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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________
FORM 10-Q
_______________________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            
Commission File number 001-32959
_______________________________________________________________
AIRCASTLE LIMITED
(Exact name of registrant as specified in its charter)
_______________________________________________________________
Bermuda98-0444035
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
c/o Aircastle Advisor LLC
201 Tresser Boulevard, Suite 400
Stamford
Connecticut
06901
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code:     (203) 504-1020
_______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class                             Trading Symbol Name of Each Exchange on Which Registered
Common Shares, par value $0.01 per share N/A NONE
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
The aggregate market value of the Registrant’s Common Shares based upon the closing price on the New York Stock Exchange on August 31, 2020 (the last business day of registrant’s most recently completed second fiscal quarter), beneficially owned by non-affiliates of the Registrant was $0 because the Registrant’s Common Shares were not publicly traded as of that date. For purposes of the foregoing calculation, which is required by Form 10-K, the Registrant has included in the shares owned by affiliates those shares owned by directors and executive officers and shareholders owning 10% or more of the outstanding common shares of the Registrant, and such inclusion shall not be construed as an admission that any such person is an affiliate for any purpose.
As of July 9, 2021, there were 14,048 outstanding shares of the registrant’s common shares, par value $0.01 per share.



Aircastle Limited and Subsidiaries
Form 10-Q
Table of Contents
 
  Page
No.
Item 1.
Consolidated Balance Sheets as of May 31, 2021 and February 28, 2021
Consolidated Statements of Loss and Comprehensive Loss for the three months ended May 31, 2021 and 2020
Consolidated Statements of Cash Flows for the three months ended May 31, 2021 and 2020
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2


PART I. — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
(Unaudited)
May 31,
2021
February 28,
2021
ASSETS
Cash and cash equivalents$642,910 $578,004 
Restricted cash and cash equivalents2,693 2,594 
Accounts receivable75,427 82,572 
Flight equipment held for lease, net of accumulated depreciation of $2,161,998 and $2,076,972, respectively6,392,594 6,492,471 
Net investment in leases, net of allowance for credit losses of $870 and $864, respectively191,457 195,376 
Unconsolidated equity method investments35,664 35,377 
Other assets317,665 311,944 
Total assets$7,658,410 $7,698,338 
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Borrowings from secured financings, net of debt issuance costs and discounts$742,214 $768,850 
Borrowings from unsecured financings, net of debt issuance costs and discounts4,365,260 4,366,261 
Accounts payable, accrued expenses and other liabilities171,810 174,267 
Lease rentals received in advance55,517 58,013 
Security deposits78,254 80,699 
Maintenance payments524,038 519,178 
Total liabilities5,937,093 5,967,268 
Commitments and Contingencies
SHAREHOLDERS’ EQUITY
Preference shares, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding  
Common shares, $0.01 par value, 250,000,000 shares authorized, 14,048 shares issued and outstanding at May 31, 2021 and February 28, 2021  
Additional paid-in capital1,485,777 1,485,777 
Retained earnings235,540 245,293 
Total shareholders’ equity1,721,317 1,731,070 
Total liabilities and shareholders’ equity$7,658,410 $7,698,338 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3


Aircastle Limited and Subsidiaries
Consolidated Statements of Loss and Comprehensive Loss
(Dollars in thousands)
(Unaudited)
Three Months Ended May 31,
20212020
Revenues:
Lease rental revenue$132,125 $183,178 
Direct financing and sales-type lease revenue2,877 5,317 
Amortization of lease premiums, discounts and incentives(5,325)(7,347)
Maintenance revenue 26,477 76,630 
Total lease revenue156,154 257,778 
Gain on sale of flight equipment9,021 12,078 
Other revenue635 12,670 
Total revenues165,810 282,526 
Operating expenses:
Depreciation82,391 89,212 
Interest, net58,037 58,726 
Selling, general and administrative (including non-cash share-based payment expense of $0 and $28,049 for the three months ended May 31, 2021 and 2020, respectively)15,589 47,451 
Impairment of flight equipment20,583 77,298 
Maintenance and other costs7,528 5,566 
Total operating expenses184,128 278,253 
Other income (expense):
Loss on extinguishment of debt(24)(8)
Merger expenses (32,069)
Other10 (17)
Total other expense(14)(32,094)
Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments(18,332)(27,821)
Income tax benefit(8,292)(551)
Earnings of unconsolidated equity method investments, net of tax287 731 
Net loss$(9,753)$(26,539)
Total comprehensive loss$(9,753)$(26,539)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
3


Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended May 31,
20212020
Cash flows from operating activities:
Net loss$(9,753)$(26,539)
Adjustments to reconcile net loss to net cash and restricted cash provided by operating activities:
Depreciation82,391 89,212 
Amortization of deferred financing costs4,191 3,311 
Amortization of lease premiums, discounts and incentives5,325 7,347 
Deferred income taxes1,850 5,404 
Non-cash share-based payment expense 28,049 
Collections on net investment in leases3,913 5,032 
Security deposits and maintenance payments included in earnings(13,139)(81,634)
Gain on sale of flight equipment(9,021)(12,078)
Loss on extinguishment of debt24 8 
Impairment of flight equipment20,583 77,298 
Provision for credit losses6 3,307 
Other(290)(715)
Changes in certain assets and liabilities:
Accounts receivable1,661 (46,088)
Other assets(11,651)(62,590)
Accounts payable, accrued expenses and other liabilities(3,604)(24,059)
Lease rentals received in advance(2,496)(9,740)
Net cash and restricted cash provided by (used in) operating activities69,990 (44,475)
Cash flows from investing activities:
Acquisition and improvement of flight equipment(70,834)(28,426)
Proceeds from sale of flight equipment63,420 51,881 
Aircraft purchase deposits and progress payments, net of returned deposits and aircraft sales deposits11,963 (5,198)
Other (409)
Net cash and restricted cash provided by investing activities4,549 17,848 
Cash flows from financing activities:
Repurchase of shares (25,536)
Parent contribution at Merger 25,536 
Proceeds from secured and unsecured debt financings 550,000 
Repayments of secured and unsecured debt financings(27,224)(323,910)
Debt extinguishment costs(24)(8)
Deferred financing costs(4,604) 
Security deposits and maintenance payments received22,793 15,318 
Security deposits and maintenance payments returned(475)(31,140)
Dividends paid (24,025)
Net cash and restricted cash (used in) provided by financing activities(9,534)186,235 
Net decrease in cash and restricted cash:65,005 159,608 
Cash and restricted cash at beginning of period580,598 171,437 
Cash and restricted cash at end of period$645,603 $331,045 

The accompanying notes are an integral part of these unaudited consolidated financial statements.



4


Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
(Unaudited)
Three Months Ended May 31,
20212020
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents$642,910 $325,691 
Restricted cash and cash equivalents2,693 5,354 
Unrestricted and restricted cash and cash equivalents$645,603 $331,045 
Supplemental disclosures of cash flow information:
Cash paid for interest$44,948 $74,457 
Cash paid for income taxes$891 $159 
Supplemental disclosures of non-cash investing activities:
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions$ $29,869 
Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment$12,138 $252 
Transfers from flight equipment held for lease to Net investment in leases and Other assets
$3,554 $81,600 

The accompanying notes are an integral part of these unaudited consolidated financial statements.
5


Aircastle Limited and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands, except share amounts)
(Unaudited)
Three Months Ended May 31, 2021
Additional
Paid-In
Capital
Retained
Earnings
Total
Shareholders’
Equity
 Common Shares
SharesAmount
Balance, February 28, 202114,048 $ $1,485,777 $245,293 $1,731,070 
Net loss— — — (9,753)(9,753)
Balance, May 31, 202114,048 $ $1,485,777 $235,540 $1,721,317 
Three Months Ended May 31, 2020
Additional
Paid-In
Capital
Retained
Earnings
Total
Shareholders’
Equity
Common Shares
SharesAmount
Balance, February 29, 202075,076,794 $751 $1,456,977 $578,461 $2,036,189 
Amortization of share-based payments— — 28,049 — 28,049 
Net loss— — — (26,539)(26,539)
Payment of unvested shares at Merger(101,809)(1)(25,535)— (25,536)
Parent contribution at Merger— — 25,536 — 25,536 
Share cancellation and re-issuance at Merger(74,960,937)(750)750 —  
Balance, May 31, 202014,048 $ $1,485,777 $551,922 $2,037,699 


The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021

Note 1. Summary of Significant Accounting Policies
Organization and Basis of Presentation
Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda exempted company that was incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act of 1981 of Bermuda. Aircastle’s business is acquiring, leasing, managing and selling commercial jet aircraft.
On March 27, 2020, the Company successfully completed its merger (the “Merger”) and is now controlled by affiliates of Marubeni Corporation and Mizuho Leasing Company, Limited (“Mizuho Leasing”).
Aircastle is a holding company that conducts its business through subsidiaries. Aircastle directly or indirectly owns all outstanding common shares of its subsidiaries. The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company manages, analyzes and reports on its business and results of operations based on one operating segment: leasing, financing, selling and managing commercial flight equipment. Our Chief Executive Officer is the chief operating decision maker.
The accompanying consolidated financial statements are unaudited and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting and, in our opinion, reflect all adjustments, including normal recurring items, which are necessary to present fairly the results for interim periods. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations of the SEC. However, we believe that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended February 28, 2021.
The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure subsequent to the balance sheet date of May 31, 2021, through the date on which the consolidated financial statements included in this Form 10-Q were issued.
Principles of Consolidation
The consolidated financial statements include the accounts of Aircastle and all its subsidiaries, including any Variable Interest Entity (“VIE”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.
Risk and Uncertainties
In the normal course of business, Aircastle encounters several significant types of economic risk including credit, market, aviation industry and capital market risks. Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations to Aircastle. Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings. Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of the Company’s aircraft. 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.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While Aircastle believes the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.
7

