Investor and Analyst Day Presentation

May 14, 2014

Forward-Looking Statements
Certain items in this presentation and other information we provide from time to time, may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but 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, Adjusted EBITDA, Adjusted Net Income, Operating Cash Flow, Cash Earnings and Cash ROE 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 managements current expectations and beliefs and
are subject to a number of factors that could lead to actual results materially different from those described in the forwardlooking statements; Aircastle can give no assurance that its expectations will be attained. Accordingly, you should not place undue
reliance on any forward-looking statements contained in this report. Factors that could have a material adverse effect on our
operations and future prospects or that could cause actual results to differ materially from Aircastle expectations include, but are
not limited to, capital markets disruption or volatility which could adversely affect our continued ability to obtain additional
capital to finance new investments or our working capital needs; government fiscal or tax policies, general economic and business
conditions or other factors affecting demand for aircraft or aircraft values and lease rates; our continued ability to obtain favorable
tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay dividends; high or volatile fuel prices, lack of access to
capital, reduced load factors and/or reduced yields, operational disruptions caused by political unrest and other factors affecting
the creditworthiness of our airline customers and their ability to continue to perform their obligations under our leases and other
risks detailed from time to time in Aircastles filings with the SEC, including as previously disclosed in Aircastles 2013 Annual
Report on Form 10-K, and elsewhere in this report. 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
Limited expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on
which any statement is based.

The information contained herein is the property of Aircastle Limited and shall not be disclosed, copied, distributed or
transmitted, or used for any purpose, without the express written consent of Aircastle Limited.

Agenda
Introduction

Frank Constantinople, SVP/ IR

Business Strategy Overview

Ron Wainshal, CEO

Market Overview

Guy Bacigalupi, CRO

Investment Strategy

Mike Kriedberg, CCO

Portfolio Management
Financing Markets Update

Dave Walton, COO

Roy Chandran, EVP Capital Markets

Capital Structure and Financial Performance

Mike Inglese, CFO

Q&A
3

Business Strategy Overview

Aircastle Profile & History

Formed 10 years ago as a bespoke aircraft investor and lessor

Went public in Aug 2006 (NYSE: AYR)

Sold significant minority stake to Marubeni Corporation in Jul 2013

At Mar 31, 2014 owned 164 aircraft leased to 65 customers in 37 countries

$5.8 billion in book value of aircraft and $1.6 billion in equity book value

One of the Worlds Leading Aircraft Investors

5

Corporate Strategy
Value Investor in commercial jet aircraft
Cash flow-driven and long term oriented
Flexible capital structure with efficient financing access from many sources
Strong in-house team to capitalize on a multitude of opportunities
Counter-cyclical approach to buying / selling
Return capital to shareholders on a regular basis
Ownership structure with core long-term minded shareholders

Differentiated strategy that builds on our strengths

6

World Class Management Team

Team

Aircastle Role

Previous Role

Ron Wainshal

Chief Executive Officer since 2005 GECAS - Asset Management Group

Head, Restructuring Leader

Michael Inglese

Chief Financial Officer since 2007

David Walton

Chief Operating Officer since

Boullioun Aviation Services Chief
2006; General Counsel since 2005 Legal Officer

Michael
Kriedberg

Chief Commercial Officer since

2013

GECAS - Executive Vice President,

Aviation Financing Operations

Roy Chandran

Executive Vice President, Capital

Markets since 2008

Citigroup Director, Capital

Markets

Guy Bacigalupi

Chief Risk Officer since 2012

GE Capital - Risk Management;

Federal Reserve Bank of New York

PanAmSat Chief Financial Officer

Experienced and well-integrated team

7

Shareholders
NYSE-listed with two large, strategic investors with long-term, global orientations
Completed evolution from private equity funded start-up

Marubeni and Ontario Teachers collectively own ~30% of Aircastles shares

$209 million share sale to Marubeni completed in July 2013
Marubeni has two of ten seats on Aircastles Board

Premier Japanese trading company

Blue chip company with 150+ year history

120 offices in 65 countries
$70 billion in assets
Stock market capitalization of $12 billion
Broad aerospace industry experience

Leading Canadian pension plan

$140 billion in assets under
management
Largest single profession pension plan
in Canada
Significant global investor

Diverse shareholder base with two major investors

8

Investment Strategy
Analytically driven and price sensitive
Cash flow minded
Underwrite to hold; trading mindset
Broad approach to sourcing investments

Focus on value-add situations

Sensitive to last off the line / aircraft production life effects
Countercyclical orientation
Require return premium for future capital commitments

Savvy aircraft investor with disciplined approach

9

Economic Lives of Aircraft

An aircraft will remain economically viable as long as the present value of
future earnings is more than its disposition value
Engines are the most maintenance intensive parts of aircraft and account for
most of an aircrafts residual value
Engine values are driven by maintenance condition, not age
Engine values are highest when the installed base is largest

Our investment viewpoint:

Aircraft from the earlier part of a production run are likely to last longer
Last off the line aircraft typically have shorter lives
Aircraft residual values are primarily engine related, and these are most robust
earlier in the production run when the installed base is highest

10

Aircraft Value over the Production Life

The depreciation rate for last off the line aircraft is roughly twice that of a unit
produced during the first part of the production life
Chart also shows business cycle impacts on value

Market Value History: A320-200

($ millions)

$45.0

Slope 7% p.a.

$40.0

$35.0
$30.0
$25.0

Slope 4% p.a.

$20.0
$15.0
$10.0

Good time to
buy

$5.0
$0.0
1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

Source: Ascend.

11

Comparing New with Current Technology Aircraft

Consider incremental revenue generating potential
No additional seats for NEO/ MAX vs. CEO/ NG

Lower fuel consumption most easily calculated benefit

But what fuel cost levels to assume and what will lessees bear?

Gallons per year

A320 NEO vs. CEO (Illustrative)

1,750,000
2,000,000

Monthly Benefit from 12% fuel efficiency gain

Fuel Price/ gallon $ 2.50
$43,750
$50,000
$ 3.00
$52,500
$60,000
$ 3.50
$61,250
$70,000

2,250,000

$56,250
$67,500
$78,750

Note: Jet fuel price per gallon at market close on May 9, 2014 was $2.87 per Bloomberg JETINYPR index.

