AYR 10-K Fiscal year ended Dec. 31, 2018

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Diversified portfolio of modern aircraft. We have a portfolio of modern aircraft that is diversified with respect to lessees, geographic markets, lease maturities and aircraft types. As of December 31, 2018 , our aircraft portfolio consisted of 261 aircraft, comprised of a variety of aircraft types leased to 81 lessees located in 44 countries. Lease expirations for our owned aircraft are well dispersed, with a weighted-average remaining lease term of 4.5 years. This provides the company with a long-dated base of contracted revenues. We believe our focus on portfolio diversification reduces the risks associated with individual lessee defaults and adverse geopolitical or economic issues, and results in generally predictable cash flows.

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Flexible, disciplined acquisition approach and broad investment sourcing network. Since our formation, we have acquired 470 aircraft for $15.4 billion. Our investment strategy is to seek out the best risk-adjusted return opportunities across the commercial jet market, so our acquisition targets vary with market opportunities. We source our acquisitions through well-established relationships with airlines, other aircraft lessors, manufacturers, financial institutions and other aircraft owners. Since our formation in 2004, we built our aircraft portfolio through more than 164 transactions with 94 counterparties.

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Significant experience in successfully selling aircraft throughout their life cycle. Our team is adept at managing and executing the sale of aircraft. Since our formation, we sold 221 aircraft for $5.3 billion. These sales produced net gains of $323 million and involved a wide range of aircraft types and buyers. Of these aircraft, 147, or 67%, were over fourteen years old at the time of sale; many of these being sold on a part-out disposition basis, where the airframe and engines may be sold to various buyers. We believe our competence in selling older aircraft is one of the capabilities that sets us apart from many of our competitors.

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Strong capital raising track record and access to a wide range of financing sources. Aircastle is a publicly listed company, and our shares have traded on the New York Stock Exchange (“NYSE”) since 2006. Since our inception in late 2004, we raised $1.7 billion in equity capital from private and public investors. Our largest shareholder is Marubeni Corporation (“Marubeni”), with whom we maintain a strong, strategic relationship. We also obtained $14.4 billion in debt capital from a variety of sources including the unsecured bond market, commercial banks, export credit agency-backed debt, and the aircraft securitization market. The diversity and global nature of our financing sources demonstrates our ability to adapt to changing market conditions and seize new opportunities.

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Our capital structure provides investment flexibility. We have $1.05 billion available from unsecured revolving credit facilities that expire in 2021 and 2022, thereby limiting our near-term financial markets exposure. Given our relatively limited future capital commitments, we have the resources to take advantage of future investment opportunities. Our large unencumbered asset base and our unsecured revolving lines of credit give us access to the unsecured bond market, allowing us to pursue a flexible and opportunistic investment strategy.

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Experienced management team with significant expertise. Each member of our management team has more than twenty years of industry experience and we have expertise in the acquisition, leasing, financing, technical management, restructuring/repossession and sale of aviation assets. This experience spans several industry cycles and a wide range of business conditions and is global in nature. We believe our management team is highly

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Global and scalable business platform. We operate through offices in the United States, Ireland and Singapore, using a modern asset management system designed specifically for aircraft operating lessors and capable of handling a significantly larger aircraft portfolio. We believe that our current facilities, systems and personnel are capable of supporting an increase in our revenue base and asset base without a proportional increase in overhead costs.

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Pursuing a disciplined and differentiated investment strategy. In our view, the relative values of different aircraft change over time. We continually evaluate investments across different aircraft models, ages, lessees and acquisition sources and re-evaluate these choices as market conditions and relative investment values change. We believe our team’s experience with a wide range of asset types and the financing flexibility offered through unsecured debt provides us with a competitive advantage. We view orders from equipment manufacturers to be part of our investment opportunity set, but choose to keep our long term capital commitments limited.