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
COVID-19 Pandemic
COVID-19 has had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic. While there have been some improvements in certain markets recently, according to IATA, as of May 31, 2021, air travel was still down to approximately 37% of normal levels and a full recovery to pre-pandemic levels is not expected for several years. Substantially all the world’s airlines have experienced financial difficulties and liquidity challenges, including many of our customers. While we believe long-term demand for air travel will return to historical trends over time, the near-term impacts of COVID-19’s economic shock are material; the extent and duration of those impacts cannot currently be determined.
As the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection. As of July 9, 2021, we have agreed to $111,720 in total deferrals of lease payments with twenty-two customers. These deferrals have been granted for an average of six to nine months of lease rentals and represent 19% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended May 31, 2021. Of the total deferrals, $89,400 is included in Accounts receivable or Other assets as of May 31, 2021, with the balance representing future lease payments. Approximately 76% of our total deferrals as of July 9, 2021, have been agreed to as part of broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions. Some have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.
If air traffic remains depressed and if our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to some of our customers or extend the period of repayment for deferrals we have already made. We may ultimately not be able to collect all the amounts we have deferred.
As of July 9, 2021, six of our customers are subject to judicial insolvency proceedings or similar protection. These customers lease 22 aircraft, which represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and 11% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended May 31, 2021. LATAM, our second largest customer, is included in this group and represents 8% of our net book value of flight equipment and 7% of our Lease rental revenue as of and for the twelve months ended May 31, 2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.
Lease Revenue Recognition
We lease flight equipment under net operating leases with lease terms typically ranging from three to seven years. We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals.
In certain instances, we may provide lease concessions to customers, generally in the form of lease rental deferrals. While these deferral arrangements affect the timing of lease rental payments, the total amount of lease rental payments required over the lease term is generally the same as that which was required under the original lease agreement. We account for the deferrals as if no modifications to the lease agreements were made and record the deferred rentals as a receivable within Other assets.
Should we determine that the collectability of rental payments is no longer probable (including any deferral thereof), we will recognize lease rental revenue using a cash basis of accounting rather than an accrual method. In the
8

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
period we conclude that collection of lease payments is no longer probable, we recognize any difference between revenue amounts recognized to date under the accrual method and payments that have been collected from the lessee, including security deposit amounts held, as a current period adjustment to lease rental revenue.
Impairment of Flight Equipment
We perform an annual recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis. A recoverability assessment is also performed whenever events or changes in circumstances, or indicators, suggest 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 change in aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued. When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2 – Fair Value Measurements.
Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors.
We continue to closely monitor the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and have and will continue to perform additional customer and aircraft specific reviews should changes in facts and circumstances arise that may impact the recoverability of our aircraft. We will focus on our customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of COVID-19 and value deterioration.
Recent Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform Topic 848 (“ASC 848”), in response to the market transition from the LIBOR and other interbank offered rates (“IBORs”) to alternative reference rates. U.S. GAAP requires entities to evaluate whether a contract modification, such as the replacement or change of a reference rate, results in the establishment of a new contract or continuation of an existing contract. ASC 848 allows an entity to elect not to apply certain modification accounting requirements to contracts affected by reference rate reform. The standard provides this temporary election through December 31, 2022, and cannot be applied to contract modifications that occur after December 31, 2022. Reference rate reform will primarily impact our lease and debt arrangements for which floating-rate lease rentals and interest expense are based on LIBOR. As of May 31, 2021, less than 1% of our fleet have floating-rate lease rentals and, for the three months ended May 31, 2021, 5% of our interest expense was derived from floating-rate debt which is referenced to LIBOR. We have not adopted ASC 848 and are currently evaluating the election available to us under the standard.
Effective, March 1, 2021, the Company adopted FASB ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes. The guidance aims to simplify the accounting for income taxes by removing certain exceptions to the general principles within the current guidance and by clarifying and amending the current guidance. The guidance is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2020. This adoption did not have a material impact on our consolidated financial statements.

9

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Note 2. 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.
The following tables set forth our financial assets as of May 31, 2021 and February 28, 2021 that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
  Fair Value Measurements at May 31, 2021
Using Fair Value Hierarchy
 Fair Value as of May 31, 2021Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Valuation
Technique
Assets:
Cash and cash equivalents$642,910 $642,910 $ $ Market
Restricted cash and cash equivalents2,693 2,693   Market
Total$645,603 $645,603 $ $ 
  Fair Value Measurements at February 28, 2021
Using Fair Value Hierarchy
 Fair Value as of February 28, 2021Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Valuation
Technique
Assets:
Cash and cash equivalents$578,004 $578,004 $ $ Market
Restricted cash and cash equivalents2,594 2,594   Market
Total$580,598 $580,598 $ $ 
Our cash and cash equivalents, and restricted cash and cash equivalents balances, consist largely of money market securities that are highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within the fair value hierarchy.
For the three months ended May 31, 2021, we had no transfers into or out of Level 3.
We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on the average of the market approach that uses Level 2 inputs, which include third party appraisal data and an income approach that uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital.
We account for our investment in unconsolidated joint ventures under the equity method of accounting. Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital. These investments are also reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.
10

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Aircraft Valuation
Impairment of Flight Equipment
During the three months ended May 31, 2021, the Company recorded transactional impairment charges totaling $20,583 which related to two narrow-body aircraft and were the result of an early lease termination and a scheduled lease expiration. The Company recognized $21,061 of maintenance revenue for these two aircraft.
During the three months ended May 31, 2020, the Company recorded transactional impairment charges totaling $77,298, which related to ten narrow-body and one wide-body aircraft. The Company recognized $83,342 of maintenance and security deposits into revenue for these eleven aircraft. The impairment charges and revenue were recognized as a result of the early lease terminations of nine aircraft and scheduled lease expirations of two aircraft.
We plan to perform our annual recoverability assessment of all our aircraft during the fiscal third quarter for the nine months ended November 30, 2021. We continue to closely monitor the impact of COVID-19 on our customers, air traffic, lease rental rates, and aircraft valuations, and have and will continue to perform additional customer and aircraft specific reviews should changes in facts and circumstances arise that may impact the recoverability of our aircraft. We have and will focus on our customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, aircraft with near-term lease expirations, and certain aircraft variants that are more susceptible to the impact of the COVID-19 pandemic and value deterioration.
The recoverability assessment is a comparison of the carrying value of each aircraft to its undiscounted expected future cash flows. We develop the assumptions used in the recoverability assessment, including those relating to current and future demand for each aircraft type, based on management’s experience in the aircraft leasing industry, as well as information received from third-party sources. Estimates of the undiscounted cash flows for each aircraft type are impacted by changes in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors.
If our estimates or assumptions change, including those related to our customers that have entered judicial insolvency proceedings, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in our recoverability assessments are appropriate, actual results could differ from those estimates.
Financial Instruments
Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and amounts borrowed under financings. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.
The fair value of our senior notes is estimated using quoted market prices. The fair values of all our other financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements.
The carrying amounts and fair values of our financial instruments at May 31, 2021 and February 28, 2021 were as follows:
 May 31, 2021February 28, 2021
 Carrying  Amount
of Liability
Fair Value
of Liability
Carrying
Amount
of Liability
Fair Value
of Liability
Credit Facilities$ $ $ $ 
Unsecured Term Loan215,000 210,767 215,000 210,290 
Export Credit Agency (“ECA”) Financings27,163 28,422 36,423 37,942 
Bank Financings720,389 721,859 738,353 740,086 
Senior Notes4,200,000 4,448,863 4,200,000 4,402,722 
All our financial instruments are classified as Level 2 except for our Senior Notes, which are classified as Level 1.
11

