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, 2022
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
_______________________________________________________________
(Exact name of registrant as specified in its charter)
_______________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||||
| (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 | ||||||||||||
| N/A | ||||||||||||||
| N/A | ||||||||||||||
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 filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☑ | Smaller 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, 2021 (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 8, 2022, 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 Financial Statements | |||||||
| Consolidated Balance Sheets as of May 31, 2022 and February 28, 2022 | ||||||||
| Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) for the three months ended May 31, 2022 and 2021 | ||||||||
| Consolidated Statements of Cash Flows for the three months ended May 31, 2022 and 2021 | ||||||||
| 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. CONSOLIDATED FINANCIAL STATEMENTS
Aircastle Limited and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
| May 31, 2022 | February 28, 2022 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents | |||||||||||
| Accounts receivable | |||||||||||
| Flight equipment held for lease, net | |||||||||||
| Net investment in leases, net | |||||||||||
| Unconsolidated equity method investments | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| LIABILITIES | |||||||||||
| Borrowings from secured financings, net | $ | $ | |||||||||
| Borrowings from unsecured financings, net | |||||||||||
| Accounts payable, accrued expenses and other liabilities | |||||||||||
| Lease rentals received in advance | |||||||||||
| Security deposits | |||||||||||
| Maintenance payments | |||||||||||
| Total liabilities | |||||||||||
| Commitments and Contingencies | |||||||||||
| SHAREHOLDERS’ EQUITY | |||||||||||
Preference shares, $ | |||||||||||
Common shares, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total shareholders’ equity | |||||||||||
| Total liabilities and shareholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Aircastle Limited and Subsidiaries
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollars in thousands)
(Unaudited)
| Three Months Ended May 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Revenues: | |||||||||||
| Lease rental revenue | $ | $ | |||||||||
| Direct financing and sales-type lease revenue | |||||||||||
| Amortization of lease premiums, discounts and incentives | ( | ( | |||||||||
| Maintenance revenue | |||||||||||
| Total lease revenue | |||||||||||
| Gain on sale of flight equipment | |||||||||||
| Other revenue | |||||||||||
| Total revenues | |||||||||||
| Operating expenses: | |||||||||||
| Depreciation | |||||||||||
| Interest, net | |||||||||||
| Selling, general and administrative | |||||||||||
| Provision for credit losses | |||||||||||
| Impairment of flight equipment | |||||||||||
| Maintenance and other costs | |||||||||||
| Total operating expenses | |||||||||||
| Other income (expense): | |||||||||||
| Loss on extinguishment of debt | ( | ( | |||||||||
| Other | |||||||||||
| Total other income (expense) | ( | ( | |||||||||
| Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments | ( | ||||||||||
| Income tax provision (benefit) | ( | ||||||||||
| Earnings of unconsolidated equity method investments, net of tax | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Net income (loss) available to common shareholders | $ | $ | ( | ||||||||
| Total comprehensive income (loss) available to common shareholders | $ | $ | ( | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
| Three Months Ended May 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash and restricted cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of deferred financing costs | |||||||||||
| Amortization of lease premiums, discounts and incentives | |||||||||||
| Deferred income taxes | |||||||||||
| Collections on net investment in leases | |||||||||||
| Security deposits and maintenance payments included in earnings | ( | ||||||||||
| Gain on sale of flight equipment | ( | ( | |||||||||
| Loss on extinguishment of debt | |||||||||||
| Impairment of flight equipment | |||||||||||
| Provision for credit losses | |||||||||||
| Other | ( | ( | |||||||||
| Changes in certain assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable, accrued expenses and other liabilities | ( | ( | |||||||||
| Lease rentals received in advance | ( | ||||||||||
| Net cash and restricted cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition and improvement of flight equipment | ( | ( | |||||||||
| Proceeds from sale of flight equipment | |||||||||||
| Aircraft purchase deposits and progress payments, net of deposits returned and aircraft sales deposits | ( | ||||||||||
| Net cash and restricted cash (used in) provided by investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Repayments of secured and unsecured debt financings | ( | ( | |||||||||
| Debt extinguishment costs | ( | ( | |||||||||
| Deferred financing costs | ( | ( | |||||||||
| Security deposits and maintenance payments received | |||||||||||
| Security deposits and maintenance payments returned | ( | ( | |||||||||
| Dividends paid | ( | ||||||||||
| Net cash and restricted cash used in financing activities | ( | ( | |||||||||
| Net increase in cash and restricted cash: | |||||||||||
| Cash and restricted cash at beginning of period | |||||||||||
| Cash and restricted cash at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
