FTAI Aviation Ltd. 10-Q

Item 1. Financial Statements FTAI AVIATION LTD. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) (Unaudited) Notes March 31, 2025 December 31, 2024 Assets Current Assets Cash and cash equivalents 2 $ 112,133 $ 115,116 Accounts receivable, net (1) 2 223,504 150,823 Inventory, net 2 645,163 551,156 Assets held for sale 2 465,725 — Other current assets (2) 2 423,336 408,923 Total current assets 1,869,861 1,226,018 Leasing equipment, net 4 1,989,367 2,373,730 Property, plant, and equipment, net 2 108,054 107,451 Investments 5 31,400 19,048 Intangible assets, net 6 16,036 42,205 Goodwill 3 61,070 61,070 Other non-current assets 2 192,356 208,430 Total assets $ 4,268,144 $ 4,037,952 Liabilities Current Liabilities Accounts payable $ 110,802 $ 69,119 Liabilities held for sale 76,496 — Accrued liabilities 142,098 96,910 Current maintenance deposits 33,748 62,552 Current security deposits 19,557 18,100 Other current liabilities 91,061 100,565 Total current liabilities 473,762 347,246 Long-term debt, net 7 3,642,527 3,440,478 Non-current maintenance deposits 2 25,510 44,179 Non-current security deposits 2 13,429 26,830 Other non-current liabilities 84,583 97,851 Total liabilities $ 4,239,811 $ 3,956,584 Commitments and contingencies 14 Equity Ordinary shares ($ 0.01 par value per share; 2,000,000,000 shares authorized; 102,555,975 and 102,550,975 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively) $ 1,026 $ 1,026 Preferred shares ($ 0.01 par value per share; 200,000,000 shares authorized; 6,800,000 and 11,740,000 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively) 68 117 Additional paid in capital ( 2,044 ) 153,328 Retained earnings (accumulated deficit) 29,283 ( 73,103 ) Shareholders' equity 28,333 81,368 Total liabilities and equity $ 4,268,144 $ 4,037,952 ______________________________________________________ (1) Includes accounts receivable from the 2025 Partnership of $ 69,140 and $ 0 as of March 31, 2025 and December 31, 2024, respectively. (2) Includes receivables from the 2025 Partnership of $ 34,110 and $ 0 as of March 31, 2025 and December 31, 2024, respectively. See accompanying notes to consolidated financial statements. 5 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (Dollars in thousands, except share and per share data) Three Months Ended March 31, Notes 2025 2024 Revenues Aerospace products revenue (1) $ 365,063 $ 189,057 Lease income 68,471 53,240 Maintenance revenue 49,607 45,790 Asset sales revenue 18,939 38,607 Total revenues 12 502,080 326,694 Expenses Cost of sales 248,714 142,804 Operating expenses 2 32,438 25,317 General and administrative 3,116 3,683 Acquisition and transaction expenses 7,292 6,179 Management fees and incentive allocation to affiliate 11 — 4,895 Depreciation and amortization 4, 6 59,562 49,920 Asset impairment — 962 Total expenses 351,122 233,760 Other (expense) income Interest expense ( 62,040 ) ( 47,707 ) Equity in losses of unconsolidated entities (2) 5 ( 7,614 ) ( 667 ) Other income (3) 43,941 634 Total other expense ( 25,713 ) ( 47,740 ) Income before income taxes 125,245 45,194 Provision for income taxes 10 22,859 5,572 Net income 102,386 39,622 Less: Dividends on preferred shares 6,115 8,335 Less: Loss on redemption of preferred shares 6,327 — Net income attributable to shareholders $ 89,944 $ 31,287 Earnings per share: 13 Basic $ 0.88 $ 0.31 Diluted $ 0.87 $ 0.31 Weighted average shares outstanding: Basic 102,552,436 100,245,905 Diluted 103,159,051 100,960,065 ______________________________________________________ (1) Includes revenue of $ 100,638 and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership. See Note 11 for additional information. (2) Includes the profit elimination of $( 6,950 ) and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership. (3) Includes gain on sale of $ 10,870 and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership. See accompanying notes to consolidated financial statements. 6 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited) (Dollars in thousands) Three Months Ended March 31, 2025 Ordinary Shares Preferred Shares Additional Paid In Capital (Accumulated Deficit) Retained Earnings Total Equity Equity - December 31, 2024 $ 1,026 $ 117 $ 153,328 $ ( 73,103 ) $ 81,368 Net income 102,386 102,386 Total comprehensive income 102,386 102,386 Redemption of preferred shares ( 49 ) ( 117,791 ) ( 117,840 ) Loss on redemption of preferred shares ( 6,327 ) ( 6,327 ) Issuance of ordinary shares 739 739 Dividends declared - ordinary shares ( 30,767 ) ( 30,767 ) Dividends declared - preferred shares ( 6,115 ) ( 6,115 ) Equity-based compensation 4,889 4,889 Equity - March 31, 2025 $ 1,026 $ 68 $ ( 2,044 ) $ 29,283 $ 28,333 Three Months Ended March 31, 2024 Ordinary Shares Preferred Shares Additional Paid In Capital Accumulated Deficit Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2023 $ 1,002 $ 159 $ 255,973 $ ( 81,785 ) $ 534 $ 175,883 Net income 39,622 39,622 Total comprehensive income 39,622 39,622 Dividends declared - ordinary shares ( 30,074 ) ( 30,074 ) Dividends declared - preferred shares ( 8,335 ) ( 8,335 ) Equity-based compensation 510 510 Equity - March 31, 2024 $ 1,002 $ 159 $ 218,074 $ ( 42,163 ) $ 534 $ 177,606 See accompanying notes to consolidated financial statements. 