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Note 3. Lease Rental Revenues and Flight Equipment Held for Lease
Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at May 31, 2021 were as follows:
Year Ending February 28/29,
Amount(1)
Remainder of 2021$445,308 
2022566,477 
2023506,285 
2024377,617 
2025233,328 
Thereafter523,563 
Total$2,652,578 
_______________
(1)Reflects impact of lessee lease rental deferrals.
Geographic concentration of lease rental revenue earned from flight equipment held for lease was as follows:
 Three Months Ended May 31,
Region20212020
Asia and Pacific34 %45 %
Europe34 %27 %
Middle East and Africa6 %8 %
North America14 %10 %
South America12 %10 %
Total100 %100 %
The classification of regions in the table above and in the tables and discussion below is determined based on the principal location of the lessee of each aircraft.
The following table shows the number of lessees with lease rental revenue of at least 5% of total lease rental revenue and their combined total percentage of lease rental revenue for the periods indicated:
Three Months Ended May 31,
20212020
Number of LesseesCombined % of Lease
Rental Revenue
Number of LesseesCombined % of Lease
Rental Revenue
Largest lessees by lease rental revenue534%320%

12

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
The following table sets forth revenue attributable to individual countries representing at least 10% of Total revenue (including maintenance and other revenue) based on each lessee’s principal place of business for the periods indicated:
Three Months Ended May 31,
20212020
CountryRevenue% of Total RevenueRevenue% of Total Revenue
India(1)
$20,202 12 %$  %
Mexico(2)
  %69,508 25 %
South Korea(3)
21,043 13 %  %
_______________
(1)For the three months ended May 31, 2021, total revenue attributable to India included maintenance revenue totaling $654. Total revenue attributable to India was less than 10% for the three months ended May 31, 2020.
(2)For the three months ended May 31, 2020, total revenue attributable to Mexico included maintenance and other revenue, including early lease termination fees and security deposits recognized into revenue, totaling $67,265. Total revenue attributable to Mexico was less than 10% for the three months ended May 31, 2021.
(3)For the three months ended May 31, 2021, total revenue attributable to South Korea included maintenance revenue totaling $13,253. Total revenue attributable to South Korea was less than 10% for the three months ended May 31, 2020.
Geographic concentration of net book value of flight equipment (including flight equipment held for lease and net investment in leases, or “net book value”) was as follows:
 May 31, 2021February 28, 2021
RegionNumber
of
Aircraft
Net Book
Value %
Number
of
Aircraft
Net Book
Value %
Asia and Pacific77 36 %79 37 %
Europe92 28 %92 27 %
Middle East and Africa10 4 %11 4 %
North America28 12 %28 12 %
South America26 13 %26 13 %
Off-lease17 
(1)
7 %16 
(2)
7 %
Total250 100 %252 100 %
_______________
(1)Consisted of one Airbus A320-200 aircraft, one Airbus A330-200 aircraft, and one Boeing 737-800 aircraft, all of which were delivered to lessees in Europe during the second quarter of 2021, one Airbus A321-200 aircraft which was delivered to a lessee in North America during the second quarter of 2021, four Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, one Boeing 737-800 aircraft which is subject to an executed lease with a lessee in Europe, and one Airbus A320-200 aircraft, three Airbus A330-200 aircraft, and four Boeing 737-800 aircraft, which we are marketing for lease or sale.
(2)Consisted of one Airbus A320-200 aircraft, one Airbus A330-200 aircraft and one Boeing 737-800 aircraft, each of which was delivered to a lessee in Europe during the first half of 2021, three Airbus A320-200 aircraft which are subject to confirmed letters of intent with customers in Europe or South America, and one Boeing 737-800 aircraft which is subject to a lease commitment with a customer in Europe, and one Airbus A320-200 aircraft, three Airbus A330-200 aircraft, and five Boeing 737-800 aircraft, which we are marketing for lease or sale.
The following table sets forth the net book value of flight equipment (includes net book value of flight equipment held for lease and net investment in leases) attributable to individual countries representing at least 10% of net book value of flight equipment based on each lessee’s principal place of business as of:
 May 31, 2021February 28, 2021
CountryNet Book
Value
Net Book
Value %
Number
of
Lessees
Net Book
Value
Net Book
Value %
Number
of
Lessees
India$730,449 11%3$756,514 11%3
13

