Aircastle Limited

04/21/2026 | Press release | Distributed by Public on 04/21/2026 12:38

Annual Report for Fiscal Year Ending February 28, 2025 (Form 10-K)

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 Annual 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 Item 1A. - "Risk Factors" and elsewhere in this Annual Report. Please see "Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995" for a discussion of the uncertainties, risks and assumptions associated with these statements. Our consolidated financial statements are prepared in accordance with U.S. GAAP and, unless otherwise indicated, the other financial information contained in this Annual Report has also been prepared in accordance with U.S. GAAP. Unless otherwise indicated, all references to "dollars" and "$" in this Annual Report are to, and all monetary amounts in this Annual Report are presented in, U.S. dollars.
OVERVIEW
Aircastle acquires, leases, and sells commercial jet aircraft to airlines worldwide. We are a leading secondary market investor, sourcing aircraft through a variety of acquisition channels, including other aircraft lessors, airlines through purchase-leaseback transactions, financial institutions and other aircraft owners, and aircraft manufacturers. We have significant experience in successfully managing aircraft throughout their life cycle, including lease and technical management, aircraft redeliveries, transitions, and asset sales or disposals. We sell aircraft and engine assets, either with a lease attached or on a part-out basis, with the objective of generating profits and reinvesting sale proceeds. Our aircraft are managed by an experienced team based in the United States, Ireland and Singapore.
As of February 28, 2026, we owned and managed 282 aircraft leased to 76 lessees located in 45 countries. The Net Book Value of our fleet was $8.5 billion as of February 28, 2026, an increase of 8% from $7.9 billion as of February 28,
2025. The weighted average age of our fleet was 9.0 years and the weighted average remaining lease term was 5.4 years. The weighted average utilization rate of our fleet was 99% for the year ended February 28, 2026.
Our total revenues, net income and Adjusted EBITDA were $975.1 million, $194.0 million, and $945.1 million, respectively, for the year ended February 28, 2026, compared to $821.0 million, $123.6 million and $789.9 million, respectively, for the year ended February 28, 2025. Our financial performance continued to reflect strong global passenger demand for air travel and sustained demand for our narrow-body aircraft, driven by ongoing OEM delivery delays and broader supply chain constraints. These market conditions supported elevated lease extension activity and strong gains on sales, which contributed positively to our operating results. Our financial performance was also favorably impacted by additional cash settlement proceeds received in respect of our contingent and possessed insurance policies ("C&P Policies") for aircraft formerly on lease to Russian airlines.
Acquisitions and Sales
During the year ended February 28, 2026, we acquired 46 aircraft for $1.7 billion. As of February 28, 2026, we had commitments to acquire 17 aircraft for $829.5 million, with delivery through November 2028, which include estimated amounts for pre-delivery deposits, contractual price escalations and other adjustments. As of April 14, 2026, we have acquired 1 additional aircraft and have commitments to acquire 20 aircraft for $908.9 million.
During the year ended February 28, 2026, we sold 33 aircraft and other flight equipment for net proceeds of $729.5 million and recognized gains on the sale or disposition of aircraft totaling $95.9 million. As of April 14, 2026, we have sold 2 additional aircraft.
Middle East Conflict
Recent armed conflicts and heightened geopolitical tensions in the Middle East have increased uncertainty regarding regional stability. Military actions and retaliatory measures involving multiple parties in the region have disrupted, and may continue to disrupt, commercial aviation and related economic activity, including oil markets and trade flows.
We are closely monitoring the evolving conflict and related geopolitical developments. While the ultimate impact on our business, financial condition and results of operations is currently uncertain, these hostilities have adversely affected, and an escalation or prolonged continuation of hostilities could continue to adversely affect, commercial aviation activity in the region, including through airspace closures, reduced flight operations, increased fuel and insurance costs, supply chain disruptions and broader macroeconomic effects. Such impacts could, in turn, negatively affect the financial condition and operating performance of airlines operating in, or flying through, the region, potentially resulting in lease restructurings, payment deferrals, or defaults.
As of and for the year ended February 28, 2026, our airline customers located in the Middle East represented approximately 5% of both our Net Book Value and lease rental revenue. Although our exposure to the region is limited and diversified across lessees and aircraft types, a sustained deterioration in regional or economic conditions could nevertheless have an adverse effect on our business, financial condition and results of operations.
Russian Aircraft Insurance Settlements
The Company leased 9 aircraft to Russian airlines that were unrecoverable following Russia's invasion of Ukraine in February 2022. The Company filed claims against the reinsurers of the Russian airlines' insurance, as well as under the Company's C&P Policies, seeking indemnification.
