 24, 2025 to the holders of record on March 14, 2025. Additionally, on February 26, 2025, our Board of Directors declared cash dividends on the Series C Preferred Shares and Series D Preferred Shares of $ 0.52 and $ 0.59 per share, respectively, for the quarter ended December 31, 2024, payable on March 17, 2025 to the holders of record on March 10, 2025. 92 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.