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Originating investments from many different sources across the globe. Our strategy is to seek out worthwhile investments by leveraging our team’s wide range of contacts. We utilize a multi-channel approach to sourcing acquisitions and have purchased aircraft from a large number of airlines, lessors, original equipment manufacturers, lenders and other aircraft owners. Since our formation in 2004, we have acquired aircraft from 94 different sellers.

•	Selling assets when attractive opportunities arise. We sell assets with the aim of realizing profits and reinvesting proceeds. We also use asset sales for portfolio management purposes, such as reducing lessee specific concentrations and lowering residual value exposures to certain aircraft types. Since our formation, we have sold aircraft to 65 buyers.

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Maintaining efficient access to capital from a wide set of sources and leveraging our recent investment grade credit rating. We believe the aircraft investment market is influenced by the business cycle. Our strategy is to increase our purchase activity when prices are low and to emphasize asset sales when prices are high. To implement this approach, we believe it is important to maintain access to a wide variety of financing sources. During 2018, we achieved our objective of improving our corporate credit ratings to an investment grade level by maintaining strong portfolio and capital structure metrics while achieving a critical size through accretive growth. We believe our improved credit rating will not only reduce our borrowing costs, but also facilitate more reliable access to both unsecured and secured debt capital throughout the business cycle.

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Leveraging our strategic relationships. We intend to capture the benefits provided through the extensive global contacts and relationships maintained by Marubeni, which is our biggest shareholder and is one of the largest Japanese trading companies. Marubeni has enabled greater access to Japanese-based financing and helped source and develop our joint venture with the leasing arm of the Industrial Bank of Japan, Limited.

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Capturing the value of our efficient operating platform and strong operating track record. We believe our team’s capabilities in the global aircraft leasing market places us in a favorable position to source and manage new income-generating activities. We intend to continue to focus our efforts in areas where we believe we have competitive advantages, including new direct investments as well as ventures with strategic business partners.

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Intending to pay quarterly dividends to our shareholders based on the Company ’ s sustainable earnings levels. Aircastle has paid dividends each quarter since our initial public offering in 2006. On October 30, 2018 , our Board of Directors declared a regular quarterly dividend of $0.30 per common share, or an aggregate of $22.9 million for the three months ended December 31, 2018 , which was paid on December 14, 2018 to holders of record on November 30, 2018 . These dividend amounts may not be indicative of any future dividends. Our

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(1)	Consisted of eleven Airbus A320-200 and two Airbus A330-200 aircraft which we are marketing for lease or sale.

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•	2020: 26 aircraft, representing 7%;

•	2021: 27 aircraft, representing 10%;

•	2022: 29 aircraft, representing 9%; and

•	2023: 30 aircraft, representing 11%.

•	individual lessee exposures;

•	geographic concentrations;

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•	aircraft type concentrations;

•	portfolio credit quality distribution; and

•	lease maturity distribution.

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•	passenger and air cargo demand;

•	competition;

•	passenger fare levels and air cargo rates;

•	availability of financing and other circumstances affecting airline liquidity, including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in fuel hedging contracts and the ability of airlines to make or refinance principal payments as they come due;

•	operating costs, including the price and availability of jet fuel, labor costs and insurance costs and coverages;

•	restrictions in labor contracts and labor difficulties, including pilot shortages;

•	economic conditions, including recession, financial system distress and currency fluctuations in the countries and regions in which the lessee operates or from which the lessee obtains financing, including the uncertainty and any negative macroeconomic effects associated with the U.S. government shutdown;

•	aircraft accidents;

•	the continuing availability of government support, whether through subsidies, loans, guarantees, equity investments or otherwise;

•	changing political conditions, including risk of rising protectionism, restrictions on immigration or imposition of new trade barriers;

•	geopolitical and other events, including war, acts or threats of terrorism, outbreaks of epidemic diseases and natural disasters;

•	cyber risk, including information hacking, viruses and malware; and

•	governmental regulation of, or affecting the air transportation business, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations.