During the years ended February 28, 2025 and February 29, 2024, the Company received insurance settlement proceeds of $49.5 million and $43.2 million, respectively. For the year ended February 28, 2025, the proceeds were recorded in other income and related to settlements under certain of the Company's C&P Policies. For the year ended February 29, 2024, the proceeds were recorded within gain on sale or disposition of flight equipment and related to 4 aircraft formerly on lease to Joint Stock Company Aurora Airlines and Joint Stock Company Rossiya Airlines, resulting in the transfer of aircraft title to a Russian insurer.
In addition, during the year ended February 28, 2026, the Company recognized other income of $70.8 million related to settlement agreements with certain additional insurers under its C&P Policies.
The receipt of the settlement proceeds serves to mitigate, in part, the Company's losses under its aviation insurance policies. The Company continues to pursue recoveries from the remaining insurers; however, the timing and amount of any additional recoveries, including those related to insurance litigation, remain uncertain. Accordingly, at this time, the Company can give no assurance as to when or what amounts it may ultimately collect with respect to these matters.
Finance
We operate in a capital-intensive industry and have a demonstrated track record of consistently raising substantial capital from both debt and equity investors. Since our inception, we raised $2.6 billion in equity capital from private and public investors, including $500.0 million received in aggregate during the years ended February 28, 2026 and 2025, from our Shareholders. We have also obtained $25.0 billion in debt capital from a variety of sources, including the unsecured bond market, commercial banks, export credit agency-backed debt, the aircraft securitization markets and JOLCO financings. The diversity and global nature of these 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, equity offerings, unsecured bond offerings, borrowings secured by our aircraft, draws under on our revolving credit facilities and proceeds from 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. Accordingly, 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" below.
AIRCASTLE AIRCRAFT INFORMATION
The following table sets forth certain information with respect to our owned aircraft and aircraft managed by us as of February 28, 2026 and 2025:
As of February 28,
2026 2025
Owned Aircraft (Dollars in millions)
Net Book Value of Flight Equipment $ 8,534 $ 7,902
Net Book Value of Unencumbered Flight Equipment $ 8,417 $ 7,127
Number of Aircraft 277 265
Number of Unencumbered Aircraft 273 244
Number of Lessees 76 76
Number of Countries 45 47
Weighted Average Age (years)(1)
9.0 9.1
Weighted Average Remaining Lease Term (years)(1)
5.4 5.4
Weighted Average Fleet Utilization during the Fourth Quarter(2)(3)
97.7 % 99.3 %
Weighted Average Fleet Utilization for the Year Ended(2)
99.1 % 99.2 %
Portfolio Yield for the Fourth Quarter(4)
9.3 % 9.6 %
Portfolio Yield for the Year Ended(4)
9.5 % 9.4 %
Managed Aircraft
Number of Managed Aircraft(5)
5 8
____________
(1)Weighted by Net Book Value.
(2)Aircraft on lease as a percentage of total days in period weighted by net book value.
(3)The fourth quarter of fiscal year 2025 includes 4 aircraft that were previously leased to a customer that filed for bankruptcy protection, and we expect these aircraft to remain off-lease for an extended period.
(4)Lease rental revenue, together with interest income and cash collections on our net investment in leases for the period, expressed as a percentage of the average Net Book Value for the period; quarterly information is annualized.
(5)Number of managed aircraft as of February 28, 2026 includes 4 aircraft owned by our joint venture with Mizuho Leasing.
PORTFOLIO DIVERSIFICATION
Owned Aircraft as of
February 28, 2026
Owned Aircraft as of
February 28, 2025
Number of
Aircraft 		% of Net
Book Value 		Number of
Aircraft 		% of Net
Book Value
Aircraft Type
Passenger:
Narrow-body - new technology(1)
95 51 % 77 45 %
Narrow-body - current technology 165 43 % 168 46 %
Wide-body 12 5 % 14 7 %
Total Passenger 272 99 % 259 98 %
Freighter 5 1 % 6 2 %
Total 277 100 % 265 100 %
Manufacturer
Airbus 175 63 % 179 68 %
Boeing 79 29 % 65 24 %
Embraer 23 8 % 21 8 %
Total 277 100 % 265 100 %
Regional Diversification
Asia and Pacific 70 27 % 67 28 %
Europe 79 23 % 99 30 %
Middle East and Africa 14 5 % 11 5 %
North America 72 30 % 58 26 %
South America 36 12 % 29 11 %
Off-lease 6
(2)
3 % 1 - %
Total 277 100 % 265 100 %
_______________
(1)Includes Airbus A320-200neo and A321-200neo, Boeing 737-MAX8 and 737-MAX9, and Embraer E2 aircraft.