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
At May 31, 2021 and February 28, 2021, the amounts of lease incentive liabilities recorded in maintenance payments on our Consolidated Balance Sheets were $16,097 and $14,673, respectively.
Note 4. Net Investment in Leases
At May 31, 2021 and February 28, 2021, our net investment in leases consisted of 15 and 15 aircraft, respectively. The components of our net investment in leases at May 31, 2021 and February 28, 2021, were as follows:
May 31, 2021February 28, 2021
Lease receivable$61,321 $67,075 
Unguaranteed residual value of flight equipment131,006 129,165 
Net investment leases192,327 196,240 
Allowance for credit losses(870)(864)
Net investment in leases, net of allowance$191,457 $195,376 
The activity in the allowance for credit losses related to our net investment in leases for the three months ended May 31, 2021 is as follows:
Amount
Balance at February 28, 2021$864 
Provision for credit losses6 
Balance at May 31, 2021$870 
At May 31, 2021, future lease payments on net investment in leases are as follows:
Year Ending February 28/29,Amount
Remainder of 2021$17,073 
202213,470 
202312,568 
20246,989 
20256,060 
Thereafter15,414 
Total lease payments to be received71,574 
Present value of lease payments - lease receivable(61,321)
Difference between undiscounted lease payments and lease receivable$10,253 
Note 5. Unconsolidated Equity Method Investments
We have a joint venture with Mizuho Leasing which has nine aircraft with a net book value of $308,640 at May 31, 2021.
Amount
Investment in joint ventures at February 28, 2021$35,377 
Earnings from joint venture, net of tax287 
Investment in joint ventures at May 31, 2021$35,664 


14

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Note 6. Secured and Unsecured Debt Financings
The outstanding amounts of our secured and unsecured debt financings are as follows:
 At May 31, 2021At
February 28,
2021
Debt ObligationOutstanding
Borrowings
Number of AircraftInterest RateFinal Stated
Maturity
Outstanding
Borrowings
Secured Debt Financings:
ECA Financings$27,163 1 3.49%11/30/24$36,423 
Bank Financings(1)
720,389 31 2.25% to 4.55%06/17/23 to 03/06/25738,353 
Less: Debt issuance costs and discounts(5,338)— (5,926)
Total secured debt financings, net of debt issuance costs and discounts742,214 32 768,850 
Unsecured Debt Financings:
Senior Notes due 2022500,000 5.50%02/15/22500,000 
Senior 5.00% Notes due 2023500,000 5.00%04/01/23500,000 
Senior 4.40% Notes due 2023650,000 4.40%09/25/23650,000 
Senior Notes due 2024500,000 4.125%05/01/24500,000 
Senior Notes due 2025650,000 5.25%08/11/25650,000 
Senior Notes due 2026650,000 4.25%06/15/26650,000 
Senior Notes due 2028750,000 2.85%01/26/28750,000 
Unsecured Term Loans215,000 1.65%02/27/22 to 02/27/24215,000 
Revolving Credit Facilities 1.575% to 2.00%12/27/21 to 04/26/25 
   Less: Debt issuance costs and discounts(49,740)(48,739)
Total unsecured debt financings, net of debt issuance costs and discounts4,365,260 4,366,261 
Total secured and unsecured debt financings, net of debt issuance costs and discounts$5,107,474 $5,135,111 
        
(1)The borrowings under these financings at May 31, 2021 have a weighted-average fixed rate of interest of 3.22%.
Unsecured Debt Financings:
Revolving Credit Facilities
On April 1, 2021, we entered into an amendment that split the $300,000 commitment of one of our unsecured revolving credit facilities into two tranches: $160,000 was allocated to Tranche A, which will mature on the facility’s previously stated maturity date of December 27, 2021, and $140,000 was allocated to Tranche B, which will mature on February 28, 2023. On May 24, 2021, the revolving credit facility was expanded to $330,000, with $155,000 and $175,000 of the commitment allocated to Tranche A and Tranche B, respectively.
On April 26, 2021, we entered into an amendment that increased the size of one of our revolving credit facilities from $800,000 to $1,000,000. The stated maturity date for $900,000 of the total commitment was extended to April 26, 2025, and the remaining $100,000 commitment will mature on the facility’s previously stated maturity date of June 27, 2022.
On April 26, 2021, we entered into an amendment that reduced the size of our revolving credit facility with Mizuho Bank Ltd., a related party, from $150,000 to $50,000 and extended its maturity date to July 30, 2022. Mizuho Bank, Ltd. is now a lender for our $1,000,000 revolving credit facility with a commitment in the amount of $100,000.
15

