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Aircastle Announces Second Quarter 2014 Results

Companies mentioned in this article: Aircastle Limited

STAMFORD, Conn., July 31, 2014 /PRNewswire/ --

Highlights

    --  Lease rental including finance lease revenues of $187.1 million, and
        Adjusted EBITDA(1) of $211.7 million
    --  Net income of $3.1 million, or $0.04 per diluted common share
    --  Adjusted net income(1) of $47.7 million, or $0.59 per diluted common
        share
    --  Invested $916 million year-to-date in 2014; approximately $490 million
        in additional investment commitments outstanding
    --  Sold 17 aircraft and designated for sale two 747-400 freighters; net
        pre-tax contribution of $8.2 million
    --  Refinanced $450 million of 9.75% senior notes due in 2018, with 5.125%
        notes due in 2021
    --  Fleet utilization of almost 100% with an aircraft portfolio yield of
        13.1% and net cash interest margin of 9.7%
    --  33(rd) consecutive dividend declared by Aircastle's Board of Directors

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported second quarter 2014 net income of $3.1 million, or $0.04 per diluted common share, and adjusted net income of $47.7 million, or $0.59 per diluted common share. The second quarter results included lease rental and finance lease revenues of $187.1 million versus $162.0 million in the second quarter of 2013.

Commenting on the results, Ron Wainshal, Aircastle's CEO, stated, "Our second quarter 2014 results were strong as we reported 16% lease rental revenue growth versus last year. Our net interest margin was 9.7%, which was among the highest in the industry, and represented 23% year-over-year growth in dollar terms. So far in 2014, Aircastle continued to meet our high yield and profitability targets, completing $916 million of accretive investments, committing an additional $490 million to aircraft acquisitions and pursuing new opportunities. We also sold 17 aircraft and designated for sale two freighters for net pre-tax income of $8.2 million while improving the overall quality of our portfolio.

Mr. Wainshal continued, "As a flexible and value-oriented aircraft investor, Aircastle is focused on generating stable cash flow, efficiently allocating capital between investments and returning capital to shareholders at appropriate stages of the market cycle. In addition to opportunistically repurchasing shares, we have provided a regular return of capital to shareholders in the form of dividends for 33 consecutive quarters, including significant dividend growth over the past three years."

Aircastle's CFO, Mike Inglese, added, "We've made great strides improving our capital structure, enhancing the Company's competitive position. In that regard, we are particularly pleased to have lowered our cost of capital by replacing 9.75% coupon debt with new, longer term 5.125% notes, reducing interest expense by approximately $21 million per annum and further supporting cash flow generation for years to come."

Second Quarter Results

For the second quarter of 2014, operating and finance lease revenues were $187.1 million, up $25.1 million, or 15% year over year, due primarily to the impact of aircraft acquisitions of $51.2 million, partially offset by lower revenues due to aircraft dispositions of $20.3 million and from the effect of lease extensions, transitions and terminations totaling $5.6 million.

Total revenues for the second quarter were $226.1 million, an increase of $55.8 million, or 33% above the previous year, reflecting higher operating and finance lease revenue of $25.1 million, as discussed above, and higher maintenance revenues of $23.0 million and lower amortization of net lease discounts and incentives in the quarter, both of which were driven by several end of lease sales.

Adjusted EBITDA for the second quarter was $211.7 million, up $28.2 million, or 15% from the second quarter of 2013. The increase was primarily driven by higher lease rental and finance lease revenue of $25.1 million and higher maintenance revenue of $23.0 million, partially offset by lower net gain on the sale of flight equipment of $20.4 million. The second quarter of 2013 included a $23.6 million gain from the sale of three A330-200 freighter aircraft.

Net income for the second quarter was $3.1 million, down $29.7 million. The decrease was primarily due to bond redemption expenses of $36.6 million associated with refinancing $450 million of 9.75% senior unsecured notes due in 2018. Proceeds from the sale of 5.125% senior unsecured notes due in 2021 were used to repay the higher cost notes and will result in future interest expense savings. Lower net gains from the sale of aircraft of $20.4 million and higher aircraft impairment charges of $28.3 million were partially offset by higher total revenues of $55.8 million.