(2)We currently have 6 off-lease narrow-body aircraft that are being marketed for lease. Of these aircraft, 4 were previously leased to a customer that filed for bankruptcy protection, and we expect these aircraft to remain off-lease for an extended period. Of the remaining 2 aircraft, 1 aircraft was delivered on lease to a customer during the first quarter of fiscal year 2026 and the other aircraft is expected to be delivered on lease to a customer in the second quarter of fiscal year 2026.
The top ten customers for our owned aircraft as of February 28, 2026 were as follows:
Customer Percent of
Net Book Value 		Country Number of
Aircraft
IndiGo 10.0% India 17
United 6.9% United States 12
KLM 5.6% Netherlands 15
American Airlines
4.8% United States 17
LATAM 4.7% Chile 13
Frontier Airlines
4.4% United States 7
WestJet 3.6% Canada 7
Viva Aerobus
3.3% Mexico 8
Lion Air(1)
3.0% Indonesia 10
Aerolineas Argentinas 2.6% Argentina 7
Total top ten customers 48.9% 113
All other customers 51.1% 164
Total all customers 100.0% 277
(1)Includes 6 aircraft on lease with 3 affiliated airlines.
COMPARATIVE RESULTS OF OPERATIONS
Results of Operations for the year ended February 28, 2026 as compared to the year ended February 28, 2025:
Year Ended February 28,
2026 2025
(Dollars in thousands)
Revenues:
Lease rental revenue $ 759,701 $ 652,379
Direct financing and sales-type lease revenue 20,945 21,295
Amortization of lease premiums, discounts and incentives 280 (21,682)
Maintenance revenue 95,654 90,490
Total lease revenue 876,580 742,482
Gain on sale or disposition of flight equipment 95,889 77,191
Other revenue 2,650 1,302
Total revenues 975,119 820,975
Operating expenses:
Depreciation 384,028 355,666
Interest, net 282,139 247,923
Selling, general and administrative 89,483 86,416
Provision (benefit) for credit losses (57) 8,715
Impairment of flight equipment 53,323 19,391
Maintenance and other costs 17,101 16,938
Total operating expenses 826,017 735,049
Other income (expense):
Gain (loss) on extinguishment of debt (2,973) 285
Other 74,120 56,247
Total other income: 71,147 56,532
Income from continuing operations before income taxes 220,249 142,458
Income tax provision 28,863 21,948
Earnings of unconsolidated equity method investment, net of tax 2,662 3,103
Net income $ 194,048 $ 123,613
Revenues:
Total revenues increased $154.1 million, attributable to:
Lease rental revenue increased $107.3 million, primarily attributable to an increase of $179.4 million related to 94 aircraft purchased since March 1, 2024.
This was partially offset by a $65.3 million decrease related to the sale of 58 aircraft since March 1, 2024.
Amortization of lease premiums, discounts and incentives:
Year Ended February 28,
2026 2025
(Dollars in thousands)
Amortization of lease premiums $ (6,839) $ (11,128)
Amortization of lease discounts 16,600 5,773
Amortization of lease incentives (9,481) (16,327)
Amortization of lease premiums, discounts and incentives $ 280 $ (21,682)
The amortization of lease premiums decreased by $4.3 million, primarily attributable to the full amortization of premiums on aircraft whose leases were extended.
The amortization of lease discounts increased by $10.8 million due to the acquisition of aircraft.
The amortization of lease incentives decreased by $6.8 million, primarily due to the reversal of lease incentive liabilities related to 2 engine redeliveries and the sale of aircraft.
Maintenance revenue. For the years ended February 28, 2026 and 2025, we recorded $95.7 million and $90.5 million, respectively, of maintenance revenue, primarily related to maintenance payments received by us and recognized into income in connection with scheduled aircraft lease expirations and engine redeliveries.
Gain on sale or disposition of flight equipment. During the year ended February 28, 2026, we sold 33 aircraft and other flight equipment for gains totaling $95.9 million. During the year ended February 28, 2025, we sold 27 aircraft for gains totaling $77.2 million.
Operating Expenses:
Total operating expenses increased $91.0 million attributable to:
Depreciation expense increased $28.4 million, primarily attributable to an increase of $68.7 million related to 95 aircraft purchased since March 1, 2024. This increase was partially offset by a decrease of $30.7 million related to 57 aircraft sold since March 1, 2024.
Interest, net increased $34.2 million due to a higher weighted average debt outstanding of $619.3 million.
Selling, general and administrative expenses increased $3.1 million primarily due to higher personnel costs.
Provision (benefit) for credit losses. During the year ended February 28, 2025, we recorded a credit provision of $8.7 million, primarily related to debt securities and certain restructured receivables in connection with an airline restructuring. No material provision for credit losses was recorded for the year ended February 28, 2026.