7 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 102,386 $ 39,622 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Equity in losses of unconsolidated entities (1) 7,614 667 Gain on sale of assets (2) ( 19,419 ) ( 58,061 ) Gain on insurance recoveries ( 30,125 ) — Security deposits and maintenance claims included in earnings ( 3,559 ) ( 2,437 ) Equity-based compensation 4,889 510 Depreciation and amortization 59,562 49,920 Asset impairment — 962 Deferred income taxes 20,683 4,548 Change in fair value of guarantees 316 ( 259 ) Amortization of lease intangibles and incentives 8,825 9,202 Amortization of deferred financing costs 2,830 2,638 Bad debt expense 150 — Other 60 ( 259 ) Change in: Accounts receivable ( 73,088 ) ( 27,945 ) Inventory ( 127,211 ) ( 6,877 ) Other assets ( 41,410 ) ( 1,845 ) Accounts payable and accrued liabilities 65,251 ( 10,252 ) Management fees payable to affiliate ( 260 ) 238 Other liabilities ( 3,460 ) ( 717 ) Net cash used in operating activities ( 25,966 ) ( 345 ) Cash flows from investing activities: Investment in unconsolidated entities ( 19,967 ) — Principal collections on finance leases — 786 Principal collections on notes receivable 989 1,964 Acquisition of leasing equipment ( 267,417 ) ( 276,990 ) Investment in financing receivables ( 2,764 ) — Acquisition of property, plant and equipment ( 4,156 ) ( 1,312 ) Acquisition of lease intangibles 1,282 862 Deposits for acquisition of leasing equipment (3) ( 46,344 ) ( 25,535 ) Proceeds from sale of assets (4) 232,946 128,384 Proceeds from settlement of insurance claims 30,125 — Proceeds from deposits on sale of leasing equipment 3,376 2,098 Return of deposits for acquisition of leasing equipment (3) 44,303 530 Net cash used in investing activities $ ( 27,627 ) $ ( 169,213 ) See accompanying notes to consolidated financial statements. 8 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (Dollars in thousands) Three Months Ended March 31, 2025 2024 Cash flows from financing activities: Proceeds from debt $ 290,000 $ 210,000 Repayment of debt ( 90,000 ) ( 35,000 ) Payment of deferred financing costs ( 39 ) ( 292 ) Receipt of security deposits under operating lease agreements 1,233 1,856 Return of security deposits under operating lease agreements ( 300 ) — Receipt of maintenance deposits under operating lease agreements 15,011 8,927 Release of maintenance deposits under operating lease agreements ( 4,246 ) ( 3,056 ) Redemption of preferred shares ( 124,167 ) — Cash dividends - ordinary shares ( 30,767 ) ( 30,074 ) Cash dividends - preferred shares ( 6,115 ) ( 8,335 ) Net cash provided by financing activities $ 50,610 $ 144,026 Net decrease in cash and cash equivalents and restricted cash ( 2,983 ) ( 25,532 ) Cash and cash equivalents and restricted cash, beginning of period 115,266 90,906 Cash and cash equivalents and restricted cash, end of period $ 112,283 $ 65,374 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 $ 34,602 $ 31,968 Acquisition of leasing equipment in accrued liabilities ( 8,341 ) ( 6,854 ) Receipt of leasing equipment in settlement of accounts receivable ( 2,634 ) — Purchase deposits reclassified to leasing equipment from other assets upon acquisition ( 17,027 ) ( 11,808 ) Decrease (increase) in leasing equipment for engines provided to aircraft lessees in lieu of cash reimbursements of maintenance deposits 5,756 ( 1,497 ) Accounts receivable settled with security deposits ( 601 ) ( 1,442 ) Accounts receivable settled with maintenance deposits ( 5,787 ) ( 18,964 ) ______________________________________________________ (1) Includes the profit elimination of $( 6,950 ) and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership within the Aerospace Products segment. (2) Includes gain on sale of $ 10,870 and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership. (3) Includes deposits for acquisition of leasing equipment paid on behalf of the 2025 Partnership of $ 25,400 and $ 0 for the three months ended March 31, 2025 and 2024, respectively, and return of deposits for the acquisition of leasing equipment reimbursed from the 2025 Partnership of $ 42,813 and $ 0 for the three months ended March 31, 2025 and 2024, respectively. (4) Includes proceeds from sale of assets of $ 58,892 and $ 0 for the three months ended March 31, 2025 and 2024, respectively, for sales to the 2025 Partnership. See accompanying notes to consolidated financial statements. 9 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 1. ORGANIZATION FTAI Aviation Ltd. is a Cayman Islands exempted company, which through its subsidiaries, is a leading full-service provider for CFM56-5B, CFM56-7B and V2500 aircraft engines, which power the majority of the world’s fleet of narrowbody aircraft. We own and lease aircraft and engines to airlines and asset owners globally. Additionally, we repair and sell refurbished engines and aftermarket components of engines as well as develop and manufacture Parts Manufacturer Approval (“PMA”) parts through a joint venture. Our engine maintenance activities are performed at our owned maintenance facilities in Montréal and Miami which total over 700,000 square feet in size and at locations worldwide through our exclusivity arrangements and partnerships. Our principal corporate location is in New York City, and we have a global presence through our offices in Cardiff, Dubai, Dublin and Singapore, in addition to Montréal and Miami. The majority of our target customers are small and medium sized airlines which have narrowbody fleets powered by CFM56-5B, CFM56-7B and V2500 engines. There are hundreds of these operators worldwide, which creates a large addressable market in which FTAI focuses and can provide significant value versus competitors. We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 12). Except as otherwise specified, “we”, “us”, “our”, “FTAI”, “FTAI Aviation” or “the Company” refer to us and our consolidated subsidiaries. 