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•	18% of our net book value serves as collateral for our secured indebtedness, and the terms of certain of our indebtedness require us to use proceeds from sales of aircraft, in part, to repay amounts outstanding under such indebtedness;

•	our failure to comply with the terms of our indebtedness, including restrictive covenants contained therein, may result in additional interest being due or defaults that could result in the acceleration of the principal, and unpaid interest on, the defaulted debt, as well as the forfeiture of any aircraft pledged as collateral; and

•	non-compliance with covenants prohibiting certain investments and other restricted payments, including limitations on our ability to pay dividends, repurchase our common shares, raise additional capital or refinance our existing debt, may reduce our operational flexibility and limit our ability to refinance or grow the business.

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Senior Notes. Our senior notes indentures impose operating and financial restrictions on our activities. These restrictions limit our ability to, or in certain cases prohibit us from, incurring or guaranteeing additional indebtedness, refinancing our existing indebtedness, paying dividends, repurchasing our common shares, making other restricted payments, making certain investments or entering into joint ventures and a cross-default to certain other financings of the Company.

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•	ECA Financings. Our ECA Financings contain a $500 million minimum net worth covenant and also contain, among other customary provisions, a material adverse change default and a cross-default to certain other financings of the Company.

•	Bank Financings. Our secured bank financings contain, among other customary provisions, a $500 million minimum net worth covenant, a cross-default to certain other financings of the Company, and for one portfolio financing, a minimum debt service coverage ratio of 1.15.

•	Unsecured Revolving Credit Facilities and Loan. Our unsecured revolving credit facilities/loan contain $750 million minimum net worth covenants, minimum unencumbered asset ratios, minimum interest coverage ratios and cross-defaults to certain other financings of the Company.

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•	passenger and air cargo demand;

•	operating costs, including fuel costs, and general economic conditions affecting our lessees’ operations;

•	interest rates;

•	foreign exchange rates;

•	the availability of credit;

•	airline restructurings and bankruptcies;

•	changes in control of, or restructurings of, other aircraft leasing companies;

•	manufacturer production levels and technological innovation;

•	discounting by manufacturers on aircraft types nearing end of production;

•	manufacturers merging, exiting the industry or ceasing to produce aircraft types;

•	new-entrant manufacturers producing additional aircraft models, or existing manufacturers producing newly engined aircraft models or new aircraft models, in competition with existing aircraft models;

•	geopolitical events, including war, prolonged armed conflict and acts of terrorism;

•	governmental regulation;

•	climate change initiatives, technological change, aircraft noise and emissions regulations, aircraft age limits and other factors leading to reduced demand for, early retirement or obsolescence of aircraft models;

•	tariffs and other restrictions on trade;

•	outbreaks of communicable diseases and natural disasters;

•	reintroduction into service of aircraft previously in storage; and

•	airport and air traffic control infrastructure constraints.

•	the age of the aircraft;

•	the particular maintenance and operating history of the airframe and engines;

•	the number of operators using that type of aircraft;

•	whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to us;

•	the demand for and availability of such aircraft at any given time;

•	applicable airworthiness directives or manufacturer’s service bulletins that have not yet been performed to the aircraft;

•	grounding orders or other regulatory action that could prevent or limit utilization of our aircraft;

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•	any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased; and

•	compatibility of our aircraft configurations or specifications with those desired by the operators of other aircraft of that type.

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•	forfeiting advance deposits and progress payments to Embraer, as well as incurring certain significant costs related to these commitments such as contractual damages and legal, accounting and financial advisory expenses;

•	defaulting on any future lease commitments we may have entered into with respect to these aircraft, which could result in monetary damages and strained relationships with lessees;

•	failing to realize the benefits of purchasing and leasing such aircraft; and

•	risking harm to our business reputation, which would make it more difficult to purchase and lease aircraft in the future on agreeable terms, if at all.