Adjusted net income for the quarter was $47.7 million, up $1.7 million year over year, and reflects higher total revenues of $55.8 million, lower maintenance expenses of $3.5 million and higher joint venture earnings of $0.5 million. Partially offsetting these improvements were lower gain on sale of $20.4 million, higher aircraft impairment charges of $28.3 million, higher depreciation of $3.7 million, higher taxes of $2.8 million, and lower other income of $2.9 million.

Aviation Assets

During the first half of the year, we acquired 11 aircraft and two engines for $915.9 million. Seven aircraft which were less than five years old accounted for $818.9 million of this total. As of June 30, 2014, we also had commitments to acquire seven additional aircraft for approximately $490 million. We expect to acquire three of these aircraft for approximately $117 million during the third quarter of 2014. The four other aircraft are Boeing 777-300ERs to be purchased from and leased back to LATAM once the existing financings are repaid. We now expect this transaction to be completed during the first half of 2015.

During the first half of the year, we sold 23 aircraft, including four freighter and eleven older aircraft, for $246.0 million and repaid $20.2 million in associated debt. Of these, 17 aircraft were sold during the second quarter. In addition to these completed sales, we also disposed of one Boeing 747-400 converted freighter early in July and designated two other 747-400 converted freighter aircraft that we intend to sell by the end of this year.

As of June 30, 2014, Aircastle owned 148 aircraft having a net book value of $5.7 billion.


                                                                         Owned                   Owned

                                                                     Aircraft as of         Aircraft as of
                                                                        June 30,
                                                                                               June 30,
                                                                                    2013(1)
                                                                                                   2014(1)
                                                                                                    ------



    Flight Equipment Held for Lease ($ mils.)                                        $4,779                 $5,651



    Unencumbered Flight Equipment ($ mils.)                                          $2,346                 $3,187

                                                                                        158             148

    Number of Aircraft(2)

                                                                                         76              91

    Number of Unencumbered Aircraft



    Passenger Aircraft (% of NBV)                                                       77%            84%



    Freighter Aircraft (% of NBV)                                                       23%            16%



    Weighted Average Fleet Age - Combined (years)((3))                                 10.8             8.6



    Weighted Average Remaining Combined Lease Term (years)(4)                           4.7             4.9



    Weighted Average Fleet Utilization for the three months ended(5)                    98%           100%



    Portfolio Yield for the three months ended(6)                                     13.4%          13.1%



    Net Cash Interest Margin(7)                                                        9.3%           9.7%



             (1)    Calculated using net book value
                     of flight equipment held for
                     lease and net investment in
                     finance leases at period end.

             (2)    At June 30, 2014 excludes two
                     aircraft classified as assets
                     held for sale

             (3)    Weighted average age by net
                     book value.

             (4)    Weighted average remaining
                     lease term by net book value.

             (5)    Aircraft on-lease days as a
                     percent of total days in
                     period weighted by net book
                     value.

             (6)    Lease rental revenue for the
                     period as a percent of the
                     average net book value of
                     flight equipment held for
                     lease for the period;
                     quarterly information is
                     annualized.

             (7)    Net Cash 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
                     quarterly basis, annualized.

Financing Update

In late March 2014, we issued $500 million of 5.125% senior unsecured notes due in 2021. On April 25, 2014, we used the proceeds from this issue to redeem $450 million of 9.75% senior unsecured notes that were due in 2018. In connection with the redemption of the 9.75% notes, we recorded a $36.6 million debt extinguishment expense, which included a $32.8 million call premium that was paid to the holders of the notes on April 25, 2014.

Common Dividend and Share Repurchases

On July 28, 2014, Aircastle's Board of Directors declared a third quarter 2014 cash dividend on its common shares of $0.20 per share, payable on September 12, 2014 to shareholders of record on August 29, 2014.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Thursday, July 31, 2014 at 10:00AM Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (888) 397-5352 (from within the U.S. and Canada) or (719) 325-2393 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "1022002".

A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.aircastle.com. Please allow extra time prior to the call to visit the site and download the necessary software required to listen to the internet broadcast. A replay of the webcast will be available for one month following the call. In addition to this earnings release, an accompanying power point presentation has been posted to the Investor Relations section of Aircastle's website.

For those who are not available to listen to the live call, a replay will be available until 1:00PM Eastern time on Saturday, August 30, 2014 by dialing (888) 203-1112 (from within the U.S. and Canada) or (719) 457-0820 (from outside of the U.S. and Canada); please reference passcode "1022002".