Aircastle Limited and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
(Unaudited)
| Three Months Ended May 31, | |||||||||||
| 2022 | 2021 | ||||||||||
| Reconciliation to Consolidated Balance Sheets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents | |||||||||||
| Unrestricted and restricted cash and cash equivalents | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | $ | |||||||||
| Cash (received) paid for income taxes | $ | ( | $ | ||||||||
| Supplemental disclosures of non-cash investing activities: | |||||||||||
| Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets assumed in asset acquisitions | $ | $ | |||||||||
| Advance lease rentals, security deposits, maintenance payments, other liabilities and other assets settled in sale of flight equipment | $ | $ | |||||||||
Transfers from flight equipment held for lease to Net investment in leases and Other assets | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
Aircastle Limited and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands, except share amounts)
(Unaudited)
| Common Shares | Preference Shares | Additional Paid-In Capital | Accumulated Deficit | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
Balance, February 28, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Balance, May 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
| Common Shares | Preference Shares | Additional Paid-In Capital | Retained Earnings | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||
| Balance, February 28, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
Balance, May 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 1. Summary of Significant Accounting Policies
Organization
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 consists of acquiring, leasing, managing and selling commercial jet aircraft.
The Company is controlled by affiliates of Marubeni Corporation (“Marubeni”) and Mizuho Leasing Company, Limited (“Mizuho Leasing”). Aircastle is a holding company and conducts its business through subsidiaries that are wholly-owned, either directly or indirectly, by Aircastle.
Basis of Presentation and Principles of Consolidation
The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).
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, 2022.
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.
We manage and analyze our business and report on our 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 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, 2022, through the date on which the consolidated financial statements included in this Form 10-Q were issued.
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 early 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
8
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Lease Revenue Recognition
We lease flight equipment under net operating leases with lease terms typically ranging from 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 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 an aircraft type’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 in the Notes to Unaudited Consolidated Financial Statements.
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, such as the location of the aircraft and accessibility to records and technical documentation.
We continue to closely monitor the impact of recent crises, such as the Russian invasion of Ukraine and the COVID-19 pandemic, 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 aircraft with near-term lease expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers or aircraft variants that are more susceptible to the impact of the above crises 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 London interbank
9
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
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 the use of unobservable inputs.
The following tables set forth our financial assets as of May 31, 2022 and February 28, 2022 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, 2022 Using Fair Value Hierarchy | |||||||||||||||||||||||||||||
Fair Value as of May 31, 2022 | Quoted 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 | $ | $ | $ | $ | Market | ||||||||||||||||||||||||
| Restricted cash and cash equivalents | Market | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
Fair Value Measurements at February 28, 2022 Using Fair Value Hierarchy | |||||||||||||||||||||||||||||
Fair Value as of February 28, 2022 | Quoted 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 | $ | $ | $ | $ | Market | ||||||||||||||||||||||||
| Restricted cash and cash equivalents | Market | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||||||||
Our cash and cash equivalents and our restricted cash and cash equivalents 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 our fair value hierarchy.
For the three months ended May 31, 2022, we had no
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 aircraft and investment in unconsolidated joint
10
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
venture. 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 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.
Aircraft Valuation
Impairment of Flight Equipment
During the three months ended May 31, 2022, the Company wrote off the remaining book value of eight narrow-body aircraft in Russia which have not been returned to us totaling $4.4 million. While we maintain title to the aircraft and will continue to pursue repossession, we determined that it is unlikely we will regain possession of these eight aircraft – see Note 3 in the Notes to Unaudited Consolidated Financial Statements. The Company recognized $1.5 million of other revenue for these aircraft related to payments received on letters of credit.