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
On June 29, 2021, we elected to redeem the outstanding balance of our 5.5% Senior Notes due 2022, including accrued interest and a call premium on July 30, 2021.
As of May 31, 2021, we had no borrowings outstanding under our revolving credit facilities and had $1,380,000 available for borrowing.
As of May 31, 2021, we were in compliance with all applicable covenants in our financings.
Note 7. Shareholders' Equity
On June 8, 2021, the Company issued 400,000 depositary shares (the “Depositary Shares”), each representing a 0.001 interest in a share of 5.250% Series A Cumulative Redeemable Perpetual Preference Shares par value $0.01 per share with a $1,000 liquidation preference per share (equivalent to $1,000 per Depositary Share) (the “Preference Shares”). The Preference Shares are perpetual and have no maturity date.
Dividends on the Preference Shares, when, as and if declared by the Company’s board of directors or any duly authorized committee thereof, will be payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021. Dividends will be payable: (i) from the date of original issue to, but excluding September 15, 2026 (the “original reset date”) at a fixed rate per annum of 5.250%; (ii) from, and including, the original reset date to, but excluding, September 15, 2031 (the “2031 reset date”), at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.410%; (iii) from, and including, the 2031 reset date to, but excluding, September 15, 2046 (the “2046 reset date”), during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 4.660%; and (iv) from, and including, the 2046 reset date, during each reset period at a rate per annum equal to the five-year treasury rate as of the most recent reset dividend determination date plus 5.410%. Dividends on the Preference Shares will accumulate daily and be cumulative from, and including, the date of original issuance of the Preference Shares.
The Company may not redeem the Preference Shares before the date that is 90-days prior to the original reset date. The Company may, at its option, redeem the Preference Shares, in whole or in part, from time to time during the period beginning 90-days prior to each reset date and ending on such reset date at a redemption price in cash equal to $1,000,000 per Preference Share (equivalent to $1,000 per Depositary Share), plus all accumulated and unpaid dividends (whether or not declared) to, but excluding, such redemption date. In addition, the Company may redeem the Preference Shares, in whole but not in part, at the Company’s option under certain other limited conditions.
Except with respect to certain amendments to the terms of the Preference Shares, in the case of certain dividend non-payments and as otherwise required by applicable law, the Preference Shares will not have voting rights.
The Company intends to use the net proceeds from the Offering for general corporate purposes, which may include the repayment, refinancing or redemption of its existing indebtedness.

Note 8. Related Party Transactions
On April 26, 2021, the Company entered into an amendment that reduced the size and extended the term of our unsecured revolving credit facility with Mizuho Bank Ltd., a related party – see Note 6 for additional information.
During the three months ended May 31, 2021, the Company incurred $980 in fees to Marubeni as part of its intra-company service agreement, whereby Marubeni provides company-sponsored benefits, management services, strategy consultancy, and general administrative support to the Company.


16

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021

Note 9. Income Taxes
Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.
The sources of loss from continuing operations before income taxes and earnings of our unconsolidated equity method investments for the three months ended May 31, 2021 and 2020 were as follows:
 Three Months Ended May 31,
 20212020
U.S. operations$3,711 $4,046 
Non-U.S. operations(22,043)(31,867)
Loss from continuing operations before income taxes and earnings of unconsolidated equity method investments$(18,332)$(27,821)
Our aircraft-owning subsidiaries generally earn income from sources outside the U.S. and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland, Mauritius and the U.S. are subject to tax in those respective jurisdictions.
We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.
The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was signed into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to net operating loss carrybacks, alternative minimum tax credit refunds, modification to the net interest expense deduction limitation and technical correction to the tax depreciation methods for qualified improvement property. The CARES Act did not materially impact the Company’s effective tax rate for the three months ended May 31, 2021.
The Company’s effective tax rates (“ETRs”) for the three months ended May 31, 2021 and 2020 were 45.2%, and 2.0%, respectively. The movement in the ETR is primarily caused by changes in the mix of the Company’s pre-tax earnings/(losses) in its taxable and non-tax jurisdictions. Further, the three-month period ended May 31, 2020 included discrete items related to stock compensation and the impact of the CARES act.
Note 10. Interest, Net
The following table shows the components of interest, net:
 Three Months Ended May 31,
 20212020
Interest on borrowings and other liabilities$54,033 $55,739 
Amortization of deferred financing fees and debt discount4,191 3,311 
Interest expense58,224 59,050 
Less: Interest income(35)(324)
Less: Capitalized interest(152) 
Interest, net$58,037 $58,726 
17

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Note 11. Commitments and Contingencies
Rent expense, primarily for the corporate offices and sales and marketing offices, was $413 and $411 for the three months ended May 31, 2021 and 2020, respectively.
As of May 31, 2021, Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut; Dublin, Ireland; and Singapore for future minimum lease payments as follows:
Year Ending February 28/29,Amount
Remainder of 2021$1,446 
20221,789 
20231,721 
20241,752 
20251,783 
Thereafter4,387 
Total$12,878 
At May 31, 2021, we had commitments to acquire 23 aircraft for $779,372.
Commitments, including $101,933 of remaining progress payments, contractual price escalations and other adjustments for these aircraft, at May 31, 2021, net of amounts already paid, are as follows:
Year Ending February 28/29,Amount
Remainder of 2021$134,520 
2022360,828 
2023132,699 
202439,404 
2025111,921 
Thereafter 
Total$779,372 

Note 12. Other Assets
The following table describes the principal components of other assets on our Consolidated Balance Sheets as of:
May 31,
2021
February 28,
2021
Deferred income tax asset$602 $637 
Lease incentives and lease premiums, net of amortization of $79,265 and $75,126, respectively67,471 75,169 
Flight equipment held for sale53,618 53,289 
Aircraft purchase deposits and Embraer E-2 progress payments41,279 52,092 
Right-of-use asset(1)
7,769 8,056 
Deferred rent receivable75,287 69,103 
Other assets71,639 53,598 
Total other assets$317,665 $311,944 
______________
(1)Net of lease incentives and tenant allowances.