About Aircastle Limited

Aircastle Limited acquires, leases and sells commercial jet aircraft to airlines throughout the world. As of June 30, 2014, Aircastle's aircraft portfolio consisted of 148 aircraft on lease with 63 customers located in 37 countries.

Safe Harbor

Certain items in this press release 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 proposed public offering of notes and our ability to acquire, sell, lease or finance aircraft, raise capital, pay dividends, and increase revenues, earnings, EBITDA, Adjusted EBITDA, Adjusted Net Income 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 management's 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 forward-looking 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 press release. 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's 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 Aircastle's filings with the SEC, including as previously disclosed in Aircastle's 2013 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. 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 press release. 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.



    1. Refer to Supplemental Financial
     Information accompanying this press
     release for a reconciliation of GAAP
     to non-GAAP numbers.

(
)


                                                                                              Aircastle Limited and Subsidiaries

                                                                                                 Consolidated Balance Sheets

                                                                                          (Dollars in thousands, except share data)


                                                                                                                                                              December 31,            June 30,
                                                                                                                                                                      2013                       2014
                                                                                                                                                                      ----                       ----

                                                                                                                                                                                         (Unaudited)

    ASSETS

    Cash and cash equivalents                                                                                                                                                $654,613                     $187,532

    Accounts receivable                                                                                                                                              2,825                        6,041

    Restricted cash and cash equivalents                                                                                                                           122,773                      101,358

    Restricted liquidity facility collateral                                                                                                                       107,000                       65,000

    Flight equipment held for lease, net of accumulated depreciation of $1,430,325 and                                                                           5,044,410                    5,577,966
                                                                                                                                                             $1,407,022

    Net investment in finance leases                                                                                                                               145,173                       72,600

    Unconsolidated equity method investment                                                                                                                         21,123                       21,838

    Other assets                                                                                                                                                   153,976                      179,232
                                                                                                                                                                   -------                      -------

    Total assets                                                                                                                                                           $6,251,893                   $6,211,567
                                                                                                                                                                           ==========                   ==========


    LIABILITIES AND SHAREHOLDERS' EQUITY

    LIABILITIES

    Borrowings from secured financings (including borrowings of ACS Ireland VIEs of                                                                                        $1,586,835                   $1,552,493
                                                                                                                                    $152,545 and $85,478, respectively)

    Borrowings from unsecured financings                                                                                                                         2,150,527                    2,200,000

    Accounts payable, accrued expenses and other liabilities                                                                                                       111,661                      131,675

    Lease rentals received in advance                                                                                                                               49,235                       52,215

    Liquidity facility                                                                                                                                             107,000                       65,000

    Security deposits                                                                                                                                              118,804                      130,611

    Maintenance payments                                                                                                                                           442,432                      433,703

    Fair value of derivative liabilities                                                                                                                            39,992                        4,757
                                                                                                                                                                    ------                        -----

    Total liabilities                                                                                                                                            4,606,486                    4,570,454
                                                                                                                                                                 ---------                    ---------


    Commitments and Contingencies


    SHAREHOLDERS' EQUITY

    Preference shares, $.01 par value, 50,000,000 shares authorized, no shares issued and                                                                                -                           -
    outstanding

    Common shares, $.01 par value, 250,000,000 shares authorized, 80,806,975 shares                                                                                    808                          810
    issued and outstanding at December 31, 2013; and 81,007,388 shares issued and
    outstanding at June 30, 2014

    Additional paid-in capital                                                                                                                                   1,562,106                    1,562,736

    Retained earnings                                                                                                                                              158,398                      134,909

    Accumulated other comprehensive loss                                                                                                                          (75,905)                    (57,342)
                                                                                                                                                                   -------                      -------

    Total shareholders' equity                                                                                                                                   1,645,407                    1,641,113
                                                                                                                                                                 ---------                    ---------

    Total liabilities and shareholders' equity                                                                                                                             $6,251,893                   $6,211,567
                                                                                                                                                                           ==========                   ==========



                                                                               Aircastle Limited and Subsidiaries

                                                                                Consolidated Statements of Income

                                                                        (Dollars in thousands, except per share amounts)

                                                                                           (Unaudited)


                                                                                                         Three Months Ended                              Six Months Ended
                                                                                                            June 30,
                                                                                                                                                       June 30,

                                                                                                 2013                     2014           2013                  2014
                                                                                                 ----                     ----           ----                  ----