During the three months ended May 31, 2021, the Company recorded transactional impairment charges totaling $20.6 million which related to two narrow-body aircraft and were the result of an early lease termination and a scheduled lease expiration. The Company recognized $21.1 million of maintenance revenue for these two aircraft.
Annual Recoverability Assessment
We plan to perform our annual recoverability assessment of all our aircraft during the third quarter of 2022.
We continue to closely monitor the impact of recent crises, such as the Russian invasion of Ukraine and the COVID-19 pandemic, 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 aircraft with near-term lease expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers or aircraft variants that are more susceptible to the impact of the above crises and value deterioration.
The recoverability assessment is a comparison of the carrying value of each aircraft to its estimated undiscounted 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, such as the location of the aircraft and accessibility to records and technical documentation.
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.
11
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
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 and 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, 2022 and February 28, 2022 were as follows:
| May 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
| Carrying Amount of Liability | Fair Value of Liability | Carrying Amount of Liability | Fair Value of Liability | ||||||||||||||||||||
| Credit Facilities | $ | $ | $ | $ | |||||||||||||||||||
| Unsecured Term Loan | |||||||||||||||||||||||
| Export Credit Agency (“ECA”) Financings | |||||||||||||||||||||||
| Bank Financings | |||||||||||||||||||||||
| Senior Notes | |||||||||||||||||||||||
All our financial instruments are classified as Level 2 except for our senior notes, which are classified as Level 1.
Note 3. Flight Equipment Held for Lease, Net
The following table summarizes the activities for the Company’s flight equipment held for lease for the three months ended May 31, 2022:
| Amount | ||||||||
Balance at February 28, 2022 | $ | |||||||
| Additions | ||||||||
| Depreciation | ( | |||||||
| Disposals and transfers to net investment in leases and held for sale | ( | |||||||
| Impairments | ( | |||||||
Balance at May 31, 2022 | $ | |||||||
Accumulated depreciation as of May 31, 2022 | $ | |||||||
Write-off of Russian Aircraft
As of May 31, 2022, nine of our aircraft that were previously leased to Russian airlines remain in Russia. We also have one aircraft outside of Russia that is not operational and not in our possession. Most of the operators of these aircraft have continued to fly the aircraft notwithstanding the leasing terminations and our repeated demands for the return of our assets. While we maintain title to the aircraft and will continue to pursue repossession, we determined that it is unlikely we will regain possession of eight of the nine aircraft that remain in Russia. As a result, the Company wrote off the remaining book value of these eight aircraft totaling $4.4 million during three months ended May 31, 2022. These eight aircraft have been removed from the Company’s owned fleet count. The Company is vigorously pursuing insurance claims to recover its losses relating to these aircraft, however, collection, timing and amounts of any insurance recoveries is uncertain.
12
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 4. Lease Rental Revenues
Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at May 31, 2022 were as follows:
| Year Ending February 28/29, | Amount(1) | |||||||
| 2023 (Remainder of fiscal year) | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
_______________
(1)Reflects impact of lessee lease rental deferrals.
At May 31, 2022 and February 28, 2022, the amounts of lease incentive liabilities recorded in maintenance payments on our consolidated balance sheets were $18.3 million and $16.5 million, respectively.
Note 5. Net Investment in Leases, Net
At May 31, 2022 and February 28, 2022, our net investment in leases consisted of ten and eleven aircraft, respectively. The components of our net investment in leases at May 31, 2022 and February 28, 2022, were as follows:
| May 31, 2022 | February 28, 2022 | ||||||||||
| Lease receivable | $ | $ | |||||||||
| Unguaranteed residual value of flight equipment | |||||||||||
| Net investment leases | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Net investment in leases, net | $ | $ | |||||||||
The activity in the allowance for credit losses related to our net investment in leases for the three months ended May 31, 2022 was as follows:
| Amount | ||||||||
Balance at February 28, 2022 | $ | |||||||
| Provision for credit losses | ||||||||
| Write-offs | ( | |||||||
Balance at May 31, 2022 | $ | |||||||
13
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
At May 31, 2022, future lease payments on net investment in leases are as follows:
| Year Ending February 28/29, | Amount | |||||||
| 2023 (Remainder of fiscal year) | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total lease payments to be received | ||||||||
| Present value of lease payments - lease receivable | ( | |||||||
| Difference between undiscounted lease payments and lease receivable | $ | |||||||
Note 6. Concentration of Risk
The classification of regions in the tables below is based on our customers’ principal place of business.