Impairment of aircraft. During the year ended February 28, 2026, the Company recorded total impairment charges of $53.3 million. This amount includes $35.9 million related to aircraft leased to 2 customers that filed for bankruptcy protection. For these aircraft, the Company recognized $11.5 million of maintenance and lease rentals received in advance into revenue during the same period.
The remaining $17.4 million of impairment charges were primarily transaction-related, including aircraft and engine redeliveries, and also related to other flight equipment recorded within other assets that is subject to tear-down and parts sales programs. For these items, the Company recognized $25.0 million of revenue related to maintenance, security deposits and the reversal of lease incentive liabilities during the year ended February 28, 2026.
During the year ended February 28, 2025, the Company recorded impairment charges totaling $19.4 million, including $11.0 million of transactional impairments related to a scheduled lease expiration and a lease amendment for 1 aircraft. The Company recognized $24.0 million of maintenance revenue for these aircraft during the year ended February 28, 2025.
Other Income:
Total other income increased by $14.6 million. During the years ended February 28, 2026 and 2025, the Company entered into settlement agreements with certain insurers under its C&P Policies for aggregate settlement amounts of $70.8 million and $49.5 million, respectively, related to aircraft formerly on lease to Russian airlines.
Income Tax Provision:
Income tax provision. We recognized income tax provisions of $28.9 million and $21.9 million for the years ended February 28, 2026 and 2025, respectively. Our effective tax rate for the years ended February 28, 2026 and 2025 was 13.1% and 15.4%, respectively. The decrease in our effective tax rate was primarily attributable to the mix of profits between the various jurisdictions in which we operate, primarily driven by lower U.S. earnings and the utilization of Bermuda net operating losses.
Results of Operations for the year ended February 28, 2025, as compared to the year ended February 29, 2024:
We have omitted discussion of the above two periods covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2025, filed with the SEC on April 23, 2025. You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and result of operations for the year ended February 28, 2025 to the year ended February 29, 2024.
Aircraft Valuation
For complete information on impairment of flight equipment, see Note 2 in the Notes to the Consolidated Financial Statements and "Comparative Results of Operations" above.
APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP, which requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying footnotes. Our estimates and assumptions are based on historical experiences and currently available information. Actual results may differ from such estimates under different conditions, sometimes materially. A summary of our significant accounting policies is presented in the notes to our consolidated financial statements included elsewhere in this Annual Report. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require our most subjective judgments, estimates and assumptions. Our most critical accounting policies and estimates are described below.
Lease Revenue Recognition
We lease flight equipment under net operating leases with lease terms typically ranging from 3 to 7 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.
Our aircraft lease agreements generally provide for the periodic payment of fixed rent over the term of the lease, with the amount of contracted rent dependent upon the type, age, specification and condition of the aircraft, as well as market conditions at the time the lease is committed. The amount of rent we receive is also affected by a number of factors, including the creditworthiness of our lessees and the occurrence of delinquencies, restructurings and defaults. In addition, our lease rental revenues are affected by the extent to which aircraft are off-lease and our ability to remarket aircraft nearing the end of their leases in order to minimize off-lease time. Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry conditions and trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues.
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.
Maintenance Payments and Maintenance Revenue
Our aircraft are generally leased under net leases, pursuant to which the lessee is responsible for paying operating expenses incurred or accrued during the term of the lease, which typically include maintenance, overhaul, fuel, crew, landing, airport and navigation charges, certain taxes, licenses, consents and approvals, aircraft registration and insurance premiums. Many of our leases also contain provisions requiring us to pay a portion of the cost of aircraft modifications performed by the lessee at its expense where such modifications are mandated by recognized airworthiness authorities.
In general, the lessee is responsible for performing maintenance on the aircraft and is required to make payments for heavy maintenance, overhaul or replacement of certain high-value components. These maintenance payments are typically calculated based on hours or cycles of utilization or on calendar time, depending upon the applicable component, and are made either monthly in arrears or at the end of the lease term. Our determination of whether to require such payments to be made monthly or to permit a lessee to make a single maintenance payment at the end of the lease term depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease. Where a lessee makes monthly maintenance payments, we are generally obligated to use such funds to reimburse the lessee for costs they incur for eligible heavy maintenance, overhaul or replacement of certain high-value components during the lease term, typically
following the completion of the relevant work. Where a lessee makes a single end of lease maintenance payment, the lessee would typically be required to compensate us for its utilization of the aircraft during the lease. In some cases, however, we may owe a net payment to the lessee if heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception.