    Revenues:

    Lease rental revenue                                                                                 $157,918                             $183,231                      $314,508  $357,566

    Finance lease revenue                                                                       4,114                              3,897                     7,998              7,884

    Amortization of lease premiums, discounts and lease incentives                            (8,709)                               414                  (15,790)           (6,177)

    Maintenance revenue (including contra maintenance revenue of $0                            13,185                             36,182                    30,051             39,224
    and $0 for the three months ended and $0 and $16,382 for the six
    months ended June 30, 2013 and 2014, respectively)


    Total lease revenue                                                                       166,508                            223,724                   336,767            398,497

    Other revenue                                                                               3,870                              2,422                     9,800              4,252
                                                                                                -----                              -----                     -----              -----

    Total revenues                                                                            170,378                            226,146                   346,567            402,749
                                                                                              -------                            -------                   -------            -------


    Operating expenses:

    Depreciation                                                                               72,079                             75,784                   141,979            149,711

    Interest, net                                                                              66,656                             60,494                   125,808            124,757

    Selling, general and administrative (including non-cash share based                        13,182                             14,057                    26,467             28,001
    payment expense of $1,053 and $1,228 for the three months ended
    and $1,864 and $2,218 for the six months ended June 30, 2013 and
    2014, respectively)

    Impairment of Aircraft                                                                          -                            28,306                     6,199             46,569

    Maintenance and other costs                                                                 6,138                              2,646                     9,550              4,509
                                                                                                -----                              -----                     -----              -----

    Total expenses                                                                            158,055                            181,287                   310,003            353,547
                                                                                              -------                            -------                   -------            -------


    Other income (expense):

    Gain on sale of flight equipment                                                           21,317                                884                    22,509              1,994

    Loss on extinguishment of debt                                                                  -                          (36,570)                        -          (36,570)

    Other                                                                                       2,946                                  -                    4,161                757


    Total other income (expense)                                                               24,263                           (35,686)                   26,670           (33,819)
                                                                                               ------                            -------                    ------            -------


    Income from continuing operations before income taxes                                      36,586                              9,173                    63,234             15,383

    Income tax provision                                                                        3,732                              6,558                     7,316              7,441

    Earnings of unconsolidated equity method investment, net of tax                                 -                               521                         -               971
                                                                                                  ---                               ---                       ---               ---

    Net income                                                                                            $32,854                               $3,136                       $55,918    $8,913
                                                                                                          =======                               ======                       =======    ======


    Earnings per common share - Basic:

    Net income per share                                                                                    $0.48                                $0.04                         $0.82     $0.11
                                                                                                            =====                                =====                         =====     =====


    Earnings per common share - Diluted:

    Net income per share                                                                                    $0.48                                $0.04                         $0.82     $0.11
                                                                                                            =====                                =====                         =====     =====


    Dividends declared per share                                                                           $0.165                               $0.200                        $0.330    $0.400
                                                                                                           ======                               ======                        ======    ======

(
)


                                                                                                   Aircastle Limited and Subsidiaries

                                                                                             Consolidated Statements of Comprehensive Income

                                                                                                         (Dollars in thousands)

                                                                                                               (Unaudited)


                                                                                                                                    Three Months Ended                       Six Months Ended
                                                                                                                                       June 30,
                                                                                                                                                                           June 30,


                                                                                                                              2013                  2014       2013                2014
                                                                                                                              ----                  ----       ----                ----


    Net income                                                                                                                        $32,854                        $3,136                   $55,918   $8,913
                                                                                                                                      -------                        ------                   -------   ------

    Other comprehensive income, net of tax:

    Net change in fair value of derivatives, net of tax expense of                                                           8,127                          12                  11,953             382
                                                                   $193 and $0 for the three months ended and $311 and $804 for
    the six months ended June 30, 2013 and 2014, respectively

    Net derivative loss reclassified into earnings                                                                           9,711                       8,854                  17,985          18,181
                                                                                                                             -----                       -----                  ------          ------

    Other comprehensive income                                                                                              17,838                       8,866                  29,938          18,563
                                                                                                                            ------                       -----                  ------          ------

    Total comprehensive income                                                                                                        $50,692                       $12,002                   $85,856  $27,476
                                                                                                                                      =======                       =======                   =======  =======


                                                                                       Aircastle Limited and Subsidiaries

                                                                                      Consolidated Statements of Cash Flows

                                                                                             (Dollars in thousands)