The geographic concentration of our Net Book Value as of May 31, 2022 and February 28, 2022 was as follows:
| May 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
| Region | Number of Aircraft | Net Book Value % | Number of Aircraft | Net Book Value % | |||||||||||||||||||
| Asia and Pacific | % | % | |||||||||||||||||||||
| Europe | % | % | |||||||||||||||||||||
| Middle East and Africa | % | % | |||||||||||||||||||||
| North America | % | % | |||||||||||||||||||||
| South America | % | % | |||||||||||||||||||||
| Off-lease | (1) | % | (2) | % | |||||||||||||||||||
| Total | % | % | |||||||||||||||||||||
_______________
(1)Of the fifteen off-lease aircraft at May 31, 2022, we have one narrow-body aircraft and eight wide-body aircraft which we are currently marketing for lease or sale.
(2)Of the eleven off-lease aircraft at February 28, 2022, we have five wide-body aircraft which we are currently marketing for lease or sale.
The following table sets forth individual countries representing at least 10% of our Net Book Value as of May 31, 2022 and February 28, 2022:
| May 31, 2022 | February 28, 2022 | ||||||||||||||||||||||
| Country | Net Book Value | Net Book Value % | Number of Lessees | Net Book Value | Net Book Value % | Number of Lessees | |||||||||||||||||
| India | $ | $ | |||||||||||||||||||||
14
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
The geographic concentration of our lease rental revenue earned from flight equipment held for lease was as follows:
| Three Months Ended May 31, | ||||||||||||||
| Region | 2022 | 2021 | ||||||||||||
| Asia and Pacific | % | % | ||||||||||||
| Europe | % | % | ||||||||||||
| Middle East and Africa | % | % | ||||||||||||
| North America | % | % | ||||||||||||
| South America | % | % | ||||||||||||
| Total | % | % | ||||||||||||
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, | ||||||||||||||||||||||||||
| 2022 | 2021 | |||||||||||||||||||||||||
| Number of Lessees | Combined % of Lease Rental Revenue | Number of Lessees | Combined % of Lease Rental Revenue | |||||||||||||||||||||||
| Largest lessees by lease rental revenue | ||||||||||||||||||||||||||
For the three months ended May 31, 2022, the Company recognized $25.4 million of maintenance and other revenue, or 14 % of our total revenues, related to payments received on maintenance and general security letters of credit from our former Russian lessees. Total revenue attributable to Russia was less than 10% for the three months ended May 31, 2021.
For the three months ended May 31, 2022 and 2021, total revenue attributable to India was 12 % and 12 %, respectively.
Judicial Insolvency Proceedings or Similar Protection
As of July 8, 2022, three of our customers, to which we lease seventeen aircraft, are subject to judicial insolvency proceedings or similar protection. We have signed restructured lease agreements for fifteen of these aircraft, subject only to the lessees emerging from their respective judicial insolvency processes.
Note 7. Unconsolidated Equity Method Investments
We have a joint venture with Mizuho Leasing which has nine aircraft with a net book value of $295.1 million at May 31, 2022.
| Amount | ||||||||
Investment in joint venture at February 28, 2022 | $ | |||||||
| Earnings from joint venture, net of tax | ||||||||
Investment in joint venture at May 31, 2022 | $ | |||||||
On June 30, 2022, the Company received full repayment of the unsecured loan facility it provided to the joint venture in the amount of $1.5 million.