Maintenance costs
Hard to gauge how new technology will perform, particularly engines

Residual value and useful life

Production levels expected to rise

12

Capital Structure
Conservative
Multiple funding sources
Balance between secured and unsecured
Neutral to interest rate movements

Manage maturity walls

Corporate revolver for flexibility and to capture opportunities

Maintain access throughout market cycle

Flexible financing approach;

Integrated with investment strategy
13

Business Outlook
Global GDP growth forecast to increase
slowly
Recovery in Europe, slowing growth in Asia

GDP growth will drive passenger travel

Air freight expected to benefit eventually
However, a glut of supply poses a big challenge
for the sector

Low interest rates and high fuel prices are

having a significant impact on the aircraft
market
IATA Forecast

GDP Growth Rates

2010 2011 2012 2013 2014P
5.2% 3.9% 3.2% 3.0% 3.6%

World Output
Advanced Economies
United States
Euro Area
Japan
Developing Asia

2.5%
2.0%
4.7%
9.7%

1.8%
1.6%
-0.5%
7.9%

2.8%
-0.7%
1.4%
6.7%

1.9%
-0.5%
1.5%
6.5%

2.8%
1.2%
1.4%
6.7%

Emerging Economies
China
India
Brazil
Turkey
Russia

10.4%
10.3%
7.5%
9.2%
4.5%

9.3%
6.6%
2.7%
8.8%
4.3%

7.7%
4.7%
1.0%
2.2%
3.4%

7.7%
4.4%
2.3%
4.3%
1.3%

7.5%
5.4%
1.8%
2.3%
1.3%

Source: International Monetary Fund, World Economic Outlook Database, April 2014.

2014

2015

2016

2017

Pax Traffic Growth

5.8%

6.7%

6.6%

6.3%

Air Cargo Traffic Growth

4.0%

5.4%

5.1%

4.2%

Source: IATA Industry Financial Forecast Table, March 2014.

14

Action Plan for 2014 / Corporate Goals

Situation
Growing investment opportunity set
More new deliveries and increased aircraft
trading activity

Many new aircraft families being

introduced

Action
$1 billion in new investments during 2014
Completed $715 million in Q1
$400 million in additional commitments, although second part of
LATAM deal could slip to 2015

Analyzing new products

Low interest rates

Strong bank and debt capital markets
conditions

Pursue refinancing opportunities

Good demand for part-out aircraft

Significant capital inflows into aircraft
market

Part-out sales help address lease roll-off

Demand for rental aircraft generally

strong

Address lease placement needs

Two major long-term minded

shareholders

Pursue Marubeni synergies and JV opportunities with Teachers

Emerging markets volatility

Maintain vigilant asset & risk management approach

Repaid 2006-1 securitization and 9.75% notes

Issued new 5.125% notes; new secured bank debt deals
Expanded and enhanced revolver
Six end of life aircraft sold in Q1
Expect to sell eight to ten more end of life aircraft during 2014

Pursue opportunistic sales actively

Only two aircraft left for 2014; making progress on 2015

Drive Cash ROE and sustainable earnings higher

15

Market Overview

16

Aircastles Risk Management Approach

Defined Risk Appetite

Transaction Process

Customer Diversification

Credit Analysis

Geographic Diversification

Transaction Analysis

Asset Diversification

Know Your Customer

Portfolio Run-off

Deal Approval

Transaction

Portfolio Monitoring

Customer

Weekly Watch List

Quarterly Risk Review
Annual Risk Update

Portfolio

Customer Management
Financial Monitoring
Credit Scoring
Ongoing Dialogue
Annual Reviews

Risk Management is a series of concentric processes

17

Global Airline Profitability

North American airlines leading
industry in terms of profitability

$20

$18.7
$17.3

$15

- Generating almost half of total profits

- Showing continuing growth

$12.9

$10
$7.5

Asia-Pacific has resumed growth

- Recovering after sharp 2010-12 drop
- Rate of growth relatively subdued

Europe and Latin America are also

finally showing some profit growth

Overall operating margins remain weak

- Margins remain below 5%
- Doesnt cover cost of capital

$6.1
$5

$0

2010

2011

2012

2013

2014F

IATA Net Profit Projections ($, Billions)

North America
Europe
Asia-Pacific
Middle East
Latin America
Africa
Global
Operating Margin

2010
4.2
1.9
9.2
0.9
1.0
0.1
$17.3
4.9%

2011
1.7
0.3
4.2
1.0
0.2
0.0
$7.4
2.3%

2012
2.3
0.4
2.7
1.0
(0.2)
(0.1)
$6.1
1.8%

2013E
6.8
1.2
3.0
1.6
0.4
(0.1)
$12.9
3.0%

2014F
8.6
3.1
3.7
2.2
1.0
0.1
$18.7
4.3%

Increasing airline profitability

Source: IATA Fact Sheet March 2014

18

Interest Rates and Fuel Prices

Interest Rates (7 year Swap)

Fuel (Jet Fuel $/barrel)

8.0%

$180

7.0%

$160
$140

6.0%

$120

5.0%

$100

4.0%
$80

3.0%

$60

2.0%

$40

1.0%
0.0%
2000

$20

2002

2004

2006

2008

2010

2012

Interest rates at historic low levels

- How long will they stay there?

Capital markets access is broader

- Non-US carriers issuing EETCs
- New entrants coming into leasing business

Low rates improve aircraft affordability

- But have also driven up aircraft prices

$0
2000

2002

2004

2006

2008

2010

2012

2014

Fuel prices have stabilized since 2011

- Albeit at relatively high levels

Largest expense item for most airlines

High fuel prices favor new aircraft models
Susceptible to geopolitical event risk
- Hedging can only smooth out short term
volatility

More stable macroeconomic environment

Source: Bloomberg

19

Demand for Air Travel

RPKs1 (billions)

2000

2022

North America

1.2

36%

2.6

29%

3.5%

Europe

1.0

30%

2.3

26%

3.9%

Asia-Pacific

0.8

24%

2.3

26%

5.0%

Middle East

0.1

3%

0.9

10%

10.7%

Latin America

0.1

4%

0.5

6%

6.1%

Africa

0.1

2%

0.2

3%

5.3%

Industry

3.3

100%

8.9

100%

4.6%

CAGR

RPKs will almost triple in a little over 20 years

North America will remain the largest market, but with smaller overall share
Asia-Pacific will grow to same size as Europe
Fastest growth in Middle East at 10%+ CAGR
Latin America and Africa also growing, but at slower rate
1. RPK: Revenue Passenger Kilometers.