We record monthly maintenance payments by the lessee as accrued maintenance payment liabilities in recognition of our obligation in the lease to refund such receipts, and therefore we typically do not recognize such maintenance payments as maintenance revenue during the lease. Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability. We currently defer maintenance revenue recognition of most monthly maintenance payments until we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that lessee in performing heavy maintenance, which generally occurs at or near the end of the lease. End of lease term maintenance payments made to us are recognized as maintenance revenue and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue.
The amount of maintenance revenue or contra maintenance revenue we recognize in any reporting period is inherently volatile and is dependent on a number of factors, including the timing of lease expiries, including scheduled expiries and early lease terminations, the timing of maintenance events and the utilization of the aircraft by the lessee.
Lease Incentives and Amortization
Many of our leases contain provisions that may require us to pay a portion of the lessee's costs for heavy maintenance, overhaul or replacement of certain high-value components. We account for these expected payments as lease incentives, which are amortized on a straight-line basis as a reduction of revenue over the lease term. We estimate the amount of our portion for such costs, typically for the first major maintenance event for the airframe, engines, landing gear and auxiliary power units, expected to be paid to the lessee. These estimates are based on assumed utilization of the related aircraft by the lessee, the anticipated cost of the maintenance event and the estimated amounts the lessee is responsible to pay. The assumptions supporting these estimates are reevaluated annually.
This estimated lease incentive is not recognized as a lease incentive liability at the inception of the lease. We recognize the lease incentive as a reduction of lease revenue on a straight-line basis over the lease term, with the offset being recorded as a lease incentive liability, which is included in maintenance payments on the balance sheet. The payment to the lessee for the lease incentive liability is first recorded against the lease incentive liability, and any excess above the lease incentive liability is recorded as a prepaid lease incentive asset, which is included in other assets on the balance sheet and continues to amortize over the remaining lease term.
Flight Equipment Held for Lease and Depreciation
Flight equipment held for lease is stated at cost and depreciated using the straight-line method, typically over a 25-year life from the date of manufacture for passenger aircraft and over a 30 to 35-year life for freighter aircraft, depending on whether the aircraft is a converted or purpose-built freighter, to estimated residual values. Estimated residual values are generally determined to be approximately 15% of the manufacturer's estimated realized price for passenger aircraft when new and 5% to 10% for freighter aircraft when new. Management may make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of circumstances in which such exceptions may arise include but are not limited to:
•flight equipment where estimates of the manufacturers' realized sales prices are not relevant (e.g., freighter conversions);
•flight equipment where estimates of the manufacturers' realized sales prices are not readily available; and
•flight equipment which may have a shorter useful life due to obsolescence.
Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to place the aircraft into initial service are capitalized and depreciated over the remaining life of the flight equipment.
For planned major maintenance activities for aircraft that are off lease, the Company capitalizes the actual maintenance costs by applying the deferral method. Under the deferral method, we capitalize the actual cost of major
maintenance events, which are typically depreciated on a straight-line basis over the period until the next maintenance event is required.
In accounting for flight equipment held for lease, we make estimates about the expected useful lives, the fair value of attached leases, acquired maintenance assets or liabilities and the estimated residual values. In making these estimates, we rely upon actual industry experience with the same or similar aircraft types and our anticipated utilization of the aircraft. As part of our due diligence review of each aircraft we purchase, we prepare an estimate of the expected maintenance payments and any excess costs that may become payable by us, taking into consideration the then-current maintenance status of the aircraft and the relevant provisions of any existing lease.
For purchase-lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the fair value of the aircraft and lease. The fair value of the lease may include a maintenance premium and a lease premium or discount.
When we acquire an aircraft with a lease attached, determining the fair value of the lease requires us to make assumptions regarding the current fair values of leases for comparable aircraft. We estimate a range of current lease rates for similar aircraft to assess whether the attached lease is within a fair value range. If the contractual lease rate is below or above the estimated market range, the Company records a lease discount or premium equal to the present value the estimated amount below or above fair value range over the remaining term of the lease. Any such lease discount or premium is amortized into lease revenue on a straight-line basis over the remaining lease term.
Impairment of Flight Equipment
We perform recoverability assessments of all our aircraft and other flight equipment at least annually, and more frequently when events or changes in circumstances indicate that the carrying amount or net book value of an asset may not be recoverable. We perform aircraft-specific recoverability tests when such indicators exist. 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. We 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 value deterioration.
For assets with indicators of impairment, we assess whether the estimated future undiscounted net cash flows expected to be generated by the asset exceed its net book value. These undiscounted cash flows include cash flows from currently contracted lease rentals and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. If an aircraft does not meet the recoverability test, the aircraft will be written down to its estimated fair value, resulting in an impairment charge.
Our estimates and assumptions are 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 subject to change in future periods and may be affected by 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.
If our estimates or assumptions change, 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.
