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: 185 ) 48 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 50 Consolidated Balance Sheets as of December 31, 2025 and 2024 51 Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023 52 Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023 53 Consolidated Statement of Changes in Equity for the years ended December 31, 2025, 2024 and 2023 54 Consolidated Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 55 Notes to Consolidated Financial Statements 57 47 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of FTAI Aviation Ltd. Opinion on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheet of FTAI Aviation Ltd. and subsidiaries (the Company) as of December 31, 2025, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the year then ended, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Basis for Opinion The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated 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 consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a 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. 48 Recognition of maintenance revenue for aircraft leases As discussed in Note 2 to the consolidated financial statements, excess maintenance payments received under aircraft lease agreements that the Company does not expect to repay to the lessee are recorded as maintenance revenue. Estimates in recognizing maintenance revenue for aircraft leases include mean time between removal for engines on leased aircraft (MTBR), projected costs for engine maintenance, and forecasted utilization, which are affected by historical usage patterns and overall industry, market and economic conditions. For the year ended December 31, 2025, maintenance revenue was $218,499 thousand, a portion of which related to maintenance revenue for aircraft leases. We identified the recognition of maintenance revenue for aircraft leases as a critical audit matter. Specifically, auditing maintenance revenue for aircraft leases was challenging due to the high degree of audit effort, including specialized knowledge and skills, and subjective auditor judgment involved in evaluating the MTBR. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the determination of the MTBR. We evaluated the MTBR by comparing the Company’s estimate to data provided by a third-party specialist. We also assessed the Company’s retrospective review of the MTBR to actual results. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the knowledge, skill, and ability of the third-party specialist used in the Company’s process and assessing the MTBR for reasonableness by comparing to relevant industry and market information. /s/ KPMG LLP We have served as the Company’s auditor since 2025. New York, New York February 27, 2026 49 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 consolidated balance sheet of FTAI Aviation Ltd. (the Company) as of December 31, 2024, the related consolidated statements of operations, comprehensive income (loss), changes in equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (the 2024 consolidated financial statements). In our opinion, the 2024 consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. 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 Public Company Accounting Oversight Board (United States) (“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 provided a reasonable basis for our opinion. /s/ Ernst & Young LLP We served as the Company’s auditor from 2016 to 2025. New York, New York March 3, 2025 50 FTAI AVIATION LTD. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share data) Notes December 31, 2025 2024 Assets Current Assets Cash and cash equivalents 2 $ 300,476 $ 115,116 Accounts receivable, net (1) 2 209,907 150,823 Inventory, net 2 1,193,773 551,156 Other current assets (2) 2 408,364 408,923 Total current assets 2,112,520 1,226,018 Leasing equipment, net 5 1,545,804 2,373,730 Property, plant, and equipment, net 2 120,068 107,451 Investments 6 314,156 19,048 Intangible assets, net 7 19,929 42,205 Goodwill 2, 3, 4 94,221 61,070 Other non-current assets 2 167,060 208,430 Total assets $ 4,373,758 $ 4,037,952 Liabilities Current Liabilities Accounts payable $ 208,224 $ 69,119 Accrued liabilities 90,009 96,910 Current maintenance deposits 2 25,439 62,552 Current security deposits 2 14,001 18,100 Other current liabilities 2 62,202 100,565 Total current liabilities 399,875 347,246 Long-term debt, net 8 3,448,891 3,440,478 Non-current maintenance deposits 2 46,237 44,179 Non-current security deposits 2 15,211 26,830 Other non-current liabilities 129,370 97,851 Total liabilities $ 4,039,584 $ 3,956,584 Commitments and contingencies 15 Equity Ordinary shares ($ 0.01 par value per share; 2,000,000,000 shares authorized; 102,573,283 and 102,550,975 shares issued and outstanding as of December 31, 2025 and 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 December 31, 2025 and 2024, respectively) 68 117 Additional paid in capital 50,567 153,328 Retained Earnings (accumulated deficit) 282,513 ( 73,103 ) Shareholders' equity 334,174 81,368 Total liabilities and equity $ 4,373,758 $ 4,037,952 (1) Includes accounts receivable from the 2025 Partnership of $ 47,294 and $ 0 as of December 31, 2025 and December 31, 2024, respectively. (2) Includes receivables from the 2025 Partnership of $ 20,681 and $ 0 as of December 31, 2025 and December 31, 2024, respectively. See accompanying notes to consolidated financial statements. 51 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share data) Year Ended December 31, Notes 2025 2024 2023 Revenues Aerospace products revenue 2 $ 1,600,456 $ 1,079,821 $ 454,970 MRE Contract revenue 2, 12 335,788 — — Lease income 2 235,210 255,338 207,936 Maintenance revenue 2 218,499 200,809 191,347 Asset sales revenue 2 106,945 192,176 303,141 Other revenue (1) 10,511 6,757 13,502 Total revenues 13 2,507,409 1,734,901 1,170,896 Expenses Cost of sales 1,349,719 825,884 502,132 Operating expenses 2 152,541 115,861 110,163 General and administrative 9,478 14,263 13,700 Acquisition and transaction expenses 28,587 32,296 15,194 Management fees and incentive allocation to affiliate 12 — 8,449 18,037 Internalization fee to affiliate 16 — 300,000 — Depreciation and amortization 5, 7 225,797 218,064 169,877 Asset impairment — 962 2,121 Gain on sale of assets, net — ( 18,705 ) — Total expenses 1,766,122 1,497,074 831,224 Other (expense) Interest expense ( 247,751 ) ( 221,721 ) ( 161,639 ) Loss on extinguishment of debt — ( 17,101 ) — Equity in losses of unconsolidated entities (2) 6 ( 6,818 ) ( 2,200 ) ( 1,606 ) Gain on sale to the 2025 Partnership 46,380 — — Other income 73,586 17,364 7,590 Total other (expense) ( 134,603 ) ( 223,658 ) ( 155,655 ) Income before income taxes 606,684 14,169 184,017 Provision for (benefit from) income taxes 11 105,620 5,487 ( 59,800 ) Net income 501,064 8,682 243,817 Less: Dividends on preferred shares 17,243 32,763 31,795 Less: Loss on redemption of preferred shares 6,327 7,998 — Net income (loss) attributable to shareholders $ 477,494 $ ( 32,079 ) $ 212,022 Earnings (Loss) earnings per share: 14 Basic $ 4.66 $ ( 0.32 ) $ 2.12 Diluted $ 4.60 $ ( 0.32 ) $ 2.11 Weighted average shares outstanding: Basic 102,563,486 101,538,835 99,908,214 Diluted 103,846,914 101,538,835 100,425,777 (1) Includes servicing fees of $ 10,150 for the year ended December 31, 2025, from the 2025 Partnership. (2) Includes the profit elimination of $( 22,829 ) for the year ended December 31, 2025, for sales to the 2025 Partnership. See accompanying notes to consolidated financial statements. 52 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands) Year Ended December 31, 2025 2024 2023 Net income $ 501,064 $ 8,682 $ 243,817 Other comprehensive loss: Other comprehensive loss related to equity method investees, net in discontinued operations — — — Comprehensive income 501,064 8,682 243,817 Comprehensive loss attributable to non-controlling interest: Discontinued operations — — — Comprehensive income attributable to shareholders $ 501,064 $ 8,682 $ 243,817 See accompanying notes to consolidated financial statements. 53 FTAI AVIATION LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Dollars in thousands) Ordinary Shares Preferred Shares Additional Paid In Capital (Accumulated Deficit) Retained Earnings Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity Equity - December 31, 2022 $ 997 $ 133 $ 343,350 $ ( 325,602 ) $ 524 $ 19,402 Net income 243,817 243,817 Total comprehensive income 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 Net income 501,064 — 501,064 Total comprehensive income 501,064 — 501,064 Redemption of preferred shares ( 49 ) ( 117,791 ) ( 117,840 ) Loss on redemption of preferred shares ( 6,327 ) ( 6,327 ) Dividends declared - ordinary shares ( 128,205 ) ( 128,205 ) Dividends declared - preferred shares ( 17,243 ) ( 17,243 ) Issuance of ordinary shares 1,121 1,121 Equity-based compensation 21,733 21,733 Net settlement on vesting of equity awards ( 1,497 ) ( 1,497 ) Equity - December 31, 2025 $ 1,026 $ 68 $ 50,567 $ 282,513 $ — $ 334,174 See accompanying notes to consolidated financial statements. 