15
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 8. Borrowings from Secured and Unsecured Debt Financings
The outstanding amounts of our secured and unsecured debt financings were as follows:
At May 31, 2022 | At February 28, 2022 | ||||||||||||||||||||||||||||
| Debt Obligation | Outstanding Borrowings | Number of Aircraft | Interest Rate | Final Stated Maturity | Outstanding Borrowings | ||||||||||||||||||||||||
| Secured Debt Financings: | |||||||||||||||||||||||||||||
| ECA Financings | $ | N/A | $ | ||||||||||||||||||||||||||
Bank Financings(1) | 06/17/23 to 03/06/25 | ||||||||||||||||||||||||||||
| Less: Debt issuance costs and discounts | ( | ( | |||||||||||||||||||||||||||
| Total secured debt financings, net of debt issuance costs and discounts | |||||||||||||||||||||||||||||
| Unsecured Debt Financings: | |||||||||||||||||||||||||||||
| Senior 5.00% Notes due 2023 | 04/01/23 | ||||||||||||||||||||||||||||
| Senior 4.40% Notes due 2023 | 09/25/23 | ||||||||||||||||||||||||||||
| Senior Notes due 2024 | 05/01/24 | ||||||||||||||||||||||||||||
| Senior Notes due 2025 | 08/11/25 | ||||||||||||||||||||||||||||
| Senior Notes due 2026 | 06/15/26 | ||||||||||||||||||||||||||||
| Senior Notes due 2028 | 01/26/28 | ||||||||||||||||||||||||||||
| Unsecured Term Loans | 02/27/24 | ||||||||||||||||||||||||||||
| Revolving Credit Facilities | 06/27/22 to 04/26/25 | ||||||||||||||||||||||||||||
| Less: Debt issuance costs and discounts | ( | ( | |||||||||||||||||||||||||||
| Total unsecured debt financings, net of debt issuance costs and discounts | |||||||||||||||||||||||||||||
| Total secured and unsecured debt financings, net of debt issuance costs and discounts | $ | $ | |||||||||||||||||||||||||||
(1)In May 2022, the Company repaid the principal and accrued interest outstanding under our remaining ECA Financing and incurred early extinguishment costs of $0.5 million.
(2)The borrowings under these financings at May 31, 2022 have a weighted-average fixed rate of interest of 3.45 %.
Unsecured Debt Financings:
Revolving Credit Facilities
On May 24, 2022, we entered into an amendment for one of our unsecured revolving credit facilities that expanded the size and extended the term of the facility. As a result, the existing $230.0 million commitment was expanded to $280.0 million, with $35.0 million and $245.0 million of the commitment allocated to Tranche B and Tranche C, respectively. Tranche B will mature on February 28, 2023 and Tranche C will mature on May 23, 2025. Tranche A matured on its stated maturity date of December 27, 2021.
As of May 31, 2022, we had $20.0 million outstanding under our revolving credit facilities and had $1.4 billion available for borrowing.
As of May 31, 2022, we were in compliance with all applicable covenants in our financings.
On June 27, 2022, a $100.0 million commitment under one of our unsecured revolving credit facilities, with a total commitment of $1.0 billion, matured on its stated maturity date. The remaining $900.0 million commitment will mature on April 26, 2025.
16
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 9. Shareholders' Equity
Note 10. Related Party Transactions
Note 11. 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 income (loss) from continuing operations before income taxes and earnings of our unconsolidated equity method investments for the three months ended May 31, 2022 and 2021 were as follows:
| Three Months Ended May 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| U.S. operations | $ | $ | ||||||||||||
| Non-U.S. operations | ( | |||||||||||||
| Income (loss) from continuing operations before income taxes and earnings of unconsolidated equity method investments | $ | $ | ( | |||||||||||
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 the U.S. and Ireland 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 Company’s effective tax rates (“ETR”) for the three months ended May 31, 2022 and 2021 were 31.7 % and 45.2 %, 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 months ended May 31, 2021 included a significant decrease in Bermuda income.