Net Investment in Leases
If a lease meets specific criteria at lease commencement or at the effective date of a lease modification, we classify the lease as a direct financing or sales-type lease. The net investment in leases consists of the lease receivable, the estimated unguaranteed residual value of the leased flight equipment at lease-end and, for direct financing leases, deferred selling profit. For sales-type leases, we recognize the difference between the net book value of the aircraft and the net investment in the lease as a gain or loss on sale of fight equipment. Selling profit on a direct financing lease is deferred and amortized over the lease term, and a selling loss is recognized at lease commencement. Interest income on our net investment in leases is recognized as direct financing and sales-type lease revenue over the lease term in a manner that
produces a constant rate of return on the net investment in the lease.
The net investment in leases is recorded in the consolidated financial statements net of an allowance for credit losses. The allowance for credit losses is recorded upon the initial recognition of the net investment in the lease based on the Company's estimate of expected credit losses over the lease term. The allowance reflects the Company's estimate of lessee default probabilities and loss given default percentages. When determining the credit loss allowance, we consider relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the net investment in the lease. The allowance also considers potential losses due to non-credit risk related to unguaranteed residual values. A provision for credit losses is recorded as a component of operating expenses to adjust the allowance for changes to management's estimate of expected credit losses.
Fair Value Measurements
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 when events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include our aircraft and investment in unconsolidated equity method investment.
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 a combination of valuation techniques, including market approach (Level 2 or 3), which incorporates third party appraisal data, and an income approach (Level 3), which reflects the Company's assumptions and appraisal data regarding the present value of future cash proceeds from leasing and selling aircraft. Level 3 valuations contain significant unobservable inputs.
We account for our unconsolidated equity method investment under the equity method of accounting. Our investment 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.
Income Taxes
The Company records an income tax provision in accordance with the various tax laws for those jurisdictions within which our transactions occur. Aircastle uses an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount estimated by us to be realizable. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities. We did not have any unrecognized tax benefits.
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
See Note 1 in the Notes to Consolidated Financial Statements below.
RECENTLY PROPOSED ACCOUNTING PRONOUNCEMENTS
See Note 1 in the Notes to Consolidated Financial Statements below.
LIQUIDITY AND CAPITAL RESOURCES
Our business is very capital intensive, requiring significant investments in order to expand our fleet and to maintain and improve our existing portfolio. Our operations have historically generated a significant amount of cash, primarily from lease rentals and maintenance collections. We have also met our liquidity and capital resource needs by utilizing several sources over time, including:
•unsecured indebtedness, including our current unsecured revolving credit facilities, unsecured term financings and senior notes;
•various forms of borrowing secured by our aircraft, including term financings and limited recourse securitization financings for new aircraft acquisitions;
•asset sales; and
•issuance of common and preference shares.
Going forward, we expect to continue to seek liquidity from these sources and other sources, subject to pricing and conditions we consider satisfactory.
During the year ended February 28, 2026, we met our liquidity and capital resource needs with $483.1 million of cash flows from operations and $729.5 million of proceeds from the sale or disposition of aircraft and other flight equipment.
As of February 28, 2026, the weighted average maturity of our secured and unsecured debt financings was 3.1 years and we were in compliance with all applicable covenants. We have also determined that as of February 28, 2026, our consolidated subsidiaries' restricted net assets, as defined by Rule 4-08(e)(3) of Regulation S-X, are less than 25% of our consolidated net assets.
We believe we have sufficient liquidity to meet our contractual obligations over the next 12 months. As of April 1, 2026, total liquidity of $2.6 billion included $2.0 billion of undrawn credit facilities, $0.5 billion of projected adjusted operating cash flows and sales through April 1, 2027 and $0.1 billion of unrestricted cash through April 1, 2027. In addition, we believe payments received from lessees and other funds generated from operations, unsecured bond offerings, borrowings secured by our aircraft, borrowings under our revolving credit facilities and other borrowings and proceeds from future aircraft sales will be sufficient to satisfy our liquidity and capital resource needs over the next 12 months. Our liquidity and capital resource needs include payments due under our aircraft purchase obligations, required principal and interest payments under our long-term debt facilities, expected capital expenditures, lessee maintenance payment reimbursements and lease incentive payments.
Cash Flows
Year Ended February 28,
2026 2025
(Dollars in thousands)
Net cash flow provided by operating activities $ 483,053 $ 464,021
Net cash flow used in investing activities (897,586) (970,232)
Net cash flow provided by financing activities 315,370 655,286
Operating Activities:
Cash flow provided by operating activities was $483.1 million and $464.0 million for the years ended February 28, 2026 and 2025, respectively. The year ended February 28, 2026 included higher customer collections driven by the growth of our fleet and higher lease rates on lease extensions. These increases were offset by higher cash paid for interest, primarily due to higher weighted average debt outstanding during the year ended February 28, 2026.