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. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in the Company’s consolidated subsidiaries is recorded as non-controlling interest. 10 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 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, or under the HLBV method, as applicable. 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. Reclassifications — Certain amounts from prior periods in the Company’s consolidated financial statements have been reclassified to align with the presentation in the current period. Risks and Uncertainties — In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. 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. At times 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. Revenues — Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers . We have elected to exclude sales and other similar taxes from revenues. 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. 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. 11 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Asset sales revenue —Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to customers, and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control of an asset to the customer, along with corresponding costs of sales. Aerospace products revenue —Aerospace products revenue primarily consists of the transaction price related to the sale of CFM56-5B, CFM56-7B 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 CFM56-5B and CFM56-7B 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. Other Income — On December 30, 2024, we announced the launch of a Strategic Capital Initiative in partnership with third-party institutional investors. The first partnership under the initiative (the “2025 Partnership”) focuses on acquiring 737NG and A320ceo aircraft. As part of this transaction, the 2025 Partnership committed to acquire 45 on-lease narrowbody aircraft from us (the “Seed Assets”) and has signed an agreement through which our Maintenance, Repair and Exchange (“MRE”) business will provide replacement aircraft engines and modules for the life of the 2025 Partnership. Four of the aircraft were sold for a gain of $ 10.9 million, which was recognized within other income during the three months ended March 31, 2025. The aircraft sales (and the remaining 41 aircraft to be sold) are accounted for under ASC 610-20, Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets , as they are non-recurring in nature and not considered part of the Company’s ordinary activities. During the three months ended March 31, 2025, the Company received $ 30.1 million in insurance recoveries in connection with the settlement of claims related to the aircraft and engines located in Russia and recorded the gain within other income. 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. We earned 19 % of our revenue from one customer in the Aerospace Products segment during the three months ended March 31, 2025. No single customer or lessee accounted for greater than 10% of total revenue during the three months ended March 31, 2024 As of March 31, 2025 there was one customer in the Aerospace Products segment that represented 31% of total accounts receivable, net. As of December 31, 2024, 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 Ac counts — We determine the allowance for doubtful accounts based on our assessment of the collectability of our leasing receivables on a lessee-by-lessee basis. The allowance for doubtful accounts was $ 75.1 million and $ 74.9 million as of March 31, 2025 and December 31, 2024, respectively. We determine the credit loss reserve for note receivables, receivables related to finance leases and inventory sales. There was a provision for credit losses of $ 0.2 million and $ 0.0 million for the three months ended March 31, 2025 and 2024, respectively, included in operating expenses. Receivables are written off after all reasonable means to collect the full amount have been exhausted. Other Current Assets — Other current assets are summarized as follows: March 31, 2025 (unaudited) December 31, 2024 Notes receivable $ 206,388 $ 165,338 Contract asset from the 2025 Partnership 31,498 — Prepaid expenses including prepayments for maintenance that has not yet been incurred 65,426 87,323 Purchase deposits 45,084 83,229 Financing receivable resulting from failed sale-leaseback transactions 35,689 32,486 Other 39,251 40,547 Other current assets $ 423,336 $ 408,923 Other Non-Current Assets — Other non-current assets are summarized as follows: 12 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) March 31, 2025 (unaudited) December 31, 2024 Lease incentives $ 49,425 $ 56,812 Deferred tax assets 39,656 42,893 Financing receivable resulting from failed sale-leaseback transactions 26,519 28,412 Maintenance right assets 26,646 25,907 Other 50,110 54,406 Other non-current assets $ 192,356 $ 208,430 Assets Held for Sale— We classify assets as held for sale when the Company commits to a