17
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 12. Interest, Net
The following table shows the components of interest, net:
| Three Months Ended May 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Interest on borrowings and other liabilities | $ | $ | ||||||||||||
| Amortization of deferred financing fees and debt discount | ||||||||||||||
| Interest expense | ||||||||||||||
| Less: Interest income | ( | ( | ||||||||||||
| Less: Capitalized interest | ( | ( | ||||||||||||
| Interest, net | $ | $ | ||||||||||||
Note 13. Commitments and Contingencies
Rent expense, primarily for the corporate offices and sales and marketing offices, was $0.5 million and $0.4 million for the three months ended May 31, 2022 and 2021, respectively.
As of May 31, 2022, 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 | |||||||
| 2023 (Remainder of fiscal year) | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
At May 31, 2022, we had commitments to acquire 23 aircraft for $829.3 million.
Commitments, including $63.7 million of remaining progress payments, contractual price escalations and other adjustments for these aircraft, at May 31, 2022, net of amounts already paid, are as follows:
| Year Ending February 28/29, | Amount | |||||||
| 2023 (Remainder of fiscal year) | $ | |||||||
| 2024 | ||||||||
| 2025 | ||||||||
| 2026 | ||||||||
| 2027 | ||||||||
| Thereafter | ||||||||
| Total | $ | |||||||
18
Aircastle Limited and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
May 31, 2022
Note 14. Other Assets
The following table describes the principal components of other assets on our consolidated balance sheets as of May 31, 2022 and February 28, 2022:
| May 31, 2022 | February 28, 2022 | ||||||||||
| Deferred income tax asset | $ | $ | |||||||||
Lease incentives and lease premiums, net of amortization of $ | |||||||||||
| Flight equipment held for sale | |||||||||||
| Aircraft purchase deposits and Embraer E-2 progress payments | |||||||||||
Right-of-use asset(1) | |||||||||||
| Deferred rent receivable | |||||||||||
| Other assets | |||||||||||
| Total other assets | $ | $ | |||||||||
______________
(1)Net of lease incentives and tenant allowances.
Note 15. Accounts Payable, Accrued Expenses and Other Liabilities
The following table describes the principal components of accounts payable, accrued expenses and other liabilities recorded our consolidated balance sheets as of May 31, 2022 and February 28, 2022:
| May 31, 2022 | February 28, 2022 | ||||||||||
| Accounts payable, accrued expenses and other liabilities | $ | $ | |||||||||
| Deferred income tax liability | |||||||||||
| Accrued interest payable | |||||||||||
| Lease liability | |||||||||||
Lease discounts, net of amortization of $ | |||||||||||
| Total accounts payable, accrued expenses and other liabilities | $ | $ | |||||||||
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, 2022. 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 for the year ended February 28, 2022. 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. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore. Our aircraft are subject to net leases whereby the lessee is generally 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. During the three months ended May 31, 2022, we purchased one aircraft and sold four aircraft and other flight equipment. As of May 31, 2022, we owned and managed on behalf of our joint ventures 250 aircraft leased to 74 lessees located in 44 countries. As of May 31, 2022, the Net Book Value of our fleet was $6.4 billion. The weighted average age of our fleet was 10.4 years and the weighted average remaining lease term was 5.1 years. As of May 31, 2022, we have commitments to acquire 23 aircraft for $829.3 million, which includes estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments.
Our total revenues, net income (loss) and Adjusted EBITDA were $175.6 million and $7.7 million, $152.9 million for the three months ended May 31, 2022 and $165.8 million, and $(9.8) million and $148.3 million for the three months ended May 31, 2021. Cash flow provided by operating activities was $110.3 million and $70.0 million for the three months ended May 31, 2022 and 2021, respectively. Our business and financial results, customers, and the aviation industry has and will continue to be impacted by the COVID-19 pandemic and the Russian invasion of Ukraine. We believe our platform and personnel position us to effectively manage through these crises and will enable us to take advantage of new investment opportunities when they arise.
While the industry continues to recover from the impact of COVID-19, according to the International Air Transit Association (“IATA”), as of May 31, 2022, air travel was still down to approximately 64% compared to normal levels. We continue to believe long-term demand for air travel will gradually return to historical trends over time.