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•	the costs of casualty, liability and political risk insurance and the liability costs or losses when insurance coverage has not been or cannot be obtained as required, or is insufficient in amount or scope;

•	the costs of licensing, exporting or importing an aircraft, airport charges, customs duties, air navigation charges, landing fees and similar governmental or quasi-governmental impositions, which can be substantial;

•	penalties and costs associated with the failure of lessees to keep aircraft registered under all appropriate local requirements or obtain required governmental licenses, consents and approvals; and

•	carbon taxes or other fees, taxes or costs imposed under emissions limitations, climate change regulations or other initiatives.

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•	provisions providing for a classified board of directors with staggered three-year terms;

•	provisions regarding the election of directors, classes of directors, the term of office of directors and amalgamations to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 66% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions in our bye-laws dealing with the removal of directors and corporate opportunity to be rescinded, altered or amended only upon approval by a resolution of the directors and by a resolution of our shareholders, including the affirmative votes of at least 80% of the votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions providing for the removal of directors by a resolution, including the affirmative votes of at least 80% of all votes attaching to all shares in issue entitling the holder to vote on such resolution;

•	provisions providing for our Board of Directors to determine the powers, preferences and rights of our preference shares and to issue such preference shares without shareholder approval;

•	provisions providing for advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings; and

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no provision for cumulative voting in the election of directors; all the directors standing for election may be elected by our shareholders by a plurality of votes cast at a duly convened annual general meeting, the quorum for which is two or more persons present in person or by proxy at the start of the meeting and representing in excess of 50% of all votes attaching to all shares in issue entitling the holder to vote at the meeting.

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•	we may not realize a satisfactory return on our investment or the joint ventures may divert management’s attention from our business;

•	our joint venture partners could have investment goals that are not consistent with our investment objectives, including the timing, terms and strategies for any investments;

•	our joint venture partners might fail to fund their share of required capital contributions or fail to fulfill their obligations as a joint venture partner;

•	decisions of our partners to sell aircraft in one of our joint ventures may have an impact on our financial performance; and

•	our joint venture partners may have competing interests in our markets that could create conflict of interest issues, particularly if aircraft owned by the joint ventures are being marketed for lease or sale at a time when the Company also has comparable aircraft available for lease or sale.

•	variations in our quarterly or annual operating results;

•	failure to meet any earnings estimates;

•	actual or perceived reduction in our growth or expected future growth;

•	actual or anticipated accounting issues;

•	publication of research reports about us, other aircraft lessors or the aviation industry or the failure of securities analysts to cover our common shares or the decision to suspend or terminate coverage in the future;

•	additions or departures of key management personnel;

•	increased volatility in the capital markets and more limited or no access to debt financing, which may result in an increased cost of, or less favorable terms for, debt financing or may result in sales to satisfy collateral calls or other pressure on holders to sell our shares;

•	redemptions, or similar events affecting funds or other investors holding our shares, which may result in large block trades that could significantly impact the price of our common shares;

•	adverse market reaction to any indebtedness we may incur or preference or common shares we may issue in the future;

•	changes in or elimination of our dividend;

•	actions by shareholders;

•	changes in market valuations of similar companies;

•	announcements by us, our competitors or our suppliers of significant contracts, acquisitions, disposals, strategic partnerships, joint ventures or capital commitments;

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•	speculation in the press or investment community;

•	changes or proposed changes in laws or regulations affecting the aviation industry or enforcement of these laws and regulations, or announcements relating to these matters; and

•	general market, political and economic conditions and local conditions in the markets in which our lessees are located.

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(1)	See Organization and Basis of Presentation in the Notes to Consolidated Financial Statements.

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(1)	Included in Interest, net.

(2)	Included in Other income (expense).

(3)	Included in Selling, general and administrative expenses.

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(1)	Calculated using net book value at period end.

(2)	Weighted by net book value.

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

(4)	Lease rental revenue, interest income and cash collections on our net investment in finance and sales-type leases for the period as a percent of the average net book value for the period; quarterly information is annualized.

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(1)	Calculated using net book value at year end.

(2)	Consisted of eleven Airbus A320-200 aircraft and two Airbus A330-200 aircraft, which we are marketing for lease or sale, and one Boeing B737-800 along with one Boeing B777-300ER aircraft, which are subject to lease commitments.