plan to sell and it is probable that the sale will be completed within one year. These assets are recorded at the lower of their carrying value or fair market value, less costs to sell, starting from the period in which they meet the criteria for this classification. The Company expects to sell the remaining 41 Seed Assets to the 2025 Partnership and has classified them as held for sale. Upon reclassification, depreciation of the long-lived assets within the disposal group ceased, and the related assets and liabilities were transferred to assets held for sale and liabilities held for sale, respectively. The sales are expected to be completed in the second quarter of 2025. The assets and liabilities include the aircraft previously classified as leasing equipment, as well as related intangible assets and liabilities, and maintenance and security deposit liabilities. The sale of the 45 Seed Assets is treated as a single transaction and one disposal group under ASC 360, Property, plant and equipment , with the aggregate purchase price for Seed Assets, less costs to sell, exceeding the disposal group’s net book value. Assets and liabilities held for sale are summarized as follows (unaudited): March 31, 2025 Leasing equipment, net $ 437,546 Intangible assets, net 22,024 Other non-current assets 6,155 Assets held for sale $ 465,725 Current maintenance deposits $ 32,536 Current security deposits 390 Non-current maintenance deposits 13,156 Non-current security deposits 11,001 Other non-current liabilities 19,413 Liabilities held for sale $ 76,496 Dividends— Dividends are recorded if and when declared by the Board of Directors. For the three months ended March 31, 2025 and 2024, the Board of Directors declared cash dividends of $ 0.30 per ordinary share. Additionally, in the quarter ended March 31, 2025, the 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. 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, net. 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. 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 13 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 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 three months ended March 31, 2025 and 2024 are detailed below (unaudited): Three Months Ended March 31, (in thousands) 2025 2024 Cost of modules and parts sold sourced from engines originally within leasing equipment $ 10,130 $ 12,752 Transfers of engines from leasing equipment to inventory for manufacturing and sale 67,815 32,429 Transfers of inventory to leasing equipment for rebuilding and sale of engines ( 85,928 ) ( 40,267 ) Total outflows related to manufacturing modules and parts - included in net cash (used in) provided by operating activities ( 159,607 ) ( 42,771 ) Cash received for assets sold sourced from leasing equipment - inflow included in cash (used in) provided by operating activities 21,182 20,050 Cash received for sales of leasing equipment that include components sourced from inventory - inflow included in cash used in investing activities 145,450 43,898 Cash paid for engine and aircraft inventory - outflow included in cash provided by (used in) operating activities ( 15,835 ) — 3. 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 MRE 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 CFM56-5B and CFM56-7B engines. The results of operations of LMCES have been included in the Company’s results since the effective date of the acquisition. 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. 14 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) The following table summarizes the preliminary allocation of the net assets acquired: 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. 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, 2024. Three Months Ended March 31, 2024 Total revenue $ 338,276 Net income attributable to shareholders $ 32,102 15 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 4. LEASING EQUIPMENT, NET Leasing equipment, net is summarized as follows: March 31, 2025 (unaudited) December 31, 2024 Leasing equipment $ 2,480,641 $ 2,963,452 Less: Accumulated depreciation ( 491,274 ) ( 589,722 ) Leasing equipment, net $ 1,989,367 $ 2,373,730 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 $ 0.0 million and $ 1.0 million, net of redelivery compensation, during the three months ended March 31, 2025 and 2024, respectively. Depreciation expense for leasing equipment is summarized as follows (unaudited): Three Months Ended March 31, 2025 2024 Depreciation expense for leasing equipment $ 55,886 $ 48,902 5. INVESTMENTS The following table presents the ownership interests and carrying values of our investments: Carrying Value Investment Ownership Percentage March 31, 2025 (unaudited) December 31, 2024 Advanced Engine Repair JV Equity method 25 % $ 19,161 $ 19,048 2025 Partnership Equity method 20 % 12,239 — $ 31,400 $ 19,048 We did not recognize any other-than-temporary impairments for the three months ended March 31, 2025 and 2024. The following table presents our proportionate share of equity in earnings (losses) (unaudited): Three Months Ended March 31, 2025 2024 Advanced Engine Repair JV $ 113 $ ( 521 ) Falcon MSN 177 LLC — ( 146 ) 2025 Partnership ( 7,727 ) — Total $ ( 7,614 ) $ ( 667 ) Equity Method Investments Advanced Engine Repair JV In December 2016, we invested $ 15.0 million for a 25 % interest in an advanced engine repair joint venture. 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. 2025 Partnership 16 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) During the first quarter of 2025, we invested $ 20.0 million in the 2025 Partnership, an investment focused on acquiring 737NG and A320ceo on-lease narrowbody aircraft, for which we are the General Partner and hold a 20 % limited partner ownership. We exercise significant influence over this investment and account for it using the equity method. The Company's proportionate share of equity in earnings related to this investment is based on the contractual profit-sharing arrangement, the elimination of profit on sales of engine and modules to the 2025 Partnership under ASC 606, and the servicing fees charged by us in our capacity as the General Partner to the 2025 Partnership. The profit is eliminated through equity method earnings and will be recognized over time as the 2025 Partnership generates income from leasing and sales activities. Variable Interest Entities The Company evaluates its investments and other significant relationships to determine whether an investee qualifies as a variable interest entity (“VIE”). If an investee is deemed a VIE, we assess our authority to direct its activities, our obligation to absorb its expected losses, and our right to receive its residual returns to determine whether we are the primary beneficiary. If the Company determines that we are the primary beneficiary of a VIE, we consolidate the entity and recognize the non-controlling interests of other beneficiaries. To make this determination, we conduct an analysis that primarily considers the entity’s purpose, design, and associated risks, as well as its capital structure, the terms of agreements between the VIE and its variable interest holders and other involved parties, and any affiliations with related parties. Unconsolidated VIE Certain of the Company’s equity method investments are considered variable interest entities (“VIE”), as defined under the accounting guidance for consolidation. The Company is not considered the primary beneficiary of and therefore does not consolidate the VIEs. The Company’s involvement with the VIEs is in the form of equity interests, which are recorded within investments. The primary purpose of our U.S.-based and foreign-based unconsolidated VIE investments is to create strategic partnerships with third-party institutional investors to acquire 737NG and A320ceo on-lease narrowbody aircraft. The Company’s maximum exposure to loss with respect to the VIEs is its investments. The following table sets forth the Company’s investments in its unconsolidated VIEs and the maximum exposure to loss: March 31, 2025 (unaudited) December 31, 2024 Investment Maximum Exposure to Loss Investment Maximum Exposure to Loss Variable Interest Entity $ 12,239 $ 12,239 $ — $ — Consolidated VIE The Company also had a consolidated VIE investment associated with the 2025 Partnership, for which we are determined to be the primary beneficiary. However, the carrying amounts of the assets and liabilities of the consolidated VIE were $ 0.0 million and $ 0.0 million as of March 31, 2025 and December 31, 2024, respectively. 17 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 6. INTANGIBLE ASSETS AND LIABILITIES, NET Intangible assets and liabilities, net are summarized as follows: March 31, 2025 (unaudited) December 31, 2024 Intangible assets Acquired favorable lease intangibles $ 23,493 $ 70,375 Less: Accumulated amortization ( 8,855 ) ( 29,664 ) Acquired favorable lease intangibles, net 14,638 40,711 Acquired customer relationships 1,907 1,907 Less: Accumulated amortization ( 509 ) ( 413 ) Acquired customer relationships, net 1,398 1,494 Total intangible assets, net $ 16,036 $ 42,205 Intangible liabilities Acquired unfavorable lease intangibles $ 8,971 $ 13,767 Less: Accumulated amortization ( 1,391 ) ( 1,259 ) Acquired unfavorable lease intangibles, net $ 7,580 $ 12,508 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 (unaudited): Classification in Consolidated Statements of Operations Three Months Ended March 31, 2025 2024 Lease intangibles Lease income $ 3,206 $ 3,976 Customer relationships Depreciation and amortization 95 117 Total $ 3,301 4,093 As of March 31, 2025, estimated net annual amortization of intangibles is as follows (unaudited): Remainder of 2025 $ 3,014 2026 1,868 2027 1,381 2028 1,884 2029 548 Thereafter ( 239 ) Total $ 8,456 18 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 7. DEBT, NET Our debt, net is summarized as follows: March 31, 2025 (unaudited) December 31, 2024 Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings Loans payable Revolving Credit Facility (1) $ 200,000 (i) Base Rate + 1.75 %; or (ii) Adjusted Term SOFR Rate + 2.75 % 5/22/27 $ — Total loans payable 200,000 — Bonds payable Senior Notes due 2028 (2) 1,001,287 5.50 % 5/1/28 1,001,382 Senior Notes due 2030 (3) 497,168 7.88 % 12/1/30 497,071 Senior Notes due 2031 700,000 7.00 % 5/1/31 700,000 Senior Notes due 2032 800,000 7.00 % 6/15/32 800,000 Senior Notes due 2033 (4) 497,608 5.88 % 4/15/33 497,551 Total bonds payable 3,496,063 3,496,004 Debt 3,696,063 3,496,004 Less: Debt issuance costs ( 53,536 ) ( 55,526 ) Total debt, net $ 3,642,527 $ 3,440,478 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 premium of $ 1,287 and $ 1,382 at March 31, 2025 and December 31, 2024, respectively. (3) Includes an unamortized discount of $ 2,832 and $ 2,929 at March 31, 2025 and December 31, 2024, respectively. (4) Includes an unamortized discount of $ 2,392 and $ 2,449 at March 31, 2025 and December 31, 2024, respectively. We were in compliance with all debt covenants as of March 31, 2025. 8. 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. 19 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable, accounts payable and accrued liabilities, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles. The fair values of our bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy: March 31, 2025 (unaudited) December 31, 2024 Senior Notes due 2028 980,730 980,140 Senior Notes due 2030 522,660 526,380 Senior Notes due 2031 712,404 713,923 Senior Notes due 2032 812,008 816,904 Senior Notes due 2033 479,565 483,100 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 at $ 9.2 million and $ 8.9 million as of March 31, 2025 and December 31, 2024, respectively, and are reflected as a component of other non-current liabilities. The fair values of the guarantees are determined based on the estim ated condition of the engines at the end of each lease term and the estimated cost of replacement and applicable discount rates and are classified as Level 3. The Company recorded a $ 0.3 million increase related to the change in fair value, which is recorded in Asset sales revenue, during the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025 and 2024, 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 March 31, 2025 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 l easing and eventual sale of assets. 9. 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 March 31, 2025, the Incentive Plan provides for the issuance of up to 28.2 million shares. Equity-based compensation expense is reported within cost of sales and operating expenses. Unvested equity-based awards are subject to forfeiture. The Company’s accounting policy is to record the impact of forfeitures when they occur. Equity-based compensation for each type of award was as follows (unaudited): Three Months Ended March 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years) 2025 2024 Stock Options $ 127 $ — $ 1,651 9.2 Performance shares 3,262 — $ 47,266 3.3 Restricted shares 1,500 510 18,788 2.4 Total $ 4,889 $ 510 $ 67,705 Options During the three months ended March 31, 2025, the Company did not issue any options to employees. During the three months ended March 31, 2024, the Former Manager transferred 49,790 of its options to certain of the Manager’s employees. All of these options were issued prior to Internalization. Performance Shares 20 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) During the three months ended March 31, 2025, we issued performance shares to select officers and employees of the Company with a grant date fair value of $ 4.4 million, vesting over a 3 year performance period based on the achievement of relative total shareholder return ( 50 %) and cumulative diluted EPS ( 50 %). Restricted Shares During the three months ended March 31, 2025, we issued restricted shares to select officers and employees of the Company with a grant date fair value of $ 5.5 million, vesting over 3 years. All awards are subject to continued employment, with compensation expense recognized ratably over the vesting periods. The fair values of the cumulative diluted EPS performance shares and restricted shares were based on the closing price of FTAI Aviation Ltd.’s ordinary shares on the respective grant dates, and the fair value of the total shareholder return performance shares was determined using the Monte Carlo simulation. 10. INCOME TAXES The current and deferred components of the provision for income taxes are as follows (unaudited): Three Months Ended March 31, 2025 2024 Current: Cayman Islands $ — $ — Bermuda — — United States: — — Federal 244 300 State and local 390 578 Other Non-U.S. including Pillar Two top-up tax 1,542 146 Total current provision 2,176 1,024 Deferred: Cayman Islands — — Bermuda 4,441 3,439 United States: — — Federal 1,226 768 State and local 378 ( 358 ) Other Non-U.S. 14,638 699 Total deferred provision 20,683 4,548 Total provision for income taxes $ 22,859 $ 5,572 The Company is an exempted entity domiciled in the Cayman Islands where income taxes are not imposed. The Company has previously been classified as a “passive foreign investment company” for U.S. income tax purposes, resulting in income tax obligations for certain of our shareholders. 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. Our effective tax rate differs from the Cayman Islands statutory rate of 0% primarily due to a significant portion of our income being subject to tax in jurisdictions where we operate. As of and for the three months ended March 31, 2025, 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 2021. 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. 21 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 11. AFFILIATE TRANSACTIONS AND FORMER MANAGEMENT AGREEMENT Strategic Capital Initiative – 2025 Partnership On December 30, 2024, the Company announced the launch of its Strategic Capital Initiative in collaboration with third-party institutional investors. As part of the first partnership under the initiative, certain subsidiaries of the Company entered into an Aircraft Sale and Purchase Agreement, dated December 30, 2024, and a Beneficial Interest Sale and Purchase Agreement, dated December 30, 2024 (together, and as each may be amended from time to time, the “Aircraft Sale and Purchase Agreements”), pursuant to which special purpose entities (the “SPVs”) of the 2025 Partnership will acquire 45 on-lease 737NG and A320ceo aircraft for an aggregate net purchase price of approximately $ 500.0 million, subject to certain customary closing conditions. The SPVs have entered into agreements with third-party institutional investors for the private placement of limited partner interests in the SPVs. The Company also made a minority limited partner investment and will make future investments in the 2025 Partnership in the same proportion relative to third party limited partner investments. During 2024 and the three month period ended March 31, 2025, on behalf of the 2025 Partnership, the Company paid refundable deposits of $ 19.3 million and $ 25.4 million to unrelated, third-parties on future purchases of aircraft, respectively. As of March 31, 2025, the 2025 Partnership reimbursed the Company $ 42.8 million in refundable deposits, and the remaining $ 1.9 million owed to the Company is recorded in other current assets. The Company, along with certain subsidiaries of the SPVs, has entered into a MRE Agreement that requires the Company to sell serviceable engines and modules and purchase unserviceable engines and modules from the SPVs when aircraft controlled by the SPVs need such serviceable engines and modules to fulfill their obligations under an aircraft lease. Under this agreement, the Company will sell CFM56-5B, CFM56-7B and V2500 commercial aircraft engines and related modules to the SPVs and purchase unserviceable engines and modules for a net cash purchase price. The net cash purchase price received by the Company is contractual and customary market-based compensation for fulfilling such performance obligations, primarily through sales transactions where serviceable engines and modules are exchanged for cash consideration and noncash consideration, in which unserviceable engines or modules owned by the 2025 Partnership are transferred to the Company. Revenue from these transactions is recognized under ASC 606 when control of the serviceable engine or module transfers to the 2025 Partnership. During the three month period March 31, 2025 and 2024, the Company recorded revenue of $ 100.6 million and $ 0.0 million , for sale and purchase of such engines to and from the 2025 Partnership. Former Management Agreement 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. 22 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (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 and income incentive allocation prior to the Internalization (unaudited): Three Months Ended March 31, 2024 Management fees $ 587 Income incentive allocation 4,308 Total $ 4,895 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 (unaudited): Three Months Ended March 31, 2025 March 31, 2024 Classification in the Consolidated Statements of Operations: General and administrative $ 196 $ 1,950 Acquisition and transaction expenses 104 317 Total $ 300 $ 2,267 23 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (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. 12. 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, directly and also through its equity method investment. 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 CFM56-5B, CFM56-7B 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 (unaudited): I. For the Three Months Ended March 31, 2025 24 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Three Months Ended March 31, 2025 Aviation Leasing Aerospace Products Corporate and Other Eliminations Total Revenues Aerospace products revenue (1) $ — $ 365,063 $ — $ — $ 365,063 Lease income 68,467 — 4 — 68,471 Maintenance revenue 49,607 — — — 49,607 Asset sales revenue 18,939 — — — 18,939 Total revenues $ 137,013 $ 365,063 $ 4 $ — $ 502,080 Expenses Cost of sales 19,959 228,755 — — 248,714 Operating expenses 7,426 5,687 19,325 — 32,438 General and administrative — — 3,116 — 3,116 Acquisition and transaction expenses 2,905 1,132 3,255 — 7,292 Depreciation and amortization 55,061 3,584 917 — 59,562 Total expenses 85,351 239,158 26,613 — 351,122 Other income (expense) Interest expense — — ( 62,040 ) — ( 62,040 ) Equity in (losses) earnings of unconsolidated entities (2) ( 777 ) 113 — ( 6,950 ) ( 7,614 ) Other income (3) 43,489 — 452 — 43,941 Total other income (expense) 42,712 113 ( 61,588 ) ( 6,950 ) ( 25,713 ) Income (loss) before income taxes 94,374 126,018 ( 88,197 ) ( 6,950 ) 125,245 Provision for (benefit from) income taxes 17,348 19,375 ( 13,864 ) — 22,859 Net income (loss) 77,026 106,643 ( 74,333 ) ( 6,950 ) 102,386 Less: Dividends on preferred shares — — 6,115 — 6,115 Less: Loss on redemption of preferred shares — — 6,327 — 6,327 Net income (loss) attributable to shareholders $ 77,026 $ 106,643 $ ( 86,775 ) $ ( 6,950 ) $ 89,944 ______________________________________________________ (1) Includes revenue of $ 100,638 for the three months ended March 31, 2025 for sales to the 2025 Partnership. See Note 11 for additional information. (2) Includes the profit elimination of $( 6,950 ) for the three months ended March 31, 2025 for sales to the 2025 Partnership within the Aerospace Products segment. (3) Includes gain on sale of $ 10,870 for the three months ended March 31, 2025 for sales to the 2025 Partnership within the Aviation Leasing segment. 