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 to 2 times that of global GDP growth. This expansion of air travel has driven growth in the world aircraft fleet; and there are approximately 25,000 commercial mainline passenger and freighter aircraft in the world fleet today. Aircraft leasing companies own approximately 48% 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.
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 recent crises, such as the COVID-19 pandemic and the Russian invasion of Ukraine. 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.
We believe that we have sufficient liquidity to meet our contractual obligations over the next twelve months and as of July 1, 2022, total liquidity of $1.9 billion includes $1.2 billion of undrawn credit facilities, $0.2 billion of unrestricted cash, $0.1 billion of contracted asset sales and $0.4 billion of projected adjusted operating cash flows through July 1, 2023.
Update on Russian Invasion on Ukraine
As of May 31, 2022, nine of our aircraft that were previously leased to Russian airlines remain in Russia. We also have one aircraft outside of Russia that is not operational and not in our possession. Most of the operators of these aircraft have continued to fly the aircraft notwithstanding the leasing terminations and our repeated demands for the return of our assets. While we maintain title to the aircraft and will continue to pursue repossession, we determined that it is unlikely we will regain possession of eight of the nine aircraft that remain in Russia. As a result, the Company wrote off the remaining book value of these eight aircraft totaling $4.4 million during the three months ended May 31, 2022. These eight aircraft have been removed from the Company’s owned fleet count. The Company is vigorously pursuing insurance claims to recover its losses relating to these aircraft, however, collection, timing and amounts of any insurance recoveries is uncertain.
Our two aircraft not subject to write-off comprise less than 1% of our Net Book Value. It is unclear whether we will be able to recover these aircraft or what the condition of the aircraft will be at the time of repossession if we do so or whether we will be able to recover the related technical records and documentation.
21
During the three months ended May 31, 2022, the Company recognized $25.4 million of maintenance and other revenue related to payments received on maintenance and general security letters of credit for our former Russian lessees. The Company is pursuing collection on remaining letters of credit totaling $24.1 million.
Fiscal Year 2022 Lease Expirations and Lease Placements
As of July 8, 2022, we had nine off-lease aircraft and ten aircraft with leases expiring in fiscal year 2022, which combined account for 6.7% of our Net Book Value at May 31, 2022, still to be placed or sold. This includes two aircraft that were previously leased to Russian airlines which have not been returned to us and which account for less than 1% of our Net Book Value at May 31, 2022.
Taking into account lease and sale commitments, we currently have the following number of aircraft with lease expirations scheduled in the fiscal years 2023-2026, representing the percentage of our Net Book Value at May 31, 2022, specified below:
•2023: 35 aircraft, representing 10%;
•2024: 45 aircraft, representing 17%;
•2025: 29 aircraft, representing 12%; and
•2026: 13 aircraft, representing 4%.
Acquisitions and Sales
During the three months ended May 31, 2022, we acquired one aircraft. As of May 31, 2022, we had commitments to acquire 23 aircraft for $829.3 million, with delivery through the fourth quarter of 2024, which includes estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments. As of July 8, 2022, we have acquired four additional aircraft and have commitments to acquire 23 aircraft for $790.6 million.
During the three months ended May 31, 2022, we sold four aircraft and other flight equipment for net proceeds of $58.2 million, and recognized a net gain on sale of $3.7 million. As of July 8, 2022, we have sold two additional aircraft.
Finance
We operate in a capital-intensive industry and have a demonstrated track record of raising substantial amounts of capital from debt and equity investors. Since our inception in late 2004, we have raised $2.1 billion in equity capital from private and public investors. We also raised $18.9 billion in debt capital from a variety of sources including export credit agency-backed debt, commercial bank debt, the aircraft securitization markets and the unsecured bond market. The diversity and global nature of our financing sources demonstrates our ability to adapt to changing market conditions and seize new growth opportunities.