(3)	Consisted of one Airbus A321-200 aircraft, which was delivered on lease to a customer during the second quarter of 2018 .

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•	an $88.9 million decrease due to the sale of 45 aircraft during 2018 and 2017; and

•	a $58.1 million decrease due to lease extensions, amendments, transitions and other changes.

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•	$58.9 million due to 84 aircraft acquired during 2018 and 2017; and

•	$3.6 million due to changes to asset lives, residual values and other changes.

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(1)	Includes a loan termination gain of $0.8 million and loan termination fees of $2.1 million related to the sale of aircraft during the years ended December 31, 2018 and 2017 , respectively.

(2)	Includes $0.3 million and $4.0 million in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2018 and 2017 , respectively.

•	a $1.3 million decrease in interest on borrowings due to lower loan termination fees as compared to the prior year, partially offset by a higher weighted average interest rate;

•	lower amortization of deferred losses on terminated interest rate derivatives of $1.0 million; and

•	lower amortization of deferred financing fees of $4.8 million resulting from aircraft sales in 2017.

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•	a $108.7 million decrease due to the sale of 60 aircraft during 2017 and 2016; and

•	a $25.5 million decrease due to lease extensions, amendments, transitions and other changes.

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•	$52.1 million due to 97 aircraft acquisitions during 2017 and 2016; and

•	$3.3 million due to changes to asset lives, residual values and other changes.

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(1)	Included $2.1 million and $5.0 million of loan prepayment fees related to the sale of aircraft during the years ended December 31, 2017 and 2016, respectively.

(2)	Included $4.0 million and $2.9 million in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2017 and 2016, respectively.

•	a $5.5 million decrease in interest on borrowings due primarily to lower weighted average debt cost and lower net termination charges compared to 2016;

•	lower amortization of deferred losses on terminated interest rate derivatives of $7.5 million; and

•	higher interest income of $2.3 million.

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•	flight equipment where estimates of the manufacturers’ realized sales prices are not relevant (e.g., freighter conversions);

•	flight equipment where estimates of the manufacturers’ realized sales prices are not readily available; and

•	flight equipment which may have a shorter useful life due to obsolescence.

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•	various forms of borrowing secured by our aircraft, including bank term facilities, limited recourse securitization financings, and ECA-backed financings for new aircraft acquisitions;

•	unsecured indebtedness, including our current unsecured revolving credit facilities, term loan and senior notes;

•	asset sales; and

•	sales of common shares.

•	a $22.7 million increase in cash from maintenance revenue;

•	a $12.1 million decrease in cash paid for taxes; and

•	a $4.3 million decrease in cash used for working capital.

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•	a net $52.7 million decrease in the acquisition and improvement of flight equipment and net investment in and collections on finance and sales-type leases;

•	a $77.7 million increase in proceeds from the sale of flight equipment; and

•	an $18.0 million decrease in unconsolidated equity method investments.

•	a $379.3 million decrease in proceeds from secured and unsecured financings;

•	a $289.8 million increase in securitization and term debt financing repayments; and

•	a $68.4 million increase in maintenance and security deposits returned, net of deposits received.

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(1)	Future interest payments on variable rate, LIBOR-based debt obligations are estimated using the interest rate in effect at December 31, 2018 .

(2)	Represents contractual payment obligations for our office leases in Stamford, Connecticut; Dublin, Ireland and Singapore.

(3)	At December 31, 2018 , we had commitments to acquire 35 aircraft for $1.33 billion , including 25 new E-Jet E2 aircraft from Embraer S.A. These amounts include estimates for pre-delivery deposits, contractual price escalation and other adjustments. As of February 8, 2019 , we have commitments to acquire 33 aircraft for $1.26 billion .

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(1)	Included in Interest, net.

(2)	Included in Other income (expense).

(3)	Included in Selling, general and administrative expenses.