18

Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2021
Note 13. Accounts Payable, Accrued Expenses and Other Liabilities
The following table describes the principal components of accounts payable, accrued expenses and other liabilities recorded on our Consolidated Balance Sheets as of:
May 31,
2021
February 28,
2021
Accounts payable, accrued expenses and other liabilities$30,186 $43,088 
Deferred income tax liability76,939 75,124 
Accrued interest payable52,904 43,676 
Lease liability10,636 11,003 
Lease discounts, net of amortization of $45,118 and $44,887, respectively1,145 1,376 
Total accounts payable, accrued expenses and other liabilities$171,810 $174,267 
Note 14. Subsequent Event
During the fiscal second quarter of 2021, the Company entered into claims sale and purchase agreements with a third party for the sale of certain unsecured claims filed by various Aircastle entities against LATAM Airlines Group S.A. and certain of its subsidiaries in the Chapter 11 case captioned LATAM Airlines Group S.A., et al., Case No. 20-11254 (JLG) (Jointly Administered) (the “Bankruptcy Case”). Proceeds from the sales of these claims were received during the fiscal second quarter of 2021. The allowed amount of our unsecured claims has been approved by the Bankruptcy Court so that such claims are now approved claims in the Bankruptcy Case subject to customary conditions.

19


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this report. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those described under “Risk Factors” and included in our Annual Report on Form 10-K for the year ended February 28, 2021. Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, and, unless otherwise indicated, the other financial information contained in this report has also been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all references to “dollars” and “$” in this report are to, and all monetary amounts in this report are presented in, U.S. dollars.
All statements included or incorporated by reference in this Quarterly Report on Form 10-Q (this “report”), other than characterizations of historical fact, are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, but are not necessarily limited to, statements relating to our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA and Adjusted EBITDA and the global aviation industry and aircraft leasing sector. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “may,” “will,” “would,” “could,” “should,” “seeks,” “estimates” and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on our historical performance and that of our subsidiaries and on our current plans, estimates and expectations and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any such forward-looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this report. These risks or uncertainties include, but are not limited to, those described from time to time in Aircastle’s filings with the Securities and Exchange Commission (the “SEC”) and previously disclosed under “Risk Factors” in Part I - Item 1A of Aircastle’s Annual Report on Form 10-K fir the year ended February 28, 2021. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. Aircastle expressly disclaims any obligation to revise or update publicly any forward-looking statement to reflect future events or circumstances.
WEBSITE AND ACCESS TO THE COMPANY’S REPORTS
Statements and information concerning our status as a Passive Foreign Investment Company (“PFIC”) for U.S. taxpayers are available free of charge through our website at www.aircastle.com under “Investors — Tax Information (PFIC).”
The information on the Company’s Internet website is not part of, nor incorporated by reference, into this report, or any other report we file with, or furnish to, the SEC.
20



OVERVIEW
Aircastle acquires, leases, and sells commercial jet aircraft to airlines throughout the world. As of May 31, 2021, we owned and managed on behalf of our joint ventures 259 aircraft leased to 77 lessees located in 43 countries. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are generally subject to net leases whereby the lessee is responsible for maintaining the aircraft and paying operational, maintenance and insurance costs. However, in many cases we are obligated to pay a specified portion of maintenance or modification costs. As of May 31, 2021, the net book value of our flight equipment (including flight equipment held for lease and net investment in leases, or “net book value”) was $6.58 billion compared to $6.69 billion at February 28, 2021. Our total revenues, net loss and Adjusted EBITDA were $165.8 million, $9.8 million and $148.3 million for the three months ended May 31, 2021, and $282.5 million, $26.5 million and $268.2 million for the three months ended May 31, 2020, respectively.
Historically, growth in commercial air traffic has been correlated with world economic activity. Prior to the COVID-19 pandemic, commercial air traffic growth expanded at a rate 1.3 to 2 times that of global GDP growth. This expansion of air travel has driven the growth in the world aircraft fleet; and there are approximately 24,000 commercial mainline passenger and freighter aircraft in the world fleet today. Aircraft leasing companies own approximately 52% of the world’s commercial jet aircraft. Under normal circumstances, we would expect the global fleet to continue expanding at a two to four percent average annual rate.
COVID-19 has had an unprecedented negative impact on the aviation sector, resulting in a dramatic slowdown in air traffic. While there have been some improvements in certain markets recently, according to IATA, as of May 31, 2021, air travel was still down to approximately 37% of normal levels and a full recovery to pre-pandemic levels is not expected for several years. Substantially all the world’s airlines have experienced financial difficulties and liquidity challenges, including many of our customers. While we believe long-term demand for air travel will return to historical trends over time, the near-term impacts of COVID-19’s economic shock are material; the extent and duration of those impacts cannot currently be determined.
As the airline industry begins to recover, airlines continue to seek support from their respective governments, raise debt and equity, delay or cancel new aircraft orders, furlough employees, request concessions from lessors, and in certain cases, seek judicial protection. As of July 9, 2021, we have agreed to $111.7 million in total deferrals of lease payments with 22 customers. These deferrals have been granted for an average of six to nine months of lease rentals and represent 19% of Lease rental and Direct financing and sales-type lease revenues for the twelve months ended May 31, 2021. Of the total deferrals, $89.4 million is included in Accounts receivable or Other assets as of May 31, 2021, with the balance representing future lease payments. Approximately 76% of our total deferrals as of July 9, 2021, have been agreed to as part of broader lease restructurings. These generally include term extensions, better security packages, or other valuable consideration in exchange for near-term economic concessions. Some have repayment terms that extend beyond twelve months and in a limited number of situations, we have agreed to broader lease restructurings that do not include the full repayment of all of lease payments.
If air traffic remains depressed and if our customers are unable to obtain sufficient funds from private, governmental or other sources, we may need to grant additional deferrals to some of our customers or extend the period of repayment for deferrals we have already made. We may ultimately not be able to collect all the amounts we have deferred.
As of July 9, 2021, six of our customers are subject to judicial insolvency proceedings or similar protection. These customers lease 22 aircraft, which represent 13% of our net book value of flight equipment (including Flight equipment held for lease and Net investment in leases, or “net book value”) and 11% of our Lease rental and direct financing and sales-type lease revenue as of and for the twelve months ended May 31, 2021. LATAM, our second largest customer, is included in this group and represents 8% of our net book value of flight equipment and 7% of our Lease rental revenue as of and for the twelve months ended May 31, 2021. We are actively engaged in these judicial proceedings to protect our economic interests. However, the outcome of these proceedings is uncertain and could result in these customers negotiating reductions in aircraft lease rentals, rejecting their leases or taking other actions that could adversely impact us or the value of our aircraft. Based on historic experience, the judicial process can take up to twelve to eighteen months to be resolved. As a result of these proceedings, the recognition of lease rental revenue for certain customers may be done
21