We intend to fund new investments through cash on hand, funds generated from operations, maintenance payments received from lessees, secured and unsecured borrowings for aircraft, draws on our revolving credit facilities and proceeds from any future aircraft sales. We may repay all or a portion of such borrowings from time to time with the net proceeds from subsequent long-term debt financings, additional equity offerings or cash generated from operations and asset sales. Therefore, our ability to execute our business strategy, particularly the acquisition of additional commercial jet aircraft or other aviation assets, depends to a significant degree on our ability to obtain additional debt and equity capital on terms we deem attractive.
See “Liquidity and Capital Resources — Secured Debt Financings” and “Liquidity and Capital Resources — Unsecured Debt Financings” below.
22
AIRCASTLE AIRCRAFT INFORMATION
The following table sets forth certain information with respect to the aircraft owned by us as of May 31, 2022 and 2021 (dollars in millions):
| Owned Aircraft | As of May 31, 2022 | As of May 31, 2021 | |||||||||
| Net Book Value of Flight Equipment | $ | 6,388 | $ | 6,584 | |||||||
| Net Book Value of Unencumbered Flight Equipment | $ | 5,322 | $ | 5,400 | |||||||
Number of Aircraft(1) | 241 | 250 | |||||||||
Number of Unencumbered Aircraft(1) | 210 | 218 | |||||||||
| Number of Lessees | 74 | 76 | |||||||||
| Number of Countries | 44 | 42 | |||||||||
Weighted Average Age (Years)(2) | 10.4 | 10.8 | |||||||||
Weighted Average Remaining Lease Term (Years)(2) | 5.1 | 4.5 | |||||||||
Weighted Average Fleet Utilization during the three months ended May 31, 2022 and 2021(3) | 94.8 | % | 93.1 | % | |||||||
Portfolio Yield for the three months ended May 31, 2022 and 2021(4) | 9.2 | % | 8.4 | % | |||||||
| Managed Aircraft on behalf of Joint Venture | |||||||||||
| Net Book Value of Flight Equipment | $ | 295 | $ | 309 | |||||||
| Number of Aircraft | 9 | 9 | |||||||||
(1)Excludes eight aircraft that remain in Russia with zero net book value – see Note 3 in the Notes to Unaudited Consolidated Financial Statements
(2)Weighted by net book value.
(3)Aircraft on-lease days as a percent of total days in period weighted by net book value.
(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 leases.
23
PORTFOLIO DIVERSIFICATION
Owned Aircraft as of May 31, 2022 | Owned Aircraft as of May 31, 2021 | ||||||||||||||||||||||
| Number of Aircraft | % of Net Book Value | Number of Aircraft | % of Net Book Value | ||||||||||||||||||||
| Aircraft Type | |||||||||||||||||||||||
| Passenger: | |||||||||||||||||||||||
Narrow-body - new technology(1) | 28 | 19 | % | 15 | 10 | % | |||||||||||||||||
| Narrow-body - current technology | 187 | 63 | % | 209 | 68 | % | |||||||||||||||||
| Wide-body - current technology | 22 | 16 | % | 22 | 18 | % | |||||||||||||||||
| Total Passenger | 237 | 98 | % | 246 | 96 | % | |||||||||||||||||
| Freighter - current technology | 4 | 2 | % | 4 | 4 | % | |||||||||||||||||
| Total | 241 | 100 | % | 250 | 100 | % | |||||||||||||||||
| Manufacturer | |||||||||||||||||||||||
| Airbus | 156 | 65 | % | 166 | 64 | % | |||||||||||||||||
| Boeing | 74 | 30 | % | 77 | 34 | % | |||||||||||||||||
| Embraer | 11 | 5 | % | 7 | 2 | % | |||||||||||||||||
| Total | 241 | 100 | % | 250 | 100 | % | |||||||||||||||||
| Regional Diversification | |||||||||||||||||||||||
| Asia and Pacific | 70 | 32 | % | 77 | 36 | % | |||||||||||||||||
| Europe | 87 | 28 | % | 92 | 28 | % | |||||||||||||||||
| Middle East and Africa | 10 | 4 | % | 10 | 4 | % | |||||||||||||||||
| North America | 34 | 17 | % | 28 | |||||||||||||||||||