Company: AYR
Filing Date: 2025-04-23
Form Type: 10-K
Source: 0001628280-25-019189
Chunk: 134

Company: Aircastle LTD
Filing Date: 2025-04-23
Form: 10-K
Item: Item 7
Chunk 134
---
 a lease premium or discount.

When we acquire an aircraft with a lease, determining the fair value of the attached lease requires us to make assumptions regarding the current fair values of leases for specific aircraft.  We estimate a range of current lease rates of like aircraft in order to determine if the attached lease is within a fair value range.  If a lease is below or above the range of current lease rates, we present value the estimated amount below or above fair value range over the remaining term of the lease.  The resulting lease discount or premium is amortized into lease revenue over the remaining term of the lease.

Impairment of Flight Equipment

We perform a recoverability test of all aircraft and other flight equipment on a quarterly and annual basis. We perform a customer or aircraft specific recoverability test whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in an aircraft type’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued. We focus on aircraft with near-term lease expirations, customers that have entered judicial insolvency proceedings and any additional customers that may become subject to similar-type proceedings, and certain other customers or aircraft variants that are more susceptible to value deterioration.

For assets with indicators of impairment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rentals and maintenance payments, future projected lease rates and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge.

Our assumptions are based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third-party industry sources.  The factors considered in estimating the undiscounted net cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors, such as the location of the aircraft and accessibility to records and technical documentation.  If our estimates or assumptions change, we