Investing Activities:
Cash flow used in investing activities was $897.6 million and $970.2 million for the years ended February 28, 2026 and 2025, respectively. The net decrease of $72.6 million was primarily attributable to higher proceeds from the sale or disposition of aircraft and other flight equipment of $163.6 million, partially offset by a $122.6 million increase in cash used for the acquisition and improvement of flight equipment.
Financing Activities:
Cash flow provided by financing activities was $315.4 million and $655.3 million for the years ended February 28, 2026 and 2025, respectively. The net decrease of $339.9 million was primarily attributable to a $300.0 million decrease in proceeds from the issuance of our common shares. In addition, there were increases of $41.8 million in dividends paid to our Shareholders and $33.4 million in maintenance and security deposits returned, net of receipts. These outflows were partially offset by a $40.9 million increase in proceeds from secured and unsecured financings, net of repayments.
Debt Obligations
For complete information on our debt obligations, please see Note 8 in the Notes to Consolidated Financial Statements below.
Contractual Obligations
Our contractual obligations consist of principal and interest payments on debt financings, aircraft acquisitions and rent payments pursuant to our office leases. Total contractual obligations increased to $7.1 billion at February 28, 2026 from $6.7 billion at February 28, 2025, due to higher outstanding debt, interest obligations and aircraft purchase commitments.
The following table presents our actual contractual obligations and their payment due dates as of February 28, 2026.
Payments Due by Period as of February 28, 2026
Contractual Obligations Total 1 year
or less 		2-3 years 4-5 years More than
5 years
(Dollars in thousands)
Principal payments:
Senior Notes due 2026-2031 $ 4,350,000 $ 650,000 $ 2,050,000 $ 1,150,000 $ 500,000
Unsecured Revolving Credit Facilities and Term Loan 840,000 - 240,000 600,000 -
Other Financings 114,177 3,398 7,095 7,516 96,168
Total principal payments 5,304,177 653,398 2,297,095 1,757,516 596,168
Interest payments on debt obligations(1)
922,595 259,487 425,466 205,856 31,786
Office leases(2)
26,551 3,220 5,709 3,100 14,522
Purchase obligations(3)
829,526 583,400 246,126 - -
Total $ 7,082,849 $ 1,499,505 $ 2,974,396 $ 1,966,472 $ 642,476
_____________
(1)Future interest payments on variable rate, SOFR-based debt obligations are estimated using the interest rate in effect as of February 28, 2026.
(2)Represents contractual payment obligations for our office leases in the United States, Ireland and Singapore.
(3)At February 28, 2026, we had signed purchase agreements to acquire 17 aircraft for $829.5 million. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments. As of April 14, 2026, we have commitments to acquire 20 aircraft for $908.9 million.
Capital Expenditures
From time to time, we make capital expenditures to maintain or improve our aircraft. These expenditures include the cost of major overhauls necessary to place an aircraft in service and modifications made at the request of lessees. For the years ended February 28, 2026 and 2025, and February 29, 2024, we incurred a total of $24.0 million, $20.4 million and $76.0 million, respectively, of capital expenditures, including lease incentives, related to the acquisition and improvement of flight equipment.
As of February 28, 2026, the weighted average age of our aircraft, by Net Book Value, was 9.0 years. In general, the costs of operating an aircraft, including maintenance expenditures, increases as aircraft age. Our lease agreements generally require the lessee to be primarily responsible for maintaining the aircraft. Maintenance reserves are generally paid by the lessee to provide for future maintenance events. Provided a lessee performs scheduled maintenance of the aircraft, we are required to reimburse the lessee for qualifying maintenance payments. In certain cases, we are also required to make lessor contributions, in excess of amounts a lessee may have paid, towards the costs of maintenance events performed by or on behalf of the lessee. We may incur additional maintenance and modification costs in the
future if we are required to remarket an aircraft or if a lessee fails to meet its maintenance obligations under the lease agreement.
Actual maintenance payments to us by lessees in the future may be less than projected as a result of a number of factors, such as a lessee default. Maintenance reserves may not cover the entire amount of actual maintenance expenses incurred and, where these expenses are not otherwise covered by the lessees, there can be no assurance that our operational cash flow and maintenance reserves will be sufficient to fund maintenance requirements, particularly as our aircraft age. See Item 1A. "Risk Factors - Risks Related to Our Business - Risks related to our leases - If lessees are unable to fund their maintenance obligations on our aircraft, we may incur increased costs at the conclusion of the applicable lease.
Off-Balance Sheet Arrangements
We have an unconsolidated equity method investment in an aircraft leasing entity with Mizuho Leasing in which we hold a 25% equity interest. As of February 28, 2026, the Net Book Value of its 4 aircraft was $146.5 million.