Center of gravity is shifting to Asia-Pacific

Source: IATA / Airbus.

20

Aircraft Deliveries
19952000

20152020

North America

1,127

35%

1,963

29%

2.8%

Europe

1,011

32%

1,633

24%

2.4%

Asia-Pacific

792

25%

1,832

27%

4.3%

Middle East

119

4%

678

10%

9.1%

Latin America

97

3%

506

8%

8.6%

Africa

61

2%

120

2%

3.4%

Industry

3,207

100%

6,732

100%

3.8%

Aircraft Deliveries1

CAGR

Flow of new aircraft deliveries follows changes in traffic

Asia-Pacific fleet will surpass Europe and be almost as large as North America
Significant aircraft deliveries into the Middle East and Latin America
Growth rate of deliveries lower than that of passenger demand
1. Mainline aircraft only.

Deliveries reflect changing global traffic flows

Source: IATA / Airbus.

21

Major Aircraft Product Families

Seating
Capacity

2014

2020

A380

A380

747-8

777X
777

A330

A350

A330 (NEO?)

787-8/9/10

A320
NEO

737
Max

787-8

A320
CEO

737 NG

E-2
E-Jets

New aircraft offerings in nearly all sizes

22

Low Cost Carriers

450

41.5%

41.1%

38.6%

400
350

ASKs (Bilion)

300

25.6%

250
19.4%

200
13.3%

150
8.6%

100

50

4.3%

2004
Europe LCC ASKs

2007
Asia LCC ASKs

2010
European LCC Share

2013
Asian LCC share

In Europe, nearly one short-haul passenger in two is flying with a low cost carrier
In Asia-Pacific, low cost carriers got off to a slower start
- Are catching up with Europe in terms of ASKs1
- Total Asian LCC ASKs would double were penetration to reach European levels

LCCs dominate point-to-point leisure markets, leaving legacy carriers long-haul

1. ASK: Available Seat Kilometers.

LCCs have transformed short/mid haul markets

Source: Seabury.

23

Gulf Mega-Connectors
450

6.0%

400

ASKs (Billion)

350

4.8%

300
250

3.2%

200
150

2.0%

100
50
0
2004
Emirates

2007
Qatar

2010
Etihad

2013

% of Global ASK

Emirates, Qatar & Etihad doubling market share every two years
- Favorable geographic location at intersection of Europe, Asia & Africa
- Taking advantage of starting with clean sheet of paper

Seriously impacting long haul markets served by European & Asian legacy carriers
- Qantas dropped long standing arrangement with BA has re-trenched east of the Suez Canal
- Air France moved from lobbying for protection to signing code shares
- Etihad taking minority stakes in various carriers to feed Abu Dhabi hub

Gulf carriers transforming long haul market

Source: Ascend.

24

Legacy Carriers Transformation

North America

Europe

Four carriers dominate market

Postmerger elimination of weaker brand

Delta

Northwest

United

Three large groups have emerged

No entities have been eliminated
Host of independent players left
Lufthansa

Austrian, Swiss,
Brussels

Air France

KLM

British Airways

Iberia

SAS

TAP

Continental

Southwest
American

AirTran
US Airways

South America
Market also down to four carriers
Two independent players left in Brazil

Avianca

TACA

LAN

TAM

GOL

Azul

Alitalia
Air Berlin

Aer Lingus

Rest of World
No material consolidation to date
National Flag Carriers in many markets
Bilaterals & access rights still drive
business

Many legacy carriers consolidating

25

Air Freight
350

25

27%

26%

25%
23%

300
53.9%

24%

22%

22%

21%

15

10

FTK/ATK (Billions)

20

250

52.0%

51.6%

51.2%
49.7%

49.6%
48.5%

49.1%

200

150

100

2006

2008

2010
Air Tonnes

2006

2012

% Air Value

2007

2008

Demand (FTK)

2009

2010

Supply (ATK)

2011

2012

2013

Load Factor

Stagnant demand for air freight

450
400

- Modal shift from air to surface / on-shoring

- Miniaturization of many consumer products

350
300

Supply continues to grow

250

- New passenger aircraft have belly capacity

- Manufacturers continue to produce freighters

200
150
100

This imbalance puts pressure on sector

50

0
2003

2008
Classics/DC-10

747-400/MD-11

2013
747-8/777/A330

2014

- Load factors low and declining

- Various players forced to exit sector
- Converted 747-400s being parked/scrapped

Freighter market under continued pressure

Source: Seabury, IATA, Ascend.

26

Macro Outlook Impact on Lessors

Development

Pros

Cons

Growth in air travel

Increases demand for

leased aircraft

Attracting more
competitors

Low interest rates

Attractive funding

Lower lessor yields

Lower rents

High fuel price levels

Increased airline pressure

to re-fleet

Mixed effect on aircraft

competitiveness

New aircraft models

More fleet trade-out

opportunities

Increased obsolescence
risk

Increase in new aircraft

deliveries

More financing
opportunities

Higher long term risk of

overcapacity

Limited new aircraft

availability

Should result in better

lease terms for lessors

Longer wait for new order

stream opportunities

Improving airline credits/

consolidation

Better credit quality

customers

Stronger negotiating
leverage for airlines

Change Presents Opportunities

27

Investment Strategy

28

Investment Strategy
Analytically driven and price sensitive
Cash flow minded
Underwrite to hold; trading mindset
Broad approach to sourcing investments

Focus on value-add situations

Sensitive to last off the line / aircraft production life effects
Countercyclical orientation
Require return premium for future capital commitments

Savvy aircraft investor with disciplined approach

29

Passenger Aircraft Rentals

Rents for new wide-bodies have recovered to pre-crisis levels
Rents for new narrow bodies have also improved though still below earlier peaks
Gap between 737-800 and A320 is closing
Rents for older aircraft have been relatively stable
10-Year Constant Age Aircraft
$1,500k

$1,300k

$1,300k

$1,100k

$1,100k

Monthly Rent

Monthly Rent

New Aircraft
$1,500k

$900k
$700k

$900k
$700k

$500k

$500k

$300k

$300k

$100k
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$100k
2007

2008

2009

2010

2011

2012

2013

2014

Source: Ascend.

Aircraft rental levels improved for new, flat for used

30

Aircraft Valuation Trends

Higher new narrow-body values
Still below pre-crisis peaks; new technology increases downside risks

Appraiser values for mid-aged narrow-bodies dont yet reflect market increases
Older 738 values much higher than A320s
New wide-body values are approaching / exceeding 2008 peak levels
Larger variants outperforming, with 777-300ER doing best; delays & new model backlog has helped

Older wide-body values have not recovered

Narrowbody CMVs

$50MM

Widebody CMVs

$180MM
$160MM

$45MM

Current Market Value

Current Market Value

$140MM
$40MM
$35MM
$30MM
$25MM

$120MM
$100MM

$80MM
$60MM
$40MM

$20MM

$20MM
$MM

$15MM

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
A320-200 New
A320-200 10Y Constant

Source: Ascend.

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
A330-300 New
A330-300 10Y Constant

737-800 New
737-800 10Y Constant

777-300ER New
767-300ER 10Y Constant

Source: Ascend.

Aircraft trading values are increasing

31

New vs Used Narrow-Body Analysis

Much of an aircrafts value derives from cash flows and residual after first lease
Conventional book depreciation for late production aircraft may be too optimistic

Mid-aged A320 base value at year 12 (2026) at around part-out value

We believe this may have less down-side risk

Entry price a very important consideration

Appraised Value Analysis1
Valuation Year

2014 A320

2002 A320

Comments

2014

Market Value

$40.5

$20.0

12 year old aircraft

value is less than
half of new

2026

Base Value

$18.9

$12.6

2026 value for new

A320 very close to
todays value for a
12 year old aircraft

Lower residual risk on todays mid-aged narrow-bodies

1. Full life values. Amounts in millions.
Source: Ascend.

32

IRR Comparison
Interest rates are extremely low
Fierce competition for new narrow-body aircraft; lowest barrier to entry type for investors
New wide-body deals have become more competitive

Some attractive returns remain available on mid-age, current technology aircraft

Return levels vary significantly by asset types and by situation

Investment
5 Year US$ Swap Rate

New Narrow-body
Unlevered IRRs
New Wide-body
Unlevered IRRs

Mid-age Aircraft
Unlevered IRRs

Last Peak
2007

Last Trough
2009

Q1
2012

Q1
2014

4.2%

2.9%

1.7%

1.8%

6-7%

11-12%

5-7%

4-7%

7-8%

11-13%

8-10%

6-9%

8-9%

15-16%*

11-14%

8-11%

This information is for illustrative purposes only and does not include the effect of maintenance cash flows or overhead, and is not intended to illustrate the financial statement
impact in a particular year of aircraft acquired during the course of that year.
* Very limited # of deals traded.

33

Market Assessment

Asset / Situation

Commentary

New current generation narrowbodies

(A320 CEOs & 737 NGs)

Extremely competitive with ample debt availability

Monthly rental yields 0.70-0.85%
Last off the line risk for residuals

New current generation widebodies

(A330s & 777ERs)

Increasingly competitive, but less so than narrow-bodies

Monthly rental yields 0.80-0.95%; prices vary broadly
Increasing residual risk given new models

New next generation widebodies

(787s & A350s)

Extremely competitive with ample debt availability

Monthly rental yields 0.70-0.80%
Will 787-8s hold their value? Will A350 go smoothly?

Mid-aged current generation

aircraft

Less competitive; some debt availability

Monthly rental yields 0.9-1.2%; very broad price ranges
Time intensive; greater re-lease risk

New order aircraft

(current & next generation)

Long wait (5-8 years) unless for end of the line aircraft
Pricing expensive, particularly with escalation
Economic drag from pre-delivery deposits
Future financing terms uncertain

34

Increasing New Deliveries

Estimate the value of new aircraft deliveries in 2014 is approximately $110 billion
$40-50 billion higher than five years earlier
Shrinking level of ECA involvement

Estimated New Aircraft Deliveries

($billions)
$160
$140
$120
$100
$80

$60
$40
$20
$0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Boeing.

Growing investor opportunity set

35

Aircraft Trading Levels

Aircraft trading levels recovering sharply in 2014
Drop was due to limited financing for used aircraft and high book values

Recent recovery in asset values driving more sales going forward

Improvement in financing terms
New entrants with lower yield requirements

Increasing portfolio management pressures at large lessors could spur more activity
UsedAircraft
Aircraft
Transactions
Transactions
3,000

2,500

2,000

1,500

1,000

500

0
2005

2006

2007

2008

2009

2010

2011

2012

2013

Source: Ascend.

36

$3 Billion in Acquisitions Since 2012

Aircraft

% of Total
Investments

Lessees

New Wide-Bodies:
7x 777-300ERs
13x A330s

LATAM
Singapore
Virgin Australia
Air Canada

Asiana
Garuda
Thai Airways
EVA

70%

Mid-Aged Narrow-Bodies:
16x 737-800s
8x A320 Family

Alaska
Volaris
Monarch
Jeju

United
Garuda
Jet Airways
Korean

17%

Classic Generation:
7x 767-300ERs

Thomas Cook/ Condor

Delta

6%

Regional Jets:
5x E-Jets

Azul

7%

Significant investment in newer wide-bodies

37

2014 Outlook
$715 million of investments completed in Q1
$400 million in additional investment commitments

Sourcing opportunities:
Lessors: exposure management solution for large players; exits for smaller entities
Airlines: custom tailored solutions with fleet management / exit strategy orientation and
supporting growth at airlines with promising business models

Pipeline remains promising but competition has increased

Focus on situations where our team, deal sourcing capabilities and financial flexibility provide
us with an edge
Anticipate we will be most competitive with mid-aged aircraft
Capture opportunities utilizing the benefits for the Ontario Teachers JV

Evaluating new technology aircraft

But acquisition prices / rentals need to be considered relative to current technology aircraft

38

LATAM 777-300ER Case Study

Purchase and lease back of eight Boeing 777300ERs for ~$900 million
LATAM is the largest airline group in South America
Four aircraft built in 2012 closed in Q1 with
leaseback periods averaging 60 months
Four aircraft built in 2008 expected to close when
the existing financing is unwound*
Leases will expire in 2017 and 2018
Deal provides LATAM with a complete 777-300ER
fleet solution
Aircraft will come off lease at a time when few
comparable new generation aircraft anticipated to
be available

Why we were successful:

Placement capability & view

Financial flexibility

Ability to invest in size

Reliability and speed

Relationship

* Subject to an outside closing date of June 30, 2015.

39

Portfolio Management

40

Aircraft Fleet Evolution

$1.45 billion in acquisitions during 2013 and $715 million in Q1:14
Nearly 75% invested in aircraft less than five years old
Weighted average fleet age reduced to 9.1 years

Freighter and classic generation aircraft sales also transforming the fleet
Fleet Distribution as a % of Total Net Book Value
Aircraft Type

Model

YE 2009

YE 2011

YE 2013

Q1 2014

Current Generation

A330s

17%

23%

30%

29%

Mid- & Wide-Bodies

777ERs

2%

5%

12%

20%

Current Generation

737 NGs

18%

17%

18%

17%

Narrow-Bodies

A320 CEOs

17%

14%

12%

11%

Freighters

747-400s

27%

22%

17%

15%

Other Freighters

3%

9%

2%

1%

Classic Generation

737s

4%

2%

1%

<1%

Aircraft

757s & 767s

12%

8%

5%

4%

Regional Jets

E-Jets

0%

0%

3%

3%

* Percentage of net book value. Figures as of March 31, 2014.

41

Diversified Customer Base

65 airline customers across the globe
Largest individual exposure is 9.3% of total NBV

Large, national flag carriers comprise most of our top customers

Top Ten Lessees
% of NBV*
> 6% per Customer

3% to 6% per
Customer

Customer

Country

#Aircraft

LATAM

Chile

South African Airways

South Africa

Thai Airways

Thailand

Singapore Airlines

Singapore

Martinair

Netherlands

Emirates

UAE

Garuda

Indonesia

US Airways

USA

11

Jet Airways

India

Virgin Australia

Australia

* Percentage of net book value. Figures as of March 31, 2014.

42

Broad Geographic Distribution

Regional distribution evolving with global trends
Asian customers now 38% of portfolio NBV vs. 20% at YE 2009
European exposure now 28% of total NBV vs. 46% at YE 2009

Airline customers based in 37 countries

Top Ten Countries
Country

#Customers

% of NBV*

Chile

9.3%

Russia

6.6%

USA

6.1%

Thailand

5.7%

South Africa

5.5%

Singapore

5.4%

Netherlands

5.2%

South Korea

4.2%

UAE

4.1%

Indonesia

3.8%

* Percentage of net book value. Figures as of March 31, 2014.

43

Asset Sales Key to Portfolio Management

We sell aircraft opportunistically, to manage exposure and to exit at the right time
49 aircraft sold since end of 2010
More than $1.1 billion in proceeds

Generating solid gains over time

Gain on sale exceeds $80 million since end of 2010
Aircraft Sold Since Year End 2010
Opportunistic
Sales

2x A330-200
3x A330-200F
4x 737-800

Exposure
Management

3x A330-200
1x A330-300

1x A319-100
3x A320-200

Exit Strategy

1x 767-300ER
4x 737-400F

8x 737-Classic
4x 757-200
9x 767-300ER
1x 747-400

1x A310-300F
4x 737-300F

Sold 66 aircraft since inception and generated unlevered IRR of 11.1%1

* Figures as of March 31, 2014.

1 Unlevered Internal Rate of Return; assumes annual SG&A expense equal to 1% of purchase price and excludes taxes and interest expense, interest rate hedging charges and
other effects of financing.

44

Successfully Using Maintenance Timing in Exit Strategy

Lessees pay for maintenance time burned off leased aircraft
Maintenance cash balance and maintenance value of the metal inversely related
Cash maintenance payments grow in significance as aircraft age

Optimizing lease term and structure makes exit easier

Careful monitoring and active management are also key
Exit opportunity may present itself before scheduled lease-end

Usually best execution when cash balance is high

Cash maintenance payment balance

Optimal time to
exit

Full-life value

Run-out value
Time
Maintenance value of metal
45

Case Study: Sale vs. Lease of 1999 Boeing 737-700

Cash flow drives decision-making
Part-out

Lease & Reinvest

Sale of engine 1

$4.04

Sale of engine 2

4.34

NPV of rentals

7.27

Sale of airframe

5.60

NPV of mtx payments

2.60

Return condition buy-out

0.44

NPV of residual value

3.66

Total

$14.44

Lease transition costs

Total

($0.31)

$13.22

All $ in millions.

Positive net P&L impact

Maintenance revenue
exceeds transactional
impairment
Consider book impacts of
metal together with lease
Holding period unlevered IRR
expected to be ~10%1

Transactional
Impairment

P&L Impact
Net book value
Sale of equipment
Net gain/(loss)

$16.42
14.00
($2.42)

Maintenance revenue

5.23

Return condition buy-out

0.44

Total
All $ in millions.

$3.25

Maintenance
Revenue

1 Unlevered Internal Rate of Return; assumes annual SG&A expense equal to 1% of purchase price and excludes taxes and interest expense, interest rate hedging charges and
other effects of financing.

46

Good Progress Managing Freighter Investments

Track record of successful freighter sales
Four in 2013 generated $25 million in gains on sale
Four in Q1:14 for a modest gain
Working to sell two 747-400 converted freighters in 2014

Q1:14 exposure down to 16% of total net book value*

Modest near-term lease placement task
One converted freighter aircraft in 2014
Three freighters in 2015; 2.9% of total NBV

Plan to work exposure down over time

Older freighters are 7% of total net book value
Younger freighter fleet is 9% of total net book value

Five factory-built 747-400s; weighted average remaining lease term of four years
Good customer quality

* Percentage of net book value. Figures as of March 31, 2014. Weighted average remaining lease term is weighted by total NBV.

47

Consistently Strong Portfolio Performance

Portfolio utilization of 98-99% and rental yield of ~14% over past six years
Q1:14 utilization of 98.9% and rental yield of 13.5%
Yield reflecting impact of investments in newer wide-body aircraft with long leases
Historical Revenue Utilization1 and Yield2

Utilization

Q114

Q413

Q313

Q213

Q113

Q412

Q312

Q212

6%
Q112

80%
Q411

7%
Q311

82%
Q211

8%

Q111

84%

Q410

9%

Q310

86%

Q210

10%

Q110

88%

Q409

11%

Q309

90%

Q209

12%

Q109

92%

Q408

13%

Q308

94%

Q208

14%

Q108

96%

Q407

15%

Q307

98%

Q207

16%

Q107

100%

Yield

Diversification and active asset management drive results

1.
2.

Aircraft on-lease days as a percent of total days in period weighted by NBV.

Calculated as lease rental revenue / average NBV of flight equipment for the period. Rental revenue does not include maintenance revenue.

48

Financing Markets Update

49

Very Attractive Aviation Financing Markets

Historical Rate Lows Driving Markets
Rates continue to be very low in historical terms driving the search for yield
Since 1980, 5-year and 10-year Treasury only lower < 10% of the time
Aviation Sector Seen As Good Diversification Play
Both traditional and non traditional lenders expanding lending envelope
JPM High Yield Index Yield to Worst (Spread to Worst data in call out boxes)
21%
All-time high YTW: 20.9%
All-time high STW: +1,925 bps

J.P. Morgan Global High Yield Index Yield to Worst

19%
17%
20-year average: 9.84%

15%
13%
Current YTW: 5.58%
Current STW: +437bps

11%

% of time below current level: 0.29%

All-time low YTW (5/8/13): 5.24%

9%

Previous all-time low YTW (3/15/13): 5.83%

Previous all-time low YTW (1/5/05): 6.95%

7%
Previous low YTW (5/11/11): 6.75%

5%
May-86

May-90

May-94

May-98

May-02

May-06

May-10

May-14

Source: J.P. Morgan High Yield Research.

50

Growing Capital Markets Role In Aviation Financing

Ample Access To Bond Markets
Both airlines and lessors have tapped markets aggressively
Secured and unsecured deals across range of instruments (EETCs, ABS, EXIM/ECA
bonds)
Foreign airline EETC issuance ~$3.1 billion vs $5.0 billion + domestic EETCs
Aviation Capital Markets Issuance Hit Record Levels in 2013

40,000
35,000

5,214

30,000
25,000
5,127
21,498

20,000
2,859

15,000

10,558
1,401

10,000
5,000
0

10,701

5,657

3,712
2,300

2009

6,245

4,955

2010

5,534
3,349

2011
Unsecured

9,652

8,910

Secured

2012
Ex-Im

2013

2014YTD

ABS

Source: Bloomberg, Press Releases.

51

Other Market Observations

Lessors Take Full Advantage of Robust Capital Market Conditions
Since 2010, $22 billion+ in unsecured issuance by lessors
Asset-based lending less relevant as credit markets fill the gap

Decoupling of ratings from trading / issuance levels

Aviation Bank Market Returning
Core aviation lenders (European, Asian and some US banks) stepping up lending
Basel compliance resulting in overweighting of credit factors (vs. asset)
Regional banks motivated by relationship lending adding capacity

Diminishing Export Credit Influence on New Delivery Financing

Volumes dropped from high of 31% ($29.5 billion) to estimated 15% ($16.8
billion) in 2014
Combined impact of robust credit markets and higher cost of ECA guarantee
Reducing margins (from high of ~130bps to ~40bps) also a factor

52

Aircastles Proven Access To Multiple Forms Of Debt Financing

Unsecured Bonds
$900 million in two issuances since 2013 ($2.65 billion in total since 2010)
Significant reduction in incremental cost of financing since 2010 (~400 bps)
Significantly expanded institutional investor base
Expanded Unsecured Revolving Credit Facility
$450 million / four year facility
Nine international banks
Multiple Secured Bank Financings
In excess of $700 million in nine separate financings (including Teachers JV
financing)
Six core aviation bank lenders
ECA Bond Market
Refinanced ECA bank facility into bond market

Integrated acquisition and growth capital strategy

53

Debt Mix and Unencumbered Asset Trend

$ millions

Debt Mix
100%

$3,500
15%

90%

$3,000

49%
80%
58%

70%
60%

$2,500

$2,000

50%
$1,500

85%

40%
30%

$1,000
$ millions

51%
42%

20%

$500

10%
0%

$0
12/31/09

12/31/10
Secured Debt %

12/31/11
Unsecured Debt %

12/31/12

12/31/13

Unencumbered Assets

1. Unencumbered Assets include cash and cash equivalents.

Capital structure reshaped given strong conditions and market validation

54

Joint Venture With Ontario Teachers Pension Plan

Formed joint venture with Teachers in late 2013
Aircastle owns 30% of the equity, Teachers 70%
Non-recourse debt to fund 65-70% of aircraft acquisitions
Target $1 billion in aviation assets
Aircastle servicing the portfolio

Key benefits and rationale

Enables Aircastle to pursue larger ticket transactions
Partner with sophisticated long-term minded investor
Leverages platforms asset management skills
Helps with concentration risk

55

Capital Structure and Financial Performance

56

Capital Allocation Framework: Shareholder Return Focused

Balanced approach to capital allocation:
1. Acquire incremental assets and prune low
margin assets to drive higher cash returns
over time
$4.0 billion of total aircraft investments from
2011 through Q1:14; NBV of flight equipment
up approximately $1.4 billion

140.0%

Through 05-07-2014, AYRs TSR from 01-012011 was +92.3%

120.0%

100.0%

80.0%

60.0%

2. Provide regular quarterly return of capital

to shareholders

40.0%

$157 million of dividends paid from 2011

through Q1:14

20.0%

0.0%

3. Opportunistically use share repurchases

Share repurchases of $138.5 million since
2011 at an average price of $11.87 per share

-20.0%

-40.0%
1/1/2011

1/1/2012

1/1/2013

1/1/2014

Source: Bloomberg. Total Shareholder Return (TSR) includes gross dividends plus
share price appreciation from January 1, 2009 through the close on May 7, 2014.

57

Transformed Capital Structure and Reduced Cost of Debt

Unsecured Debt
$3,000

Equity

Weighted Average Rate

6.00%

5.81%

5.80%

5.57%

5.60%

5.37%

$ millions

5.40%

5.22%

$2,000

5.20%

$1,500

5.00%
4.80%

$1,000

4.60%

4.63%

Weighted Average Interest Rate

$2,500

5.80%

Secured Debt

4.40%

$500

4.20%
$0
2009

2010

2011

2012

2013

Q1:14

4.00%

Unsecured Debt is 57% of Total Debt Pro-Forma March, 31, 2014

1.
2.

Weighted average rate reflects fixed rates for all unsecured bonds and all fixed rate secured debt. For Securitization No. 2, reflects fixed swap rate in effect plus margin at period end.
Debt and equity balances are as of period end. Q1:14 debt and equity are pro-forma and reflects the redemption of $450 million of 9.75% on April 25, 2014.

58

Strong Revenue and Cash Generation

Lease revenue growth tracks net growth in flight equipment
Consistent lease rental revenue drives strong cash flow and Adjusted EBITDA
Lease Rental Revenue and Adj. EBITDA2
Lease Rental Revenue

Adj. EBITDA

$800
$719

$717

$ millions

$700
$600

$580

$542 $544
$511

$530 $531

$608

$632 $648

$661

$679

$507

$500
$400

$362

$339

$300
$200
2007

1.

2008

2009

2010

2011

2012

2013

LTM

Note: See appendix for reconciliation of GAAP to Non-GAAP figures.

59

Revenue Composition by Quarter

Increasing operating and finance lease revenues reflects fleet growth
$ millions
Operating & Finance Lease Rev

Q2:12

Q3:12

Q4:12

Q1:13

Q2:13

Q3:13

Q4:13

Q1:14

$154.6

$163.1

$162.0

$160.5

$162.0

$165.3

$173.3

$178.3

Maintenance and other revenue levels are volatile and driven by the timing of
lease expirations
$ millions
Amortization of Net Lease
Discounts and Incentives
Maintenance Revenue1
Other Revenue

Q2:12

Q3:12

Q4:12

Q1:13

Q2:13

Q3:13

Q4:13

Q1:141

$2.0

($6.8)

($6.5)

($7.1)

($8.7)

($9.7)

($6.9)

($6.6)

$13.5

$10.9

$16.2

$16.9

$13.2

$12.9

$25.4

$3.0

$2.0

$5.7

$4.9

$5.9

$3.9

$1.6

$0.2

$1.8

1. Q1:14 maintenance revenue includes $16.4 million of contra maintenance revenue.

60

P&L Impact of Transactional Impairments Has Been Net Positive

What is a transactional impairment?
Typically driven by the sell / reinvest decision at lease expiry
The financial reporting elements flow through different P&L items as follow:
Revenue: MX revenue / LI reversals / Other revenue release of liability accounts
Impairment charge: difference between sale value today and NBV of flight equipment

When considered across these various elements, these have had a modest overall
incremental P&L impact
$ millions

Maintenance Revenue
Other Revenue
Transactional Impairments
Net P&L Impact
# of Aircraft

2012

2013

Q1:14

Total

$20.1

$28.2

$17.2

$65.4

1.2

1.8

--

2.9

(29.1)

(19.7)

(18.3)

(67.1)

$(7.9)

$10.2

$(1.1)

$1.3

13

61

Cash Returns Illustrate a Consistently Strong Underlying Business

Maintenance revenue, non-cash interest expense and other non-cash charges
contribute to GAAP ROE1 volatility

Return on Average Shareholders Equity

16%
14%
12%
10%
8%

6%
4%
2%
0%

2007

2008

2009

2010

2011

2012

2013

LTM

GAAP ROE 1 13.2%

2
Cash ROE 13.2%

9.6%
11.5%

8.5%
9.9%

5.0%
10.9%

9.0%
11.4%

2.3%
11.8%

1.9%
12.1%

0.8%
3
11.8%

1.
2.

Net income as reported, divided by average shareholders equity.

Cash ROE = Cash Flow From Operations plus collections on finance leases and gain (loss) on sale of flight equipment less depreciation plus distributions received from our Joint Venture with
Ontario Teachers, divided by average shareholders equity.
3. Includes contra maintenance revenue of $16.4 million in Q1:14.
NOTE: See appendix for GAAP to Non-GAAP reconciliation.

62

Among Industrys Highest Net Interest Margins

Changing fleet mix over last few years produces slightly lower revenue yields, but
Proactive liability management results in very attractive net interest margins
15.0%
14.0%

13.9%

13.8%

13.8%

13.5%

13.6%

13.5%

9.4%

9.5%

13.0%
12.0%

Lease Rental Yield 1

Net Interest Margin 2

11.0%
10.0%

9.9%

9.6%

9.8%

9.7%

9.0%

Q1:14

Q4:13

Q3:13

Q2:13

Q1:13

Q4:12

Q3:12

Q2:12

Q1:12

Q4:11

Q3:11

Q2:11

Q1:11

Q4:10

Q3:10

Q2:10

Q1:10

Q4:09

8.0%

Stable Lease Rental Yields and Net Interest Margins

1.
2.

Lease Rental Yield = Operating lease rental revenue / average NBV of flight equipment for the period calculated on a rolling 12 month basis.
Net Interest Margin = Lease Rental Yield minus Interest on borrowings, net of settlements on interest rate derivatives, and other liabilities / average NBV of flight equipment for the period
calculated on a rolling 12 month basis.

63

Cash Earnings Growth Driving Dividends

Share repurchases from 2011 - 13 totaled $138.5 million
Average price of $11.87 per share
Cash Earnings

Dividends Paid

Repurchases

$250

$ millions

$200

$186
$156

$150

$128

$193

$167

$143

$138
$119

$100

$50

$0
2007

2008

2009

2010

2011

2012

2013

LTM

Dividends increasing with cash earnings

1.

Cash Earnings = Cash Flow From Operations plus collections on finance leases and gain (loss) on sale of flight equipment less depreciation plus distributions received from our Joint Venture
with Ontario Teachers.
NOTE: See appendix for GAAP to Non-GAAP reconciliation.

64

Aircastle Summary
Value oriented strategy responsive to market dynamics
Global customer base well diversified across lessees
Effective portfolio management aligned with proactive risk management
Risk resilient model through cycles: stable cash flow supported by conservative, flexible longterm capital structure
Strong financial track record: focused on increasing cash returns
Shareholder focused orientation
32 consecutive quarterly dividends
Through Q1:14, nearly $650 million of capital returned to shareholders via dividends and repurchases

World class management team

Capitalize on our disciplined and differentiated approach

65

Appendices
Non-GAAP Reconciliation Pages

66

Adjusted EBITDA Reconciliation

Year Ended December 31,
$ thousands
Net income
Depreciation

2007

2008

2009

2010

$127,344 $115,291 $ 102,492

2011

2012

2013

LTM

$65,816 $124,270

$32,868

$29,781

$12,494

126,403

201,759

209,481

220,476

242,103

269,920

284,924

288,951

Amortization of net lease premiums (discounts)

and lease incentives

(7,379)

(1,815)

11,229

20,081

16,445

12,844

32,411

31,921

Interest, net

92,660

203,529

169,810

178,262

204,150

222,808

243,757

248,868

7,658

7,541

8,660

6,596

7,832

7,845

9,215

6,514

(12,941)

Income tax provision

Discontinued operations, net of income taxes

EBITDA
Mark-to-market (income) expense of
undesignated interest rate derivatives

$333,745 $526,305 $501,672 $491,231 $594,800 $546,285 $600,088 $588,748

(1,154)

11,446

(959)

860

848

(597)

(4,754)

(4,220)

6,674

6,529

6,868

7,509

5,786

4,232

4,569

4,748

Impairment of aircraft

18,211

7,342

6,436

96,454

117,306

129,370

Contract termination expense

4,000

1,248

Share based payment expense

Adjusted EBITDA

$339,265 $544,280 $529,792 $506,942 $607,870 $647,622 $717,209 $718,646

We define EBITDA as income from continuing operations before income taxes, interest expense, and depreciation and amortization. We use EBITDA to assess our consolidated financial and
operating performance, and we believe this non-GAAP measure is helpful in identifying trends in our performance. Using EBITDA assists us in comparing our operating performance on a
consistent basis by removing the impact of our capital structure (primarily interest charges on our outstanding debt) and asset base (primarily depreciation and amortization) from our
operating results. 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.

67

Reconciliation of GAAP to Non-GAAP Measures Operating Cash Flow

($ thousands)
Net cash provided by operating activities
Collections on Finance Leases
Operating Cash Flow

2007

2008

2009

2010

2011

2012

2013

LTM

$ 243,236

$ 333,626

$ 327,641

$ 356,530

$ 359,377

$ 427,277

$ 424,037

$ 434,281

3,852

9,508

10,436

$ 243,236

$ 333,626

$ 327,641

$ 356,530

$ 359,377

$ 431,129

$ 433,545

$ 444,717

Management believes that Operating Cash Flow when viewed in conjunction with the Companys results under US GAAP and the above reconciliation, provide useful information about
operating and period-over-period performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to
periodic reporting elements related to non-cash revenue and expense items and interest rate derivative accounting.

68

Reconciliation of GAAP to Non-GAAP Measures Cash Earnings and Cash ROE

$ in thousands

2007

2008

2009

2010

2011

2012

2013

Net cash provided by operating activities

$ 243,236

$ 333,626

$ 327,641

$ 356,530

$ 359,377

$ 427,277

$ 424,037

$ 434,281

Collections on Finance Leases

Gain on Sale of Flight Equipment
Less: Depreciation
Distributions Received from Joint Venture
Cash Earnings

11,566
(127,164)
$ 127,638

6,525
(201,759)
$ 138,392

1,162
(209,481)
$ 119,322

7,084
(220,476)
$ 143,138

39,092
(242,103)
$ 156,366

3,852
5,747
(269,920)
$ 166,956

9,508
37,220
(284,924)
$ 185,841

10,436
37,138
(288,951)
388
$ 193,292

Average Shareholder's Equity

$965,887

$1,203,372

$1,201,702

$1,316,978

$1,373,663

$1,410,117

$1,530,516

$1,644,413

Cash Earnings / Average Shareholder's Equity

Net Income
Net Income / Average Shareholder's Equity

13.2%
$127,344
13.2%

11.5%
$115,291
9.6%

9.9%
$102,492
8.5%

10.9%
$65,816
5.0%

11.4%
$124,270
9.0%

11.8%
$32,868
2.3%

12.1%
$29,781
1.9%

LTM

11.8%
$12,493
0.8%

Note: Average Shareholders Equity is the sum of the current period end shareholders equity and prior year end shareholders equity divided by two. Management believes that the cash return on
equity metric (Cash ROE) when viewed in conjunction with the Companys results under US GAAP and the above reconciliation, provide useful information about operating and period-over-period
performance, and provide additional information that is useful for evaluating the underlying operating performance of our business without regard to periodic reporting impacts related to non-cash
revenue and expense items and interest rate derivative accounting, while recognizing the depreciating nature of our assets.

69

Limitations of EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow
An investor or potential investor may find EBITDA, Adjusted EBITDA , Cash ROE and Operating Cash Flow important measures in
evaluating our performance, results of operations and financial position. We use these non-US GAAP measures to supplement our
US GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.
EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow have limitations as analytical tools and should not be viewed in
isolation or as substitutes for US GAAP measures of earnings. Material limitations in making the adjustments to our earnings to
calculate EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow, and using these non-US GAAP measures as compared to
US GAAP net income, income 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 aircrafts availability for use and may be indicative of future needs for
capital expenditures;

the cash portion of income tax (benefit) provision generally represents charges (gains), which may significantly affect our
financial results;

elements of our interest rate derivative accounting may be used to evaluate the effectiveness of our hedging policy;
hedge loss amortization charges related to Term Financing No. 1; and

adjustments required in calculating covenant ratios and compliance as that term is defined in the indenture governing our
senior unsecured notes.

EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow are not alternatives to net income, income from operations or cash
flows provided by or used in operations as calculated and presented in accordance with US GAAP. You should not rely on these
non-US GAAP measures as a substitute for any such US GAAP financial measure. We strongly urge you to review the
reconciliations to US GAAP net income, along with our consolidated financial statements included elsewhere in our Annual
Report. We also strongly urge you to not rely on any single financial measure to evaluate our business. In addition, because
EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow are not measures of financial performance under US GAAP and are
susceptible to varying calculations, EBITDA, Adjusted EBITDA, Cash ROE and Operating Cash Flow as presented here, may differ
from and may not be comparable to, similarly titled measures used by other companies.

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