                                                                                                   (Unaudited)


                                                                                                                                     Six Months Ended June 30,

                                                                                                                                 2013                     2014
                                                                                                                                 ----                     ----

    Cash flows from operating activities:

    Net income                                                                                                                            $55,918                           $8,913

    Adjustments to reconcile net income to net cash provided by operating activities:

    Depreciation                                                                                                              141,979                             149,711

    Amortization of deferred financing costs                                                                                    8,781                               6,987

    Amortization of net lease discounts and lease incentives                                                                   15,790                               6,177

    Deferred income taxes                                                                                                       3,237                               3,999

    Non-cash share based payment expense                                                                                        1,864                               2,218

    Cash flow hedges reclassified into earnings                                                                                17,985                              18,181

    Security deposits and maintenance payments included in earnings                                                          (25,538)                           (40,006)

    Gain on sale of flight equipment                                                                                         (22,509)                            (1,994)

    Loss on extinguishment of debt                                                                                                  -                             36,570

    Impairment of aircraft                                                                                                      6,199                              46,569

    Other                                                                                                                     (3,817)                               (91)

    Changes in certain assets and liabilities:

    Accounts receivable                                                                                                         (410)                            (3,619)

    Other assets                                                                                                                4,834                             (1,914)

    Accounts payable, accrued expenses and other liabilities                                                                  (3,824)                           (20,438)

    Lease rentals received in advance                                                                                         (7,050)                              2,742
                                                                                                                               ------                               -----

    Net cash provided by operating activities                                                                                 193,439                             214,005
                                                                                                                              -------                             -------

    Cash flows from investing activities:

    Acquisition and improvement of flight equipment and lease incentives                                                    (331,067)                          (834,467)

    Proceeds from sale of flight equipment                                                                                    253,909                             246,037

    Restricted cash and cash equivalents related to sale of flight equipment                                                        -                              7,600

    Aircraft purchase deposits and progress payments                                                                          (1,869)                            (3,785)

    Net investment in finance leases                                                                                         (11,605)                           (14,258)

    Collections on finance leases                                                                                               4,052                               6,219

    Unconsolidated equity method investment and associated costs                                                                    -                              (159)

    Distributions from unconsolidated equity method investment in excess of earnings                                                -                                651

    Principal repayments on debt investment                                                                                    42,001                                   -

    Other                                                                                                                       (829)                              (405)
                                                                                                                                 ----                                ----

    Net cash used in investing activities                                                                                    (45,408)                          (592,567)
                                                                                                                              -------                            --------

    Cash flows from financing activities:

    Issuance of shares net of repurchases                                                                                     (7,940)                            (2,091)

    Proceeds from notes and term debt financings                                                                                    -                            803,200

    Securitization and term debt financing repayments                                                                       (294,064)                          (827,512)

    Debt extinguishment costs                                                                                                       -                           (32,835)

    Deferred financing costs                                                                                                    (557)                           (15,834)

    Restricted secured liquidity facility collateral                                                                                -                             42,000

    Secured liquidity facility collateral                                                                                           -                           (42,000)

    Restricted cash and cash equivalents related to financing activities                                                     (81,664)                             13,815

    Security deposits and maintenance payments received                                                                       104,787                              83,144

    Security deposits and maintenance payments returned                                                                      (33,975)                           (44,577)

    Payments for terminated cash flow hedges                                                                                        -                           (33,427)

    Dividends paid                                                                                                           (22,565)                           (32,402)
                                                                                                                              -------                             -------

    Net cash (used in) provided by financing activities                                                                     (335,978)                           (88,519)
                                                                                                                             --------                             -------

    Net increase (decrease) in cash and cash equivalents                                                                    (187,947)                          (467,081)

    Cash and cash equivalents at beginning of period                                                                          618,217                             654,613
                                                                                                                              -------                             -------

    Cash and cash equivalents at end of period                                                                                           $430,270                         $187,532
                                                                                                                                         ========                         ========

(
)


                                                         Aircastle Limited and Subsidiaries

                                                         Supplemental Financial Information

                                                   (Amount in thousands, except per share amounts)

                                                                     (Unaudited)


                                                                                                   Three Months Ended           Six Months Ended

                                                                                                      June 30,                 June 30,
                                                                                                      --------                 --------

                                                                                                       2013               2014                2013     2014
                                                                                                       ----               ----                ----     ----


    Revenues                                                                                       $170,378           $226,146            $346,567 $402,749


    EBITDA                                                                                         $184,030           $145,558            $346,811 $296,999


    Adjusted EBITDA                                                                                $183,426           $211,662            $352,002 $381,675


    Adjusted net income                                                                             $46,040            $47,692             $73,452  $60,952


    Adjusted net income allocable to common shares                                                  $45,615            $47,313             $72,906  $60,521

    Per common share - Basic                                                                          $0.67              $0.59               $1.07    $0.75

    Per common share - Diluted                                                                        $0.67              $0.59               $1.07    $0.75


    Basic common shares outstanding                                                                  67,829             80,390              67,863   80,389

    Diluted common shares outstanding                                                                67,829             80,390              67,863   80,389



    Refer to the selected information
     accompanying this press release
     for a reconciliation of GAAP to
     Non-GAAP information.

(
)


                                                                        Aircastle Limited and Subsidiaries

                                                                   Reconciliation of GAAP to Non-GAAP Measures

                                                                    EBITDA and Adjusted EBITDA Reconciliation

                                                                              (Dollars in thousands)

                                                                                   (Unaudited)


                                                                                        Three Months Ended                                 Six Months Ended

                                                                                             June 30,                                          June 30,
                                                                                             --------                                          --------

                                                                                  2013                     2014                  2013                   2014
                                                                                  ----                     ----                  ----                   ----

                                                                                                          (Dollars in thousands)
                                                                                                           ---------------------

    Net income                                                                             $32,854                                      $3,136                $55,918    $8,913

    Depreciation                                                                72,079                               75,784                         141,979    149,711

    Amortization of net lease discounts and lease incentives                     8,709                                (414)                         15,790      6,177

    Interest, net                                                               66,656                               60,494                         125,808    124,757

    Income tax provision                                                         3,732                                6,558                           7,316      7,441
                                                                                 -----                                -----                           -----      -----

         EBITDA                                                                           $184,030                                    $145,558               $346,811  $296,999

    Adjustments:

      Impairment of aircraft                                                         -                              28,306                           6,199     46,569

      Loss on extinguishment of debt                                                 -                              36,570                               -    36,570

      Non-cash share based payment expense                                       1,053                                1,228                           1,864      2,218

      Gain on mark to market of interest rate derivative contracts             (1,657)                                   -                        (2,872)     (681)

         Adjusted EBITDA                                                                  $183,426                                    $211,662               $352,002  $381,675
                                                                                          ========                                    ========               ========  ========



    We define EBITDA as income (loss)
     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-US 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.

(
)


                                                                         Aircastle Limited and Subsidiaries

                                                                     Reconciliation of GAAP to Non-GAAP Measures

                                                                         Adjusted Net Income Reconciliation

                                                                               (Dollars in thousands)

                                                                                     (Unaudited)


                                                                                       Three Months Ended June 30,                  Six Months Ended June 30,

                                                                                            2013                    2014                      2013                  2014
                                                                                            ----                    ----                      ----                  ----

                                                                                                                   (Dollars in thousands)
                                                                                                                    ---------------------

    Net income                                                                                      $32,854                                           $3,136             $55,918   $8,913

    Loss on extinguishment of debt(2)                                                          -                             36,570                                  -   36,570

    Loan termination fee(1)                                                                2,954                                   -                             2,954         -

    Ineffective portion and termination of hedges(1)                                       2,003                                   9                              2,131        62

    Gain on mark to market of interest rate derivative contracts(2)                      (1,657)                                  -                           (2,872)    (681)

    Write-off of deferred financing fees(1)                                                3,825                                   -                             3,825         -

    Stock compensation expense(3)                                                          1,053                               1,228                              1,864     2,218

            Term Financing No. 1 hedge loss amortization charges(1)                        4,604                               3,839                              8,887     7,943

            Securitization No. 1 hedge loss amortization charges (1)                         404                               2,910                                745     5,927
                                                                                             ---

    Adjusted net income                                                                             $46,040                                          $47,692             $73,452  $60,952
                                                                                                    =======                                          =======             =======  =======



    (1)  Included in Interest, net.
    (2)  Included in Other income (expense).
    (3)  Included in Selling, general and administrative expenses.