The assets and liabilities of this entity are not included in our consolidated balance sheets and we record our investment under the equity method of accounting. See Note 7 in the Notes to Consolidated Financial Statements.
Foreign Currency Risk and Foreign Operations
At February 28, 2026, approximately 99% of our leases are payable to us in U.S. dollars. However, we incur Euro- and Singapore dollar-denominated expenses in connection with our subsidiaries in Ireland and Singapore. For the year ended February 28, 2026, expenses, such as payroll and office costs, denominated in currencies other than the U.S. dollar totaled $25.6 million in U.S. dollar equivalents and represented approximately 29% of total selling, general and administrative expenses.
Our international operations are a significant component of our business strategy and permit us to more effectively source new aircraft, service the aircraft we own and maintain contact with our lessees. Therefore, our international operations and our exposure to foreign currency risk will likely increase over time. Although we have not entered into foreign currency hedges, if our foreign currency exposure increases we may enter into hedging transactions in the future to mitigate this risk. For the years ended February 28, 2026 and 2025, and February 29, 2024, we incurred insignificant net gains and losses on foreign currency transactions.
Management's Use of EBITDA and Adjusted EBITDA
We define EBITDA as income (loss) from continuing operations before interest expense, income taxes, and depreciation and amortization. We use EBITDA to assess our consolidated financial and operating performance, and we believe this non-U.S. GAAP measure is helpful in identifying trends in our performance.
This measure provides an assessment of controllable expenses and affords management the ability to make decisions which are expected to facilitate meeting current financial goals, as well as achieving optimal financial performance. It provides an indicator for management to determine if adjustments to current spending decisions are needed.
EBITDA provides us with a measure of operating performance because it assists us in comparing our operating performance on a consistent basis as it removes the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our operating results. Accordingly, this metric measures our financial performance based on operational factors that management can impact in the short-term, namely the cost structure, or expenses, of the organization. EBITDA is one of the metrics used by senior management and the Board of Directors to review the consolidated financial performance of our business.
We define Adjusted EBITDA as EBITDA (as defined above) further adjusted to give effect to adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes. Adjusted EBITDA is a material component of these covenants.
The table below shows the reconciliation of net income to EBITDA and Adjusted EBITDA for the years ended February 28, 2026 and 2025, and February 29, 2024.
Year Ended February 28/29,
2026 2025 2024
(Dollars in thousands)
Net income $ 194,048 $ 123,613 $ 83,316
Depreciation 384,028 355,666 348,229
Amortization of lease premiums, discounts and incentives (280) 21,682 20,420
Interest, net 282,139 247,923 229,050
Income tax provision 28,863 21,948 23,265
EBITDA $ 888,798 $ 770,832 $ 704,280
Adjustments:
Impairment of flight equipment 53,323 19,391 55,240
(Gain) loss on extinguishment of debt 2,973 (285) -
Adjusted EBITDA $ 945,094 $ 789,938 $ 759,520
Limitations of EBITDA and Adjusted EBITDA
An investor or potential investor may find EBITDA and Adjusted EBITDA important measures in evaluating our performance, results of operations and financial position. We use these non-U.S. GAAP measures to supplement our U.S. GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.
EBITDA and Adjusted EBITDA have limitations as analytical tools and should not be viewed in isolation or as substitutes for U.S. GAAP measures of income (loss). Material limitations in making the adjustments to our income (loss) to calculate EBITDA and Adjusted EBITDA, and using these non-U.S. GAAP measures as compared to U.S. GAAP net income (loss), income (loss) from continuing operations and cash flows provided by or used in operations, include:
•depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our aircraft, which affects the aircraft's availability for use and may be indicative of future needs for capital expenditures;
•the cash portion of income tax provision (benefit) generally represents charges (gains), which may significantly affect our financial results; and
•adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our senior unsecured notes which may not be comparable to similarly titled measures used by other companies.
EBITDA and Adjusted EBITDA are not alternatives to net income (loss), income (loss) from operations or cash flows provided by or used in operations as calculated and presented in accordance with U.S. GAAP. You should not rely on these non-U.S. GAAP measures as a substitute for any such U.S. GAAP financial measure. We strongly urge you to review the reconciliations to U.S. GAAP net income (loss), along with our consolidated financial statements included elsewhere in this report. We also strongly urge you not to rely on any single financial measure to evaluate our business. In addition, because EBITDA and Adjusted EBITDA are not measures of financial performance under U.S. GAAP and are susceptible to varying calculations, EBITDA and Adjusted EBITDA as presented in this report, may differ from and may not be comparable to similarly titled measures used by other companies.
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