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(1)	For the years ended December 31, 2018 , 2017 and 2016 , distributed and undistributed earnings to restricted shares was 0.61% , 0.71% and 0.83% , respectively, of net income. The amount of restricted share forfeitures for all periods presented was immaterial to the allocation of distributed and undistributed earnings.

(2)	For the years ended December 31, 2018 , 2017 and 2016, dilutive shares represented contingently issuable shares related to the Company’s Performance Share Units (“PSUs”).

•	depreciation and amortization, though not directly affecting our current cash position, represent the wear and tear and/or reduction in value of our aircraft, which affects the aircraft’s availability for use and may be indicative of future needs for capital expenditures;

•	the cash portion of income tax (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 Securitization No. 1; and

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

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Organization and Basis of Presentation

Aircastle Limited (“Aircastle,” the “Company,” “we,” “us” or “our”) is a Bermuda exempted company that was incorporated on October 29, 2004 under the provisions of Section 14 of the Companies Act of 1981 of Bermuda. Aircastle’s business is investing in aviation assets, including acquiring, leasing, managing and selling high-utility commercial jet aircraft.

Aircastle is a holding company that conducts its business through subsidiaries. Aircastle directly or indirectly owns all of the outstanding common shares of its subsidiaries. The consolidated financial statements presented are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The Company manages, analyzes and reports on its business and results of operations on the basis of one operating segment: leasing, financing, selling and managing commercial flight equipment. Our chief executive officer is the chief operating decision maker.

Effective January 1, 2018, the Company adopted FASB ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and related updates. Lease contracts within the scope of Accounting Standards Codification (“ASC”) 840, Leases , are specifically excluded from ASU No. 2014-09. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which a company expects to be entitled in exchange for those goods or services. The update is applied using the modified retrospective approach. The standard did not have a material impact on our consolidated financial statements and related disclosures; however, as part of the Company’s adoption of this standard, we have reclassified Gain on sale of flight equipment from Other income (expense) to Revenues on our Consolidated Statements of Income for the year ended December 31, 2018 . We believe this better reflects the sale of flight equipment as part of our ordinary activities and conforms our presentation to those of our publicly traded peers. The presentation for the years ended December 31, 2017 , 2016 , 2015 and 2014 have also been reclassified to conform to the current period presentation:

	Year Ended December 31,
	2017				2016				2015				2014
Total revenues as previously reported	$	796,620			$	772,958			$	819,202			$	818,602
Gain on sale of flight equipment	55,167				39,126				58,017				23,146
Total revenues	$	851,787			$	812,084			$	877,219			$	841,748

The Company’s management has reviewed and evaluated all events or transactions for potential recognition and/or disclosure since the balance sheet date of December 31, 2018 through the date on which the consolidated financial statements included in this Form 10-K were issued.

Effective January 1, 2018, the Company adopted FASB ASU No. 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments . The standard clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The update is applied using a retrospective transition method to each period presented. The standard did not have a material impact on our consolidated financial statements and related disclosures.

Effective January 1, 2018, the Company adopted FASB ASU No. 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting . The standard clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. In addition, when applicable, disclosure is required to indicate that compensation expense has not changed. The update is applied using a prospective transition method to each period presented. The standard did not have a material impact on our consolidated financial statements and related disclosures.

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Principles of Consolidation

The consolidated financial statements include the accounts of Aircastle and all of its subsidiaries. Aircastle consolidates four Variable Interest Entities (“VIEs”) of which Aircastle is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

We consolidate VIEs in which we have determined that we are the primary beneficiary. We use judgment when deciding (a) whether an entity is subject to consolidation as a VIE, (b) who the variable interest holders are, (c) the potential expected losses and residual returns of the variable interest holders, and (d) which variable interest holder is the primary beneficiary. When determining which enterprise is the primary beneficiary, we consider (1) the entity’s purpose and design, (2) which variable interest holder has the power to direct the activities that most significantly impact the entity’s economic performance, and (3) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. When certain events occur, we reconsider whether we are the primary beneficiary of VIEs. We do not reconsider whether we are a primary beneficiary solely because of operating losses incurred by an entity.