on a cash basis of accounting rather than the accrual method depending on the customers’ lease security arrangements.
We believe that our long-standing business strategy of maintaining conservative leverage, limiting long-term financial commitments and focusing our portfolio on more liquid narrow-body aircraft will enable us to manage through the COVID-19 crisis. Our portfolio of primarily mid-life, narrow-body aircraft should remain attractive relative to new technology aircraft due to their lower capital costs in an environment of tight airline margins and low fuel prices.
In addition, we believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of July 1, 2021, total liquidity of $2.88 billion includes $1.38 billion of undrawn credit facilities, $1.02 billion of unrestricted cash, $103 million of contracted asset sales and $375 million of projected operating cash flows through June 30, 2022. As of May 31, 2021, we have commitments to acquire 23 aircraft for $779.4 million between 2021-2025.
We also believe our platform and personnel position us to effectively manage through the COVID-19 crisis and will enable us to take advantage of new investment opportunities when they arise. Our Company employs a team of experienced senior professionals with extensive industry and financial experience. Our leadership team members have an average of more than twenty years of relevant industry experience, including managing through prior downturns in the aviation industry, like the 2008 global financial crisis and the September 11, 2001 terror attacks.
Fiscal Year 2021 Lease Expirations and Lease Placements
At May 31, 2021, the Company had seventeen off-lease aircraft and 22 aircraft with scheduled lease expirations in fiscal 2021. As of July 9, 2021, of these 39 aircraft, we have eighteen aircraft, which account for 7% of our net book value at May 31, 2021, still to be placed or sold.
Fiscal Years 2022-2025 Lease Expirations and Lease Placements
Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the fiscal years 2022-2025, representing the percentage of our net book value of flight equipment (including flight equipment held for lease and net investment in leases) at May 31, 2021, specified below:
2022: 19 aircraft, representing 6%;
2023: 45 aircraft, representing 13%;
2024: 53 aircraft, representing 21%; and
2025: 38 aircraft, representing 17%.
22


Acquisitions and Sales
During the three months ended May 31, 2021, we acquired two aircraft for $63.9 million. As of July 9, 2021, we acquired one additional aircraft. At May 31, 2021, we had commitments to acquire 23 aircraft for $779.4 million. Of this amount, approximately $134.5 million represents commitments for the remainder of fiscal year 2021.
During the three months ended May 31, 2021, we sold three aircraft and other flight equipment for net proceeds of $63.4 million, and recognized net gains on sales of $9.0 million. As of July 9, 2021, we have sold one additional aircraft.

The following table sets forth certain information with respect to the aircraft owned by us as of May 31, 2021:
AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)
Owned Aircraft
As of
May 31, 
2021(1)
As of
May 31, 
2020(1)
Net Book Value of Flight Equipment$6,584 $7,421 
Net Book Value of Unencumbered Flight Equipment$5,400 $5,679 
Number of Aircraft250 274 
Number of Unencumbered Aircraft218 234 
Number of Lessees76 81 
Number of Countries42 45 
Weighted Average Age (years)(2)
10.8 10.2 
Weighted Average Remaining Lease Term (years)(2)
4.5 4.4 
Weighted Average Fleet Utilization during the three months ended May 31, 2021 and 2020(3)
93.1 %96.7 %
Portfolio Yield for the three months ended May 31, 2021 and 2020(4)
8.4 %10.3 %
Managed Aircraft on behalf of Joint Venture
Net Book Value of Flight Equipment$309 $322 
Number of Aircraft
        
(1)Calculated using net book value at period end.
(2)Weighted by net book value.
(3)Aircraft on-lease days as a percent of total days in period weighted by net book value. The decrease from our historical utilization rate for the three months ended May 31, 2021 and 2020, was primarily due to off-lease aircraft as a result of early lease terminations and scheduled lease expirations.
(4)Lease rental revenue, interest income and cash collections on our net investment in leases for the period as a percent of the average net book value for the period; quarterly information is annualized. The calculation of portfolio yield includes our net investment in leases in the average net book value, and the interest income and cash collections from our net investment in lease rentals.



23


PORTFOLIO DIVERSIFICATION
 
 Owned Aircraft as of
May 31, 2021
Owned Aircraft as of
May 31, 2020
 Number of
Aircraft
% of Net
Book Value(1)
Number of
Aircraft
% of Net
Book Value
(1)
Aircraft Type
Passenger:
Narrow-body224 78