                                                                                       Aircastle Limited and Subsidiaries

                                                                                  Reconciliation of GAAP to Non-GAAP Measures

                                                                            Reconciliation of Net Income Allocable to Common Shares

                                                                                                 (In thousands)

                                                                                                  (Unaudited)


                                                                                                                                Three Months Ended                     Six Months Ended

                                                                                                                                   June 30, 2014                         June 30, 2014
                                                                                                                                   -------------                         -------------

    Weighted-average shares:                                                                                              Shares                   Percent(2)                   Shares         Percent(2)
    ------------------------                                                                                              ------                    ---------                   ------          ---------

    Common shares outstanding - Basic                                                                                       80,390                              99.21%                   80,389              99.29%

    Unvested restricted common shares                                                                                          644                               0.79%                      572               0.71%
                                                                                                                               ---                                ----                       ---                ----

    Total weighted-average shares outstanding                                                                               81,034                             100.00%                   80,961             100.00%
                                                                                                                            ======                              ======                    ======              ======


    Net income allocation
    ---------------------

    Net income                                                                                                              $3,136                             100.00%                   $8,913             100.00%

    Distributed and undistributed earnings allocated to unvested restricted                                                   (25)                            (0.79%)                     (63)            (0.71%)
    shares


    Earnings available to common shares                                                                                     $3,111                              99.21%                   $8,850              99.29%
                                                                                                                            ======                               =====                    ======               =====


    Adjusted net income allocation
    ------------------------------

    Adjusted net income                                                                                                    $47,692                             100.00%                  $60,952             100.00%

    Amounts allocated to unvested restricted shares                                                                          (379)                            (0.79%)                    (431)            (0.71%)
                                                                                                                              ----                              ------                      ----              ------

    Amounts allocated to common shares                                                                                     $47,313                              99.21%                  $60,521              99.29%
                                                                                                                           =======                               =====                   =======               =====



    (1)    For the three and six
     months ended June 30, 2014
     the company had no dilutive
     shares.
    (2)    Percentages rounded
     to two decimal places.


                                                                                      Aircastle Limited and Subsidiaries

                                                                                  Reconciliation of GAAP to Non-GAAP Measures

                                                                            Reconciliation of Net Income Allocable to Common Shares

                                                                                                (In thousands)

                                                                                                  (Unaudited)


                                                                                                                                      Three Months Ended                     Six Months Ended

                                                                                                                                         June 30, 2013                         June 30, 2013
                                                                                                                                         -------------                         -------------

    Weighted-average shares:                                                                                                    Shares                   Percent(2)                   Shares         Percent(2)
    ------------------------                                                                                                    ------                    ---------                   ------          ---------

    Common shares outstanding - Basic                                                                                             67,829                              99.08%                   67,863              99.26%

    Unvested restricted common shares                                                                                                631                               0.92%                      508               0.74%
                                                                                                                                     ---                                ----                       ---                ----

    Total weighted-average shares outstanding                                                                                     68,460                             100.00%                   68,371             100.00%
                                                                                                                                  ======                              ======                    ======              ======


    Net income allocation
    ---------------------

    Net income                                                                                                                   $32,854                             100.00%                  $55,918             100.00%

    Distributed and undistributed earnings allocated to unvested restricted                                                        (303)                            (0.92%)                    (416)            (0.74%)
    shares
                                                                                                                                                                                                                    ---

    Earnings available to common shares                                                                                          $32,551                              99.08%                  $55,502              99.26%
                                                                                                                                 =======                               =====                   =======               =====


    Adjusted net income allocation
    ------------------------------

    Adjusted net income                                                                                                          $46,040                             100.00%                  $73,452             100.00%

    Amounts allocated to unvested restricted shares                                                                                (425)                            (0.92%)                    (546)            (0.74%)
                                                                                                                                    ----                              ------                      ----              ------

    Amounts allocated to common shares                                                                                           $45,615                              99.08%                  $72,906              99.26%
                                                                                                                                 =======                               =====                   =======               =====



    (1)       For the three and
     six months ended June 30,
     2013 the company had no
     dilutive shares.
    (2)       Percentages
     rounded to two decimal
     places.

Contact:
Frank Constantinople, SVP Investor Relations
Tel: +1-203-504-1063
fconstantinople@aircastle.com

The IGB Group
Leon Berman
Tel: +1-212-477-8438
lberman@igbir.com

SOURCE Aircastle Limited