Risk and Uncertainties

In the normal course of business, Aircastle encounters several significant types of economic risk including credit, market, aviation industry and capital market risks. Credit risk is the risk of a lessee’s inability or unwillingness to make contractually required payments and to fulfill its other contractual obligations. Market risk reflects the change in the value of financings due to changes in interest rate spreads or other market factors, including the value of collateral underlying financings. Aviation industry risk is the risk of a downturn in the commercial aviation industry which could adversely impact a lessee’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of the Company’s aircraft. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. While Aircastle believes that the estimates and related assumptions used in the preparation of the consolidated financial statements are appropriate, actual results could differ from those estimates.

Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Aircastle considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Restricted cash and cash equivalents consists primarily of rent collections, maintenance payments and security deposits received from lessees pursuant to the terms of various lease agreements held in lockbox accounts in accordance with our financings.

Virtually all of our cash and cash equivalents and restricted cash and cash equivalents are held or managed by three major financial institutions.

Flight Equipment Held for Lease and Depreciation

Flight equipment held for lease is stated at cost and depreciated using the straight-line method, typically over a 25 -year life from the date of manufacture for passenger aircraft and over a 30 to 35 -year life for freighter aircraft, depending on whether the aircraft is a converted or purpose-built freighter, to estimated residual values. Estimated residual values are generally determined to be approximately 15 % of the manufacturer’s estimated realized price for passenger aircraft when new and 5 % to 10 % for freighter aircraft when new. Management may make exceptions to this policy on a case-by-case basis when, in its judgment, the residual value calculated pursuant to this policy does not appear to reflect current expectations of value. Examples of situations where exceptions may arise include but are not limited to:

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•	flight equipment where estimates of the manufacturer’s realized sales prices are not relevant (e.g., freighter conversions);

•	flight equipment where estimates of the manufacturer’s realized sales prices are not readily available; and

•	flight equipment which may have a shorter useful life due to obsolescence.

Major improvements and modifications incurred in connection with the acquisition of aircraft that are required to get the aircraft ready for initial service are capitalized and depreciated over the remaining life of the flight equipment.

For planned major maintenance activities for aircraft off-lease, the Company capitalizes the actual maintenance costs by applying the deferral method. Under the deferral method, we capitalize the actual cost of major maintenance events, which are depreciated on a straight-line basis over the period until the next maintenance event is required.

In accounting for flight equipment held for lease, we make estimates about the expected useful lives, the fair value of attached leases, acquired maintenance assets or liabilities and the estimated residual values. In making these estimates, we rely upon actual industry experience with the same or similar aircraft types and our anticipated lessee’s utilization of the aircraft.

For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the fair value of the aircraft and lease. The fair value of the lease may include a maintenance premium and a lease premium or discount.

When we acquire an aircraft with a lease, determining the fair value of attached leases 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 the fair value range over the remaining term of the lease. The resulting lease discount or premium is amortized into lease rental income over the remaining term of the lease.

Impairment of Flight Equipment

We perform a recoverability assessment of all aircraft in our fleet, on an aircraft-by-aircraft basis annually during the second quarter. In addition, a recoverability assessment is performed whenever events or changes in circumstances, or indicators, suggest that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination, significant change in aircraft model’s storage levels, the introduction of newer technology aircraft or engines, an aircraft type is no longer in production or a significant airworthiness directive is issued. When we perform a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the aircraft exceed its net book value. The undiscounted cash flows consist of cash flows from currently contracted lease rental and maintenance payments, future projected lease rates, transition costs, estimated down time, estimated residual or scrap values for an aircraft, economic conditions and other factors. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge. See Note 2 — Fair Value Measurements.

Management develops the assumptions used in the recoverability analysis based on current and future expectations of the global demand for a particular aircraft type and historical experience in the aircraft leasing market and aviation industry, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in projected lease rental and maintenance payments, residual values, economic conditions, technology, airline demand for a particular aircraft type and other factors.