54 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from operating activities: Net income $ 501,064 $ 8,682 $ 243,817 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Equity in losses of unconsolidated entities (1) 6,818 2,200 1,606 Gain on sale of assets ( 377,540 ) ( 377,909 ) ( 160,742 ) Gain on sale of assets to the 2025 Partnership ( 46,380 ) — — Gain on insurance recoveries ( 54,325 ) — — Security deposits and maintenance claims included in earnings ( 20,881 ) ( 16,783 ) ( 40,535 ) Loss on extinguishment of debt — 17,101 — Equity-based compensation 21,733 6,006 1,638 Non-cash termination fee to affiliate (issuance of ordinary shares) — 150,000 — Depreciation and amortization 225,797 218,064 169,877 Asset impairment — 962 2,121 Deferred income taxes 73,956 ( 1,878 ) ( 63,626 ) Change in fair value of guarantees 3,114 2,086 ( 1,807 ) Amortization of lease intangibles and incentives 41,842 43,967 43,764 Amortization of deferred financing costs 11,811 11,458 8,860 Provision for credit losses 574 2,784 6,583 Other 4,170 ( 273 ) ( 6,646 ) Change in: Accounts receivable ( 42,425 ) ( 41,196 ) ( 40,357 ) Inventory ( 645,464 ) ( 206,880 ) ( 31,884 ) Other assets ( 136,784 ) ( 14,372 ) ( 5,627 ) Accounts payable and accrued liabilities 122,779 15,886 1,254 Management fees payable to affiliate ( 960 ) ( 5,507 ) 1,683 Other liabilities 356 ( 2,354 ) ( 997 ) Net cash (used in) provided by operating activities ( 310,745 ) ( 187,956 ) 128,982 Cash flows from investing activities: Investment in unconsolidated entities ( 328,546 ) — ( 19,500 ) Return of capital from unconsolidated entities 27,113 — — Principal collections on finance leases 1,580 2,157 3,638 Principal collections on notes receivable 6,680 4,930 4,875 Acquisition of business, net of cash acquired ( 49,085 ) ( 147,624 ) ( 29,632 ) Acquisition of leasing equipment ( 658,799 ) ( 1,147,341 ) ( 749,780 ) Investments in financing receivables ( 2,764 ) ( 66,858 ) — Acquisition of property, plant and equipment ( 27,712 ) ( 9,220 ) ( 6,148 ) Acquisition of lease intangibles 2,509 3,168 ( 20,964 ) Investment in promissory notes ( 4,714 ) — ( 11,500 ) Deposits for acquisitions of leasing equipment (2) ( 65,926 ) ( 158,297 ) ( 23,937 ) Proceeds from sale of assets 1,182,495 969,280 477,886 Proceeds from sale of assets to the 2025 Partnership 529,970 — — Proceeds from settlement of insurance claims 54,325 — — Proceeds from deposits on sale of leasing equipment 7,285 79,777 1,413 Return of deposits for acquisition of leasing equipment (2) 48,903 530 300 Net cash provided by (used in) investing activities $ 723,314 $ ( 469,498 ) $ ( 373,349 ) See accompanying notes to consolidated financial statements. 55 FTAI AVIATION LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Year Ended December 31, 2025 2024 2023 Cash flows from financing activities: Proceeds from debt $ 480,000 $ 2,581,819 $ 951,665 Repayment of debt ( 480,000 ) ( 1,672,304 ) ( 605,000 ) Payment of deferred financing costs ( 524 ) ( 17,356 ) ( 12,180 ) Receipt of security deposits under operating lease agreements 5,154 8,104 9,927 Return of security deposits under operating lease agreements ( 4,265 ) ( 421 ) ( 2,385 ) Receipt of maintenance deposits under operating lease agreements 49,075 49,333 30,354 Release of maintenance deposits under operating lease agreements ( 5,537 ) ( 7,134 ) ( 275 ) Proceeds from issuance of ordinary shares, net of underwriter's discount — — 5 Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs — — 61,729 Capital contributions from non-controlling interests — — 10 Settlement of equity-based compensation ( 1,497 ) — — Purchase of non-controlling interest shares — ( 534 ) — Redemption of preferred shares ( 124,167 ) ( 105,353 ) — Cash dividends - ordinary shares ( 128,205 ) ( 121,577 ) ( 119,847 ) Cash dividends - preferred shares ( 17,243 ) ( 32,763 ) ( 31,795 ) Net cash (used in) provided by financing activities ( 227,209 ) 681,814 282,208 Net increase (decrease) in cash and cash equivalents and restricted cash 185,360 24,360 37,841 Cash and cash equivalents and restricted cash, beginning of period 115,266 90,906 53,065 Cash and cash equivalents and restricted cash, end of period $ 300,626 $ 115,266 $ 90,906 Supplemental disclosure of cash flow information: Cash paid for interest, net of capitalized interest $ 235,160 $ 222,122 $ 150,622 Cash paid for taxes 15,661 5,655 1,393 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 $ 88,004 88,271 46,654 Acquisition of leasing equipment in accrued liabilities ( 22,521 ) ( 22,119 ) ( 8,962 ) Receipt of leasing equipment in settlement of accounts receivable ( 5,075 ) — ( 14,250 ) Purchase deposits reclassified to leasing equipment from other assets upon acquisition ( 52,817 ) ( 19,608 ) ( 6,371 ) Decrease in leasing equipment for engines provided to aircraft lessees in lieu of cash reimbursements of maintenance deposits 5,127 — 10,970 Accounts receivable settled with security deposits ( 3,067 ) ( 4,808 ) ( 6,050 ) Accounts receivable settled with maintenance deposits ( 27,014 ) ( 45,719 ) ( 1,856 ) (1) Includes the profit elimination of $( 22,829 ) for the year ended December 31, 2025, for sales to the 2025 Partnership within the Aerospace Products segment. (2) Includes deposits for acquisition of leasing equipment paid on behalf of the 2025 Partnership of $ 26,370 for the year ended December 31, 2025, and return of deposits for the acquisition of leasing equipment reimbursed from the 2025 Partnership of $ 45,710 for the year ended December 31, 2025. See accompanying notes to consolidated financial statements. 56 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 1. ORGANIZATION FTAI Aviation Ltd. (“FTAI”, “FTAI Aviation” or “the Company”) is a Cayman Islands exempted company, which through its subsidiaries, is a leading independent engine maintenance platform focused on the CFM56-5B, CFM56-7B and V2500 aircraft engines which power the 737NG and A320ceo aircraft. The Company repairs and rebuilds engines and aftermarket components of engines as well as develops and manufactures Parts Manufacturer Approval (“PMA”) parts through a joint venture. Additionally, the Company owns and leases aircraft and engines to airlines and asset owners globally. The Company has two reportable segments, (i) Aerospace Products and (ii) Aviation Leasing (see Note 13). The Company conducts engine maintenance at its 100% owned facilities in Montréal, Miami, Lisbon, and Orange, as well as through its 50 % equity ownership in QuickTurn Europe, located in Rome. Collectively, these facilities span over 950,000 square feet and are equipped with advanced tooling, engine test cells, and engineering capabilities to support a wide range of component repairs and service requirements. In addition, the Company also supports global operations through exclusive arrangements and strategic partnerships at key locations worldwide. The Company’s principal corporate location is in New York City, and has a global presence through offices in Cardiff, Dubai, Dublin and Singapore, in addition to Montréal, Miami, Orange, Lisbon and Rome. The majority of FTAI’s 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. 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 the Company and its subsidiaries. Principles of Consolidation — The Company consolidates all entities in which it has 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 Company uses the equity method of accounting for investments in entities in which it exercises significant influence, but which does not meet the requirements for consolidation. Under the equity method, the Company records its proportionate share of the underlying net income (loss) of these entities. 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 in 2024 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 16 for additional discussion of the restructuring charges related to the Internalization. Reclassifications — Certain amounts from prior periods in the Company’s consolidated financial statements and footnotes have been reclassified to align with the presentation in the current period. Risks and Uncertainties — In the normal course of business, the Company encounters 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 the Company operates, which could adversely impact the pricing of the services offered by the Company 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 the Company’s leasing equipment or operating assets. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its business or to refinance existing debt facilities. The Company, through its subsidiaries, also conducts operations outside of the United States; such international operations are subject to the same risks as those associated with the Company’s 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. The Company does not have significant exposure to foreign currency risk as all of its leasing arrangements are denominated in U.S. dollars. Cash and Cash Equivalents — The Company considers all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents. Inventory, net — The Company holds 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 the Company’s Consolidated Balance Sheets. 57 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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. The Company reviews its depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in its depreciation policies, useful lives of its 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, the Company makes 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, the Company relies upon observable market data for the same or similar types of equipment and, in the case of aviation equipment, its own estimates with respect to a lessee’s anticipated utilization of the aircraft or engine. When the Company acquires leasing equipment subject to an in-place lease, determining the fair value of the in-place lease requires the Company to make assumptions regarding the current fair values of leases for identical or similar equipment, in order to determine if the in-place lease is within a fair value range of current lease rates. If a lease is below or above the range of current lease rates, the resulting lease discount or premium is recognized as a lease intangible and amortized into lease income over the remaining term of the lease. 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. The Company capitalized interest of $ 0.0 million, $ 0.2 million and $ 0.7 million during the years ended December 31, 2025, 2024 and 2023, respectively. Repairs and Maintenance — Repair and maintenance costs that do not extend the lives of the assets are expensed as incurred. The Company's repairs and maintenance expense was $ 3.2 million, $ 9.8 million and $ 7.7 million during the years ended December 31, 2025, 2024 and 2023, respectively, and are included in Operating expenses. Impairment of Long-Lived Assets — The Company performs a recoverability assessment of each of its 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. 58 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) If a quantitative recoverability assessment is determined to be needed, the Company measures 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. The Company assesses 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. The Company performed a qualitative assessment for its goodwill impairment test for the year ended December 31, 2025. No impairment was recorded as a result of these tests for the years ended December 31, 2025, 2024 and 2023, respectively. Included in goodwill on the Company’s consolidated balance sheet at December 31, 2025 and 2024 was amounts acquired of $ 32.7 million and $ 56.5 million, respectively. Security Deposits — The Company’s 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 the Company 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, the Company 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. The Company records the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposit liabilities in the Consolidated Balance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability. In certain leases, the Company 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, the Company records a maintenance right asset, as a component of other assets, for the estimated value of the end-of-life maintenance payment at acquisition. The Company recognizes 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 the Company is required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when the Company is 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, the Company makes estimates about the fair value of the acquired leases. In determining the fair value of these leases, the Company makes 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 7.7 years as of December 31, 2025, and are recorded as a component of revenues. 59 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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 $ 47.4 million and $ 55.5 million as of December 31, 2025 and 2024, respectively, are included in Long-term debt, net. The Company also has unamortized deferred revolver fees related to its revolving debt o f $ 5.1 million and $ 8.2 million as of December 31, 2025 and 2024, respectively, which are included in Other non-current assets. Amortization expense was $ 11.8 million, $ 11.5 million and $ 8.9 million for the years ended December 31, 2025, 2024 and 2023, respectively, and is included in Interest expense. Revenues — Revenues are within the scope of ASC 606, Revenue from contracts with customers, and ASC 842, Leases , unless otherwise noted. The Company has elected to exclude sales tax and other similar taxes from revenues. 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 at the point in time 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 related to these engine management service contracts over time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred. Maintenance, Repair and Exchange (“MRE”) Contract revenue — MRE Contract revenue consists of the transaction price related to the sale of CFM56-5B, CFM56-7B and V2500 commercial aircraft engines and related modules to, and subsequent exchange of unserviceable engines and modules from, the special purpose entities (the “SPVs”) of the first partnership of the strategic capital initiative (the “2025 Partnership”). MRE Contract revenue is recognized under ASC 606 at the point in time when a performance obligation is satisfied by transferring control of the serviceable engine or module to the 2025 Partnership, along with corresponding costs of sales. Refer to Note 12 “Affiliate Transactions and Former Management Agreement” for additional information on the 2025 Partnership and the strategic capital initiative. Operating Leases — The Company leases 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 the Company’s 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 the Company’s 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 the Company is 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, the Company is not required to return any unused maintenance payments to the lessee. Maintenance payments received for which the Company expects to repay to the lessee are presented as current and non-current Maintenance deposits in its Consolidated Balance Sheets. Excess maintenance payments received that the Company does not expect to repay to the lessee are recorded as Maintenance revenue on its Consolidated Statements of Operations. Estimates in recognizing revenue include mean time between removal for engines on leased aircraft, projected costs for engine maintenance, and forecasted utilization, which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period. For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable lease intangible. Finance Leases — From time to time the Company enters 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. 60 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (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 the Company’s 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. The Company routinely sells leasing equipment to customers and such transactions are considered recurring and ordinary in nature to its 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. Leasing Arrangements — At contract inception, the Company evaluates whether an arrangement is or contains a lease for which it is the lessee (that is, arrangements which provide the Company 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 the Company’s 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. The Company has elected to combine lease and non-lease components for all lease contracts where it is the lessee. Additionally, for arrangements with lease terms of 12 months or less, the Company does 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. Other Income — The 2025 Partnership committed to acquire 45 on-lease narrowbody aircraft from the Company (the “Seed Assets”) and has signed an agreement through which the Company’s MRE business will provide replacement aircraft engines and modules for the life of the 2025 Partnership. During the year ended December 31, 2025, 45 aircraft were sold for a gain of $ 50.1 million, which was recognized within gain on sale to the 2025 Partnership. The aircraft sales were accounted for under ASC 610-20, Other Income — Gains and Losses from the Derecognition of Nonfinancial Assets , as they were non-recurring in nature and not considered part of the Company’s ordinary activities. During the year ended December 31, 2025, the Company received $ 54.3 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 — The Company is subject to concentrations of credit risk with respect to amounts due from customers and lessees. The Company attempts to limit its credit risk by performing ongoing credit evaluations. The Company earned 13 % and 10 % of its revenue from two customers in the Aerospace Products segment during the twelve months ended December 31, 2025. No single customer or lessee accounted for greater than 10% of total revenue during the years ended December 31, 2024 and 2023. As of December 31, 2025, there was one customer in the Aerospace Products segment that represented 23 % 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. The Company maintains cash and restricted cash balances, which generally exceed federally insured limits, and subject it to credit risk, in high credit quality financial institutions. The Company monitors the financial condition of these institutions and has not experienced any losses associated with these accounts. 61 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Allowance for Doubtful Accounts — The Company determines the allowance for doubtful accounts based on its assessment of the collectability of its leasing receivables, notes receivables and inventory sales. In assessing the allowance, the Company considers past collection history and specific risks identified among uncollected accounts. The assessment of collectability of its leasing receivables, notes receivables and inventory sales is done quarterly, on a customer-by-customer basis. 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: December 31, 2025 2024 2023 Allowance at beginning of period $ 74,947 $ 72,163 $ 65,580 Bad debt expense 574 2,784 6,583 Write-offs and recoveries, net ( 47,134 ) — — Allowance at end of period $ 28,387 $ 74,947 $ 72,163 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, the Company terminated all lease agreements with Russian airlines and its allowance for doubtful accounts at December 31, 2024 includes all accounts receivable exposure to Russian and Ukrainian lessees. Comprehensive Income — The Company’s comprehensive income represents net income adjusted for comprehensive loss related to cash flow hedges of its equity method investees of discontinued operations. Other Current Assets — Other current assets are summarized as follows: December 31, 2025 2024 Notes receivable $ 216,298 $ 165,338 Prepaid expenses including prepayments for maintenance that has not yet been incurred 79,806 87,323 Financing receivable resulting from failed sale-leaseback transactions 37,740 32,486 Purchase deposits 12,791 83,229 Contract asset from the 2025 Partnership 16,835 — Other 44,894 40,547 Other current assets $ 408,364 $ 408,923 Other Non-Current Assets — Other non-current assets are summarized as follows: December 31, 2025 2024 Lease incentives $ 43,688 $ 56,812 Deferred tax assets 31,920 42,893 Financing receivable resulting from failed sale-leaseback transactions 19,109 28,412 Maintenance right assets 6,374 25,907 Other 65,969 54,406 Other non-current assets $ 167,060 $ 208,430 Other Current Liabilities — Other current liabilities are summarized as follows: December 31, 2025 2024 Deposits on sales of leasing equipment 33,755 $ 87,296 Other 28,447 13,269 Other current liabilities $ 62,202 $ 100,565 62 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Dividends — Dividends are recorded if and when declared by the Board of Directors. The Board of Directors declared cash dividends of $ 1.35 , $ 1.20 and $ 1.20 per ordinary share for each of the years ended December 31, 2025, 2024 and 2023, respectively. Additionally, the Board of Directors declared cash dividends on the Series C Preferred Shares of $ 2.06 , $ 2.06 , $ 2.06 per share for the years ended December 31, 2025, 2024 and 2023, respectively, the Series D Preferred Shares of $ 2.38 , $ 2.38 and $ 1.78 per share for the year ended December 31, 2025, 2024 and 2023, the Series A Preferred Shares of $ 1.55 and $ 2.06 per share for the years ended December 31, 2024, and 2023, respectively, and the Series B Preferred Shares of $ 2.00 and $ 2.00 per share for the years ended December 31, 2024 and 2023, 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 reported 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 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 an outflow 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 an outflow in net cash (used in) provided by operating activities. The cash and noncash related activities described above during the years ended December 31, 2025, 2024 and 2023 are detailed below: Year Ended December 31, (in thousands) 2025 2024 2023 Cost of modules and parts sold sourced from engines originally within leasing equipment $ 25,558 $ 38,300 $ 41,167 Transfers of engines from leasing equipment to inventory for manufacturing and sale 259,383 239,462 178,740 Transfers of inventory to leasing equipment for rebuilding and sale of engines ( 255,845 ) ( 223,129 ) ( 78,788 ) Total outflows related to manufacturing modules and parts - included in net cash (used in) provided by operating activities ( 779,374 ) ( 345,821 ) ( 138,045 ) Cash received for assets sold sourced from leasing equipment - inflow included in cash (used in) provided by operating activities 61,513 76,157 94,222 Cash received for sales of leasing equipment that include components sourced from inventory - inflow included in cash used in investing activities 1,058,961 436,217 79,474 Cash paid for engine and aircraft inventory - outflow included in cash provided by (used in) operating activities ( 325,056 ) ( 8,280 ) — 63 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Recent Accounting Pronouncements Recently Adopted 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. The Company adopted this guidance in the fourth quarter of 2024, and it did not have a material impact on its consolidated financial statements and related disclosures. In August 2023, the FASB issued ASU 2023‑05, Business Combinations – Joint Venture Formations , which requires that joint ventures, upon formation, apply a new basis of accounting by initially measuring assets and liabilities at fair value. The amendments in ASU 2023‑05 are effective for joint ventures that are formed on or after January 1, 2025. The Company adopted this guidance in the first quarter of 2025. The adoption of ASU 2023-05 did not have a material impact on the Company’s consolidated financial statements. 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. The Company adopted this guidance, prospectively, in the fourth quarter of 2025. See note 11 for the Company’s income tax disclosures. Accounting Pronouncements Not Yet Adopted — 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 December 15, 2027, with early adoption and either prospective or retrospective application permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements and related disclosures. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient in developing reasonable and supportable forecasts as apart of estimating expected credit losses, allowing entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The amendments in ASU 2025-05 are effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company is currently evaluating the impact of this update on its consolidated financial statements and related disclosures. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) , which is improves the navigability of the required interim disclosures, provides clarity as to when it is applicable, and provides additional guidance on what disclosures are required in interim reporting periods by establishing a disclosure principle. The guidance is effective for interim reporting periods beginning in 2028 and can be applied either prospectively or retrospectively. The Company is currently determining its method of adoption. 64 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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. The Company acquired LMCES to further enhance its MRE business and establish permanent engine and module manufacturing capabilities in Canada. The facility operates within its 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. In connection with the acquisition, the Company 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. 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. Subsequent to the acquisition, in the year ended December 31, 2025, measurement period adjustments as of the acquisition date were made as a result of the finalization of the net working capital adjustments which increased total consideration by $ 14.1 million. This adjustment resulted in an increase in goodwill of $ 14.1 million. 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 goodwill of $ 29.6 million. The following table summarizes the allocation of the net assets acquired: September 9, 2024 Fair value of assets acquired: Current Assets Accounts receivable $ 10,758 Inventory 25,498 Other current assets 6,795 Total current assets 43,051 Property, plant, and equipment 72,151 Leasing equipment 5,675 Other non-current assets 10,633 Total assets 131,510 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) 71,040 Net assets acquired (2) $ 173,712 (1) 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. 65 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The following table presents 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 30,397 Other N/A 801 Total $ 72,151 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 the Company believes 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 66 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 4. ACQUISITION OF QUICKTURN On December 1, 2023, the Company 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. The Company 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 the Company’s 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. 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 assigned to the Aerospace Products segment and is deductible for income tax purposes. 67 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 5. LEASING EQUIPMENT, NET Leasing equipment, net is summarized as follows: December 31, 2025 2024 Leasing equipment $ 2,057,624 $ 2,963,452 Less: Accumulated depreciation ( 511,820 ) ( 589,722 ) Leasing equipment, net $ 1,545,804 $ 2,373,730 The Company identified certain assets in its leasing equipment portfolio with indicators of impairment. During the year ended December 31, 2025, the Company did not record any transactional impairment charges. In comparison, for the year ended December 31, 2024, the Company recorded transaction impairment charges of $ 1.0 million, net of redelivery compensation. In the fourth quarter of 2024, the Company completed the sale of the two vessels included within Corporate and Other. The Company 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, 2025 2024 2023 Depreciation expense for leasing equipment $ 208,987 $ 211,047 $ 168,901 6. INVESTMENTS The following table presents the ownership interests and carrying values of the Company’s investments: Carrying Value Investment Ownership Percentage December 31, 2025 December 31, 2024 Advanced Engine Repair JV Equity method 25 % $ 22,429 $ 19,048 2025 Partnership Equity method 19 % 281,740 — QuickTurn Europe Equity method 50 % 9,987 — $ 314,156 $ 19,048 The Company did not recognize any other-than-temporary impairments for the year ended December 31, 2025 and 2024. The following table presents the Company’s proportionate share of equity in (losses) earnings: Year Ended December 31, 2025 2024 2023 Advanced Engine Repair JV $ 3,381 $ ( 1,993 ) $ 833 2025 Partnership (1) ( 9,715 ) — — Falcon MSN 177 LLC (2) — ( 207 ) ( 148 ) QuickTurn Europe ( 484 ) — — Quick Turn Engine Center LLC (3) — — ( 2,291 ) Total $ ( 6,818 ) $ ( 2,200 ) $ ( 1,606 ) (1) Includes the profit elimination of $( 22,829 ) for the year ended December 31, 2025 for sales to the 2025 Partnership. (2) On May 3, 2024, the Company purchased the remaining interest of Falcon MSN 177 LLC (“Falcon”). As a result, Falcon became a consolidated subsidiary, and is no longer accounted for as an equity method investment. (3) On December 1, 2023, the Company purchased the remaining interest in QuickTurn. Equity Method Investments Advanced Engine Repair JV In December 2016, the Company 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. 68 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) In August 2019, the Company expanded the scope of its joint venture and invested an additional $ 13.5 million and maintained a 25 % interest. The Company exercises significant influence over this investment and accounts for this investment as an equity method investment. Falcon MSN 177 LLC Since November 2021, the Company 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. The Company accounted for its investment in Falcon as an equity method investment as it has significant influence through its interest. On May 3, 2024, the Company 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, the Company 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. The Company accounts for its investment in QuickTurn as an equity method investment as it has significant influence through its interest. On December 1, 2023, the Company purchased the remaining interest in QuickTurn. 2025 Partnership In the year ended December 31, 2025, the Company invested $ 291.5 million in the 2025 Partnership, an investment focused on acquiring 737NG and A320ceo on-lease narrowbody aircraft, for which the Company is the Servicer and holds a 19 % limited partner ownership. The Company exercises significant influence over this investment and accounts for it using the equity method. As the Servicer, the Company is responsible for lessee invoicing and collections, airline relationship management, contracts management including lease extension and aircraft deliveries and redeliveries. The Company's proportionate share of equity in earnings related to this investment is based on the contractual profit-sharing arrangement and the elimination of profit on sales of engine and modules to the 2025 Partnership under ASC 606. The profit from the MRE Contract revenue is eliminated through equity method earnings and will be recognized over time as the 2025 Partnership generates income from leasing and sales activities. QuickTurn Europe On June 5, 2025, the Company invested $ 10.5 million for a 50 % interest in Quick Turn Engine Center Europe S.r.l. (previously IAG Engine Center Europe S.r.l.) or “QuickTurn Europe”, a 200,000 square-foot CFM56 engine maintenance repair and overhaul facility located at the Rome Fiumicino Airport. The joint venture was established to expand the Company’s global engine maintenance capabilities and meet increasing demand for MRE services. The Company accounts for its investment in QuickTurn Europe as an equity method investment as it has significant influence through its interest. 7. INTANGIBLE ASSETS AND LIABILITIES, NET The Company’s intangible assets and liabilities, net are summarized as follows: December 31, 2025 December 31, 2024 Intangible assets Acquired favorable lease intangibles $ 17,245 $ 70,375 Less: Accumulated amortization ( 8,935 ) ( 29,664 ) Acquired favorable lease intangibles, net 8,310 40,711 Acquired customer relationships 12,607 1,907 Less: Accumulated amortization ( 988 ) ( 413 ) Acquired customer relationships, net 11,619 1,494 Total intangible assets, net $ 19,929 $ 42,205 Intangible liabilities Acquired unfavorable lease intangibles $ 7,688 $ 13,767 Less: Accumulated amortization ( 2,132 ) ( 1,259 ) Acquired unfavorable lease intangibles, net $ 5,556 $ 12,508 69 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The weighted average amortization period of intangible assets acquired during the year ended December 31, 2025 is as follows: Weighted Average Amortization Period Lease intangibles 3.5 years Customer relationships 10.5 years Total intangible assets 7.7 years 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, 2025 2024 2023 Lease intangibles Lease income $ 6,710 $ 15,597 $ 15,126 Customer relationships Depreciation and amortization 603 403 11 Total $ 7,313 $ 16,000 $ 15,137 As of December 31, 2025, estimated net annual amortization of intangibles is as follows: 2026 $ 2,444 2027 1,877 2028 2,436 2029 1,480 2030 1,398 Thereafter 4,738 Total $ 14,373 70 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 8. DEBT, NET The Company’s debt, net is summarized as follows: December 31, 2025 December 31, 2024 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 2028 (2) 1,000,995 5.50 % 5/1/28 1,001,382 Senior Notes due 2030 (3) 497,470 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) 497,784 5.88 % 4/15/33 497,551 Total bonds payable 3,496,249 3,496,004 Debt 3,496,249 3,496,004 Less: Debt issuance costs ( 47,358 ) ( 55,526 ) Total debt, net $ 3,448,891 $ 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 $ 995 and $ 1,382 at December 31, 2025 and December 31, 2024, respectively. (3) Includes an unamortized discount of $ 2,530 and $ 2,929 at December 31, 2025 and December 31, 2024, respectively. (4) Includes an unamortized discount of $ 2,216 and $ 2,449 at December 31, 2025 and December 31, 2024, respectively. Revolving Credit Facility — On May 23, 2024, the Company amended and restated its Revolving Credit Facility by executing a Third Amended and Restated Credit Agreement (the “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, the Company 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, the Company 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 the Company’s 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. 71 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Senior Notes due 2033— On October 9, 2024, the Company 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. The Company was in compliance with all debt covenants as of December 31, 2025. As of December 31, 2025, scheduled principal repayments under the Company’s debt agreements for the next five years and thereafter are summarized as follows: 2026 2027 2028 2029 2030 Thereafter Total Revolving Credit Facility — — — — — — — 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 $ — $ 500,000 $ 2,000,000 $ 3,500,000 9. 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 the Company to develop its 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). The Company’s 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, the Company’s 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. 72 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The fair values of the Company’s bonds payable are presented in the table below and classified as Level 2 within the fair value hierarchy: December 31, 2025 December 31, 2024 Senior Notes due 2028 1,001,880 980,140 Senior Notes due 2030 531,735 526,380 Senior Notes due 2031 737,618 713,923 Senior Notes due 2032 842,240 816,904 Senior Notes due 2033 508,525 483,100 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 $ 12.0 million and $ 8.9 million as of December 31, 2025 and December 31, 2024, 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, 2025 and 2024, the Company recorded a $ 3.1 million and $ 2.1 million increase, respectively, related to the change in fair value, which is recorded in Asset sales revenue. During the year ended December 31, 2023, the Company recorded $ 4.8 million 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 years ended December 31, 2025, 2024 and 2023, 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 2 to 7 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at December 31, 2025 was $ 43.0 million , which is not reasonably expected. The Company measures 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. The Company records 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 the Company’s assumptions as to future cash flows from operation of the leasing and eventual sale of assets. 10. EQUITY-BASED COMPENSATION The Company has a FTAI Aviation Ltd. 2025 Omnibus Incentive Plan (the “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 the Company, each as determined by the Compensation Committee of the Board of Directors. As of December 31, 2025, the Incentive Plan provides for the issuance of up to 5.7 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. Stock Options In 2025, the Company did not issue any options to employees. During the year ended December 31, 2024, in connection with the Company’s equity offerings (see Note 14 for details), the Company 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 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. 73 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The following table presents information related to the options granted related to the Company’s shares: Year Ended December 31, 2024 2023 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 the Company’s 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 10.0 years Restricted Shares During the year ended December 31, 2025, the Company issued the following restricted shares of the Company to select employees and officers of the Company: In February 2025, the Company issued restricted shares to select officers and employees of the Company with a grant date fair value of $ 5.5 million, vesting over 3.0 years. In November 2025, the Company issued restricted shares to select employees of the Company with a grant date fair value of $ 0.3 million, vesting over 4.0 years. Additionally, the Company issued restricted shares to the directors of the Company with a grant date fair value of $ 0.8 million. These awards vest on the earlier of (i) the one-year anniversary of the grant date (May 29, 2026) or (ii) the date of the Company’s next annual general meeting of shareholders occurring after the grant date. During the year ended December 31, 2024, the Company issued the following restricted shares of the Company to select employees and officers of the Company: In May 2024, the Company 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, the Company 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 the Company’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 1.7 years. Performance Shares During the year ended December 31, 2025, the Company 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 %). In November 2024, the Company 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. 74 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) As of December 31, 2025, there was $ 36.8 million in unrecognized compensation cost related to unvested performance shares. This cost is expected to be recognized over a weighted-average period of 2.8 years. The Consolidated Statements of Operations includes the following expense related to the Company’s equity-based compensation arrangements which are recorded in Operating expenses: December 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years) 2025 2024 2023 Stock options $ 508 $ 296 $ — $ 1,270 7.7 years Restricted shares 7,448 3,756 1,638 14,012 1.7 years Performance shares 13,777 1,954 — 36,752 2.8 years Total $ 21,733 $ 6,006 $ 1,638 $ 52,034 The tables below provide details on the Company’s 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, 2024 112,343 $ 52.70 1,000,000 $ 48.11 481,138 $ 41.90 Granted — — 28,441 153.80 51,898 128.98 Less: exercised / vested 10,000 14.77 — — 23,712 88.54 Less: forfeited and canceled — — — — — — Outstanding as of December 31, 2025 102,343 1,028,441 509,324 Stock Options Performance Shares Restricted Shares As of December 31, 2025: Weighted average exercise / issuance price (per share) $ 56.37 $ 51.03 $ 48.60 Aggregate intrinsic value (in thousands) 14,377 N/A 24,753 Weighted average remaining contractual term (in years) 7.7 2.8 1.7 11. INCOME TAXES The Company is incorporated in the Cayman Islands where income taxes are not imposed. Taxable income or loss generated by the Company’s corporate subsidiaries is subject to income tax in jurisdictions where they conduct business. For the year ended December 31, 2025, for purposes of this income tax disclosure, the Company has determined that based on the increased significance of its operations, by location, that Ireland is its domestic country of tax domicile. As a result, for 2025, the Ireland statutory income tax rate of 12.5% has been used for purposes of presenting the tax rate reconciliation. During 2025, the Company adopted ASU 2023-09 “Improvements to Income Tax Disclosures” on a prospective basis. The 2025 tables below are presented on a prospective basis, both in adoption of ASU 2023-09 and for the presentation of Ireland as the country of domicile beginning in 2025 for purposes of the income taxes note to the consolidated financial statements. Thus, the year ended December 31, 2025 is presented separately from its comparative periods ending December 31, 2024 and 2023, which remain presented consistently with prior reporting. 75 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The domestic and foreign components of the Company’s pre-tax income (loss) are as follows: Year Ended December 31, 2025 Pre-tax book income (loss) Domestic (Ireland) $ 410,329 Foreign 196,355 Total $ 606,684 Year Ended December 31, 2024 2023 Pre-tax book income (loss) Domestic (Cayman Islands) $ ( 259 ) $ ( 282 ) Foreign 14,428 184,299 Total $ 14,169 $ 184,017 The current and deferred components of the provision for (benefit from) income taxes are as follows: Year Ended December 31, 2025 Current: Ireland $ 13,534 Cayman Islands — Bermuda 4,800 United States: Federal 1,353 State and local 4,949 Other Non-Ireland including Pillar II Tax 7,028 Total current provision 31,664 Deferred: Ireland 34,920 Cayman Islands — Bermuda 10,643 United States: Federal 25,436 State and local 2,379 Other Non-Ireland 578 Total deferred provision (benefit) 73,956 Total $ 105,620 76 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Year Ended December 31, 2024 2023 Current: Cayman Islands $ — $ — Bermuda — — United States: Federal 847 935 State and local 1,158 1,176 Other Non-U.S. 1,604 1,715 Total current provision 3,609 3,826 Deferred: Cayman Islands — — Bermuda 2,320 ( 72,185 ) United States: Federal 6,020 3,943 State and local ( 616 ) ( 2 ) Other Non-U.S. ( 5,846 ) 4,618 Total deferred provision (benefit) 1,878 ( 63,626 ) Total $ 5,487 $ ( 59,800 ) 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 ceased in 2025. The Company recorded the impact of this enactment in their provision for the year ended December 31, 2023. The difference between the Company’s reported income tax rate and the Irish statutory rate is as follows: Year Ended December 31, 2025 Amount Percent Ireland statutory rate $ 75,836 12.50 % Foreign tax effects 24,946 4.11 % United States Statutory tax rate difference between the US and Ireland 9,092 1.50 % Nondeductible expenses 6,601 1.09 % US State and local taxes (1) 5,053 0.83 % Bermuda Statutory tax rate difference between Bermuda and Ireland 3,109 0.51 % Other foreign jurisdictions 1,091 0.18 % Ireland alternative minimum tax (2) 5,798 0.96 % Changes in valuation allowance ( 4,460 ) ( 0.74 ) % Other 3,500 0.58 % Income tax rate $ 105,620 17.41 % (1) State taxes in Arizona, California, and Florida made up the majority (greater than 50%) of the tax effect in this category. (2) Represents top-up tax in Ireland driven by Pillar Two given Ireland statutory tax rate of 12.5 %. Note: As of January 1, 2025, the Company adopted ASU 2023-09 related to income tax disclosures in connection with 2025 only (as presented above). The effective tax rate reconciliation for pre-2025 years are presented consistently with historical presentation below. 77 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The difference between the Company’s reported income tax rate and the Cayman Islands st atutory rate of 0 % is as f ollows: Year Ended December 31, 2024 2023 Income subject to tax in the United States 53.0 % 3.3 % Foreign taxes 80.1 % ( 30.9 ) % Change in valuation allowance ( 94.4 ) % ( 4.9 ) % Income tax rate 38.7 % ( 32.5 ) % For the year ended December 31, 2025, the Company paid income taxes, net of refunds, by jurisdiction as follows: Year Ended December 31, 2025 Ireland $ 1,238 US Federal 8,777 Florida (US State) 2,735 Other 2,911 Total $ 15,661 Note: The table above also is a result of the adoption of ASU 2023-09 for the year ended December 31, 2025. Historically, any cash taxes paid disclosure was disclosed in the Statement of Cash Flows. Cash paid for taxes was $ 5,655 and $ 1,393 in the years ended December 31, 2024 and 2023, respectively. Significant components of the Company’s deferred tax assets and liabilities are as follows: December 31, 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 6,985 $ 34,097 Interest expense — 2,187 Inventory 2,089 2,704 Customer relationship intangibles 25,650 28,500 Other 9,399 4,250 Total deferred tax assets 44,123 71,738 Less valuation allowance — ( 5,228 ) Net deferred tax assets 44,123 66,510 Deferred tax liabilities: Fixed assets and goodwill ( 51,480 ) ( 32,545 ) Equity method investments ( 12,223 ) ( 163 ) Other ( 1,896 ) ( 2,214 ) Total deferred tax liabilities ( 65,599 ) ( 34,922 ) Net deferred tax (liabilities) assets $ ( 21,476 ) $ 31,588 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. 78 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) For the year ended December 31, 2025, the Company evaluated its deferred tax assets and determined, based on the weight of available evidence, that it is more likely than not that such deferred tax assets will be realized. As a result, the valuation allowance was fully released as of December 31, 2025. Valuation allowances of $ 5.2 million and $ 18.6 million were recognized as of December 31, 2024 and 2023, 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, 2025 2024 2023 Valuation allowance at beginning of period $ 5,228 $ 18,599 $ 27,565 Change due to current year losses — 885 855 Change due to current year releases ( 5,228 ) ( 14,256 ) ( 9,821 ) Valuation allowance at end of period $ — $ 5,228 $ 18,599 As of December 31, 2025, the Company had net operating loss carryforwards for Irish income tax purposes of $ 51.0 million, which can be carried forward indefinitely against future business income, and $ 2.0 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. As of and for the period ended December 31, 2025, the Company had not established a liability for uncertain tax positions as no such positions existed. In general, the Company’s tax returns and the tax returns of its corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, the Company is not subject to examination by taxing authorities for tax years prior to 2021. The Company does 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. 12. 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 the SPVs of the 2025 Partnership would acquire 45 on-lease 737NG and A320ceo aircraft for an aggregate net purchase price of approximately $ 500.0 million. The SPVs have entered into agreements with third-party institutional investors for capital commitments to the SPVs. The Company also made a minority capital commitment and will make additional commitments to the 2025 Partnership in the same proportion relative to additional third-party institutional investors. In addition, any profit participation distributions generated from investments made by the 2025 Partnership will be paid to a subsidiary of the Company as the Strategic Capital Initiative’s servicer (i.e., general partner) as “profit participation.” The 2025 Partnership completed its fundraise in October 2025 with $ 2.0 billion of equity commitments. During the years ended December 31, 2025 and 2024, on behalf of the 2025 Partnership, the Company paid refundable deposits of $ 26.4 million and $ 19.3 million to unrelated, third-parties on future purchases of aircraft, respectively. As of December 31, 2025, the 2025 Partnership fully reimbursed the Company $ 45.7 million in refundable deposits. 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 sells 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. During the year ended December 31, 2025, the Company recorded $ 335.8 million of MRE Contract revenue, respectively, for the sale and purchase of such engines to and from the 2025 Partnership. The Company provides aircraft management services to the 2025 Partnership, and receives customary, market-based compensation for providing such services, which is included in Other revenue on the Company’s Consolidated Statement of Operations. 79 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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. In addition, the Former Manager was 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 Services were provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent ( 10 %). Prior to the Internalization, the Former Manager was paid annual fees in exchange for advising the Company on various aspects of its business, formulating its investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing the Company’s 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 the Company’s behalf, including the costs of legal, accounting and other administrative activities. Additionally, the Company 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. 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 the Company’s pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by the Company’s 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 the Company’s 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 the Company’s 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 the Company’s pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of the Company’s pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to Master GP. 80 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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 Management fees $ 993 $ 921 Income incentive allocation 7,456 17,116 Total $ 8,449 $ 18,037 The Company paid all of its operating expenses, except those specifically required to be borne by the Former Manager under the Management Agreement. The expenses required to be paid by the Company included, but were not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of its assets, legal and auditing fees and expenses, the compensation and expenses of its 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 its shareholders, costs incurred by the Former Manager or its affiliates for travel on the Company’s behalf, costs associated with any computer software or hardware that was used by the Company, costs to obtain liability insurance to indemnify the Company’s directors and officers and the compensation and expenses of the Company’s transfer agent. The Company 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; the Company did not reimburse the Former Manager for these expenses. The following table summarizes the Company’s reimbursements to the Former Manager: Year Ended December 31, 2025 2024 2023 Classification in the Consolidated Statements of Operations: General and administrative $ 247 $ 6,788 $ 7,137 Acquisition and transaction expenses 122 2,137 678 Total $ 369 $ 8,925 $ 7,815 Upon the successful completion of an offering of the Company’s ordinary shares or other equity securities (including securities issued as consideration in an acquisition), the Company 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 the Company’s 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 the Company’s ordinary shares). Any ultimate purchaser of ordinary shares for which such options are granted may have been an affiliate of the Former Manager. 13. SEGMENT INFORMATION The key factors used to identify the reportable segments are the organization and alignment of the Company’s internal operations and the nature of its products and services. The Company’s two reportable segments are (i) Aerospace Products and (ii) Aviation Leasing. The Aerospace Products segment, through the Company’s maintenance facilities and joint ventures, among other investments, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to lessees. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include V2500 engines within the Aerospace Products segment. 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 equipment that support offshore oil and gas activities and production. The Company previously owned two offshore vessels that were sold in the fourth quarter of 2024. 81 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations. The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”). Segment information is presented in the same manner that the 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 the CODM. The following tables set forth certain information, which include all significant expenses reviewed by the CODM, for each reportable segment: I. For the Year Ended December 31, 2025 Year Ended December 31, 2025 Aerospace Products Aviation Leasing Corporate and Other Eliminations Total Revenues Aerospace products revenue $ 1,600,456 $ — $ — $ — $ 1,600,456 MRE Contract revenue 335,788 — — — 335,788 Lease income — 235,210 — — 235,210 Maintenance revenue — 218,499 — — 218,499 Asset sales revenue — 106,945 — — 106,945 Other revenue (1) — 10,507 4 — 10,511 Total revenues 1,936,244 571,161 4 — 2,507,409 Expenses Cost of sales 1,240,368 109,351 — — 1,349,719 Operating expenses 34,514 37,307 80,720 — 152,541 General and administrative — — 9,478 — 9,478 Acquisition and transaction expenses 3,198 9,182 16,207 — 28,587 Depreciation and amortization 15,764 205,687 4,346 — 225,797 Total expenses 1,293,844 361,527 110,751 — 1,766,122 Other income (expense) Interest expense — — ( 247,751 ) — ( 247,751 ) Equity in earnings (losses) of unconsolidated entities (2) 2,896 13,115 — ( 22,829 ) ( 6,818 ) Gain on sale to the 2025 Partnership — 46,380 — — 46,380 Other income 5,441 64,455 3,690 — 73,586 Total other income (expense) 8,337 123,950 ( 244,061 ) ( 22,829 ) ( 134,603 ) Income (loss) before income taxes 650,737 333,584 ( 354,808 ) ( 22,829 ) 606,684 Provision for (benefit from) income taxes 102,391 62,232 ( 59,003 ) — 105,620 Net income (loss) 548,346 271,352 ( 295,805 ) ( 22,829 ) 501,064 Less: Dividends on preferred shares — — 17,243 — 17,243 Less: Loss on redemption of preferred shares — — 6,327 — 6,327 Net income (loss) attributable to shareholders $ 548,346 $ 271,352 $ ( 319,375 ) $ ( 22,829 ) $ 477,494 (1) Includes servicing fees of $ 10,150 for the year ended December 31, 2025 from the 2025 Partnership. (2) Includes the profit elimination of $( 22,829 ) for the year ended December 31, 2025 for sales to the 2025 Partnership within the Aerospace Products segment. 82 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to the Company’s geographic sources of revenue, based on location of customer and lessee, is as follows: Year Ended December 31, 2025 Aerospace Products Aviation Leasing Corporate and Other Total Revenues Africa $ 71,452 $ 20,717 $ — $ 92,169 Asia 274,618 160,451 4 435,073 Europe 415,145 244,307 — 659,452 North America 1,132,995 112,162 — 1,245,157 South America 42,034 33,524 — 75,558 Total revenues (1) $ 1,936,244 $ 571,161 $ 4 $ 2,507,409 (1) The United States, included in North America, and Ireland, included in Europe, represent 34 % and 11 % of total revenues, respectively, based on the location of the Company’s customers and 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, 2025: December 31, 2025 2026 $ 158,908 2027 129,187 2028 108,716 2029 77,127 2030 58,730 Thereafter 63,082 Total $ 595,750 83 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) II. For the Year Ended December 31, 2024 Year Ended December 31, 2024 Aerospace Products Aviation Leasing Corporate and Other Total Revenues Aerospace products revenue $ 1,079,821 $ — $ — $ 1,079,821 Lease income — 234,411 20,927 255,338 Maintenance revenue — 200,809 — 200,809 Asset sales revenue — 192,176 — 192,176 Other revenue — 1,041 5,716 6,757 Total revenues 1,079,821 628,437 26,643 1,734,901 Expenses Cost of sales 673,907 151,977 — 825,884 Operating expenses 23,818 35,495 56,548 115,861 General and administrative — — 14,263 14,263 Acquisition and transaction expenses 4,906 9,740 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 6,630 201,497 9,937 218,064 Asset impairment — 962 — 962 Gain on sale of assets, net — — ( 18,705 ) ( 18,705 ) Total expenses 709,261 399,671 388,142 1,497,074 Other income (expense) Equity in losses of unconsolidated entities ( 1,993 ) ( 207 ) — ( 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) ( 1,993 ) 14,462 ( 236,127 ) ( 223,658 ) Income (loss) from continuing operations before income taxes 368,567 243,228 ( 597,626 ) 14,169 (Benefit from) provision for income taxes 22,221 32,979 ( 49,713 ) 5,487 Net income (loss) from continuing operations 346,346 210,249 ( 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 $ 346,346 $ 210,249 $ ( 588,674 ) $ ( 32,079 ) 84 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to the Company’s geographic sources of revenue, based on location of customer and lessee, is as follows: Year Ended December 31, 2024 Aerospace Products Aviation Leasing Corporate and Other Total Revenues Africa $ 8,271 $ 4,643 $ — $ 12,914 Asia 178,252 135,579 26,643 340,474 Europe 364,384 324,327 — 688,711 North America 504,936 108,426 — 613,362 South America 23,978 55,462 — 79,440 Total revenues (1) $ 1,079,821 $ 628,437 $ 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 the Company’s customers and lessees. No other country represents more than 10% of total revenues. III. For the Year Ended December 31, 2023 Year Ended December 31, 2023 Aerospace Products Aviation Leasing Corporate and Other Total Revenues Aerospace products revenue $ 454,970 $ — $ — $ 454,970 Lease income — 179,704 28,232 207,936 Maintenance revenue — 191,347 — 191,347 Asset sales revenue — 303,141 — 303,141 Other revenue — 7,419 6,083 13,502 Total revenues 454,970 681,611 34,315 1,170,896 Expenses Cost of sales 280,280 221,852 — 502,132 Operating expenses 20,459 37,876 51,828 110,163 General and administrative — — 13,700 13,700 Acquisition and transaction expenses 1,722 7,150 6,322 15,194 Management fees and incentive allocation to affiliate — — 18,037 18,037 Depreciation and amortization 661 158,354 10,862 169,877 Asset impairment — 2,121 — 2,121 Total expenses 303,122 427,353 100,749 831,224 Other income (expense) Equity in earnings (losses) of unconsolidated entities ( 1,458 ) ( 148 ) — ( 1,606 ) Interest expense — — ( 161,639 ) ( 161,639 ) Other income (expense) 5,347 1,300 943 7,590 Total other income (expense) 3,889 1,152 ( 160,696 ) ( 155,655 ) Income (loss) from continuing operations before income taxes 155,737 255,410 ( 227,130 ) 184,017 Provision for (benefit from) income taxes ( 24,440 ) ( 36,193 ) 833 ( 59,800 ) Net income (loss) from continuing operations 180,177 291,603 ( 227,963 ) 243,817 Less: Dividends on preferred shares — — 31,795 31,795 Net income (loss) attributable to shareholders from continuing operations $ 180,177 $ 291,603 $ ( 259,758 ) $ 212,022 85 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) Summary information with respect to the Company’s geographic sources of revenue, based on location of customer and lessee, is as follows: Year Ended December 31, 2023 Aerospace Products Aviation Leasing Corporate and Other Total Revenues Africa $ 875 $ 822 $ — $ 1,697 Asia 18,364 101,305 34,315 153,984 Europe 120,439 244,055 — 364,494 North America 301,633 285,421 — 587,054 South America 13,659 50,008 — 63,667 Total revenues (1) $ 454,970 $ 681,611 $ 34,315 $ 1,170,896 (1) The United States, included in North America, represents 47 % of total revenues based on the location of the Company’s customers and 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, 2025 December 31, 2024 Property, plant and equipment and leasing equipment, net Africa $ 17,174 $ 37,369 Asia 323,542 596,547 Europe 587,359 1,038,176 North America 480,977 592,675 South America 256,820 216,414 Total property, plant and equipment and leasing equipment, net $ 1,665,872 $ 2,481,181 (1) The United States, included in North America, represents 22 % of property, plant and equipment and leasing equipment, net as of December 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. 86 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 14. 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) 2025 2024 2023 Net income from continuing operations $ 501,064 $ 8,682 $ 243,817 Net income 501,064 8,682 243,817 Less: Dividends on preferred shares 17,243 32,763 31,795 Less: Loss on redemption of preferred shares 6,327 7,998 — Net (loss) income attributable to shareholders $ 477,494 $ ( 32,079 ) $ 212,022 Weighted Average Ordinary Shares Outstanding - Basic 102,563,486 101,538,835 99,908,214 Weighted Average Ordinary Shares Outstanding - Diluted 103,846,914 101,538,835 100,425,777 Earnings (loss) per share: Basic $ 4.66 $ ( 0.32 ) $ 2.12 Diluted $ 4.60 $ ( 0.32 ) $ 2.11 There were no shares excluded from the calculation of Diluted EPS for the years ended December 31, 2025, 2024 and 2023, respectively, because the impact would be anti-dilutive. Ordinary shares issued to certain directors as compensation were 1,869 , 6,148 and 26,287 for the years ended December 31, 2025, 2024 and 2023, 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, the Company 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. 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. 15. 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 the Company’s offshore energy business, a lessee did not fulfill its obligation under its charter arrangement, therefore the Company is pursuing rights afforded to it under the charter and the range of potential losses against the obligation is $ 0.0 million to $ 3.3 million. The Company’s maximum exposure under other arrangements is unknown as no additional claims have been made. The Company believes 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 87 FTAI AVIATION LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in tables in thousands, unless otherwise noted) 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. 16. 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). In May 2024, in connection with the Internalization and termination of the Management Agreement, the Company issued 1,866,949 ordinary shares valued at $ 150.0 million. The remaining balance of $ 150.0 million 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 12 for additional discussion. There were no restructuring charges recorded for the years ended December 31, 2025 and 2023. 17. SUBSEQUENT EVENTS Dividends On February 24, 2026, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $ 0.40 per share for the quarter ended December 31, 2025, payable on March 23, 2026 to the holders of record on March 13, 2026. Additionally, on February 24, 2026, 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, 2025, payable on March 16, 2026 to the holders of record on March 9, 2026. 88 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.