25 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows: Three Months Ended March 31, 2025 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 2,199 $ 9,482 $ — $ 11,681 Asia 32,141 42,959 4 75,104 Europe 74,044 96,872 — 170,916 North America 18,263 207,432 — 225,695 South America 10,366 8,318 — 18,684 Total revenues (1) $ 137,013 $ 365,063 $ 4 $ 502,080 ______________________________________________________ (1) The United States, included in North America, Ireland, included in Europe, and Bermuda, included in North America, represent 26 %, 19 % and 11 % 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 March 31, 2025: March 31, 2025 Remainder of 2025 $ 130,220 2026 119,499 2027 99,075 2028 85,577 2029 54,851 Thereafter 62,270 Total $ 551,492 26 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) II. For the Three Months Ended March 31, 2024 Three Months Ended March 31, 2024 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Aerospace products revenue $ — $ 189,057 $ — $ 189,057 Lease income 50,913 — 2,327 53,240 Maintenance revenue 45,790 — — 45,790 Asset sales revenue 38,607 — — 38,607 Total revenues $ 135,310 $ 189,057 $ 2,327 $ 326,694 Expenses Cost of sales 31,889 110,915 — 142,804 Operating expenses 8,207 7,470 9,640 25,317 General and administrative — — 3,683 3,683 Acquisition and transaction expenses 2,761 246 3,172 6,179 Management fees and incentive allocation to affiliate — — 4,895 4,895 Depreciation and amortization 46,084 933 2,903 49,920 Asset impairment 962 — — 962 Total expenses 89,903 119,564 24,293 233,760 Other income (expense) Interest expense — — ( 47,707 ) ( 47,707 ) Equity in losses of unconsolidated entities ( 146 ) ( 521 ) — ( 667 ) Other income 369 — 265 634 Total other income (expense) 223 ( 521 ) ( 47,442 ) ( 47,740 ) Income (loss) before income taxes 45,630 68,972 ( 69,408 ) 45,194 Provision for income taxes 3,033 2,539 — 5,572 Net income (loss) 42,597 66,433 ( 69,408 ) 39,622 Less: Dividends on preferred shares — — 8,335 8,335 Net income (loss) attributable to shareholders $ 42,597 $ 66,433 $ ( 77,743 ) $ 31,287 Summary information with respect to our geographic sources of revenue, based on location of customer and lessee, is as follows: Three Months Ended March 31, 2024 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 868 $ 5,686 $ — $ 6,554 Asia 25,119 28,500 2,327 55,946 Europe 71,044 67,716 — 138,760 North America 20,847 81,372 — 102,219 South America 17,432 5,783 — 23,215 Total revenues (1) $ 135,310 $ 189,057 $ 2,327 $ 326,694 ______________________________________________________ (1) The United States, included in North America, and Ireland, included in Europe, represent 30 % and 13 % of total revenues, respectively, based on the location of our lessees. No other country represents more than 10% of total revenues. 27 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) III. Location of Long-Lived Assets The following tables sets forth the geographic location of property, plant and equipment and leasing equipment, net: March 31, 2025 (unaudited) December 31, 2024 Property, plant and equipment and leasing equipment, net Africa $ 23,571 $ 37,369 Asia 449,632 596,547 Europe 860,284 1,038,176 North America 544,316 592,675 South America 219,618 216,414 Total property, plant and equipment and leasing equipment, net $ 2,097,421 $ 2,481,181 ________________________________________________________ (1) The United States, included in North America represents 19 % of property, plant and equipment and leasing equipment, net as of March 31, 2025. 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, respectively. No other country represents more than 10% of property, plant and equipment and leasing equipment, net. 13. EARNINGS PER SHARE AND EQUITY Basic earnings per ordinary share (“EPS”) is calculated by dividing net income 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 (unaudited): Three Months Ended March 31, (in thousands, except share and per share data) 2025 2024 Net income $ 102,386 $ 39,622 Less: Dividends on preferred shares 6,115 8,335 Less: Loss on redemption of preferred shares 6,327 — Net income attributable to shareholders $ 89,944 $ 31,287 Weighted Average Ordinary Shares Outstanding - Basic 102,552,436 100,245,905 Weighted Average Ordinary Shares Outstanding - Diluted 103,159,051 100,960,065 Earnings per share: Basic $ 0.88 $ 0.31 Diluted $ 0.87 $ 0.31 For the three months ended March 31, 2025 and 2024, no shares have been excluded from the calculation of diluted EPS. Preferred Shares In February 2025, the Company redeemed 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. 14. 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. 28 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 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. 15. 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. There were no restructuring charges recorded for the three months ended March 31, 2025 and 2024, respectively. 16. SUBSEQUENT EVENTS Dividends On April 30, 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 March 31, 2025, payable on May 23, 2025 to the holders of record on May 16, 2025. Additionally, on April 30, 2025, our Board of Directors also declared cash dividends on the Series C Preferred Shares and Series D Preferred Shares of $ 0.52 and $ 0.59 per share, respectively, payable on May 19, 2025 to the holders of record on May 12, 2025. 29