In monitoring the aircraft in our fleet for impairment charges, we identify those aircraft that are most susceptible to failing the recoverability assessment and monitor those aircraft more closely, which may result in more frequent recoverability assessments. The recoverability in the value of these aircraft is more sensitive to changes in contractual cash flows, future cash flow estimates and residual values or scrap values for each aircraft. These are typically older aircraft for which lessee demand is declining.

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Net Investment in Finance and Sales-Type Leases

If a lease meets specific criteria at the inception or at any lease modification date, we recognize the lease as a Net investment in finance and sales-type leases on our Consolidated Balance Sheets. For sales-type leases, we recognize the difference between the net book value of the aircraft and the Net investment in finance and sales-type leases as a gain or loss on sale of fight equipment, less any initial direct costs and lease incentives . The Net investment in finance and sales-type leases consists of lease receivables, less the unearned income, plus the estimated unguaranteed residual value of the leased flight equipment at the lease end date. The unearned income is recognized as Finance and sales-type lease revenue in our Consolidated Statements of Income over the lease term in a manner that produces a constant rate of return on the Net investment in finance and sales-type leases.

Collectability of finance and sales-type leases is evaluated periodically on an individual customer level. The evaluation of the collectability of the finance and sales-type leases considers the credit of the lessee and the value of the underlying aircraft. An allowance for credit losses is established if there is evidence that we will be unable to collect all amounts due according to the original contractual terms of the Net investment in finance and sales-type leases. At December 31, 2018 , we had no allowance for credit losses for our Net investment in finance and sales-type leases. When collectability is not reasonably assured, the customer is placed on non-accrual status, and revenue is recognized when cash payments are received.

Unconsolidated Equity Method Investment

Aircastle accounts for its interest in an unconsolidated joint venture using the equity method as we do not control the joint venture entity. Under the equity method, the investment is initially recorded at cost and the carrying amount is affected by its share of the unconsolidated joint venture’s undistributed earnings and losses, and distributions of dividends and capital. The investment may also reflect an equity loss in the event that circumstances indicate an other-than-temporary impairment.

Security Deposits

Most of our operating leases require the lessee to pay Aircastle a security deposit or provide a letter of credit. Security deposits represent cash received from the lessee that is held on deposit until lease expiration. Aircastle’s operating leases also obligate the lessees to maintain flight equipment and comply with all governmental requirements applicable to the flight equipment, including without limitation, operational, maintenance, registration requirements and airworthiness directives.

Maintenance Payments

Typically, under an operating lease, the lessee is responsible for performing all maintenance but they may also be required to make payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending upon the component, and are required to be made monthly in arrears or at the end of the lease term. Whether to permit a lessee to make maintenance payments at the end of the lease term, rather than requiring such payments to be made monthly, depends on a variety of factors, including the creditworthiness of the lessee, the level of security deposit which may be provided by the lessee and market conditions at the time we enter into the lease. If a lease requires monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following completion of the relevant work. If a lease requires end of lease term maintenance payments, typically the lessee would be required to pay us for its utilization of the aircraft during the lease; however, in some cases, we may owe a net payment to the lessee in the event heavy maintenance is performed and paid for by the lessee during the lease term and the aircraft is returned to us in better condition than at lease inception.

We record monthly maintenance payments by the lessee as accrued maintenance payments liabilities in recognition of our contractual commitment to refund such receipts. In these contracts, we typically do not recognize such maintenance payments as maintenance revenue during the lease. Reimbursements to the lessee upon the receipt of evidence of qualifying maintenance work are charged against the existing accrued maintenance payments liability. We currently defer maintenance revenue recognition of most monthly maintenance payments collected until the end of the lease, when we are able to determine the amount, if any, by which the monthly maintenance payments received from a lessee exceed costs to be incurred by that

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lessee in performing heavy maintenance. End of lease term maintenance payments made to us are recognized as maintenance revenue, and end of lease term maintenance payments we make to a lessee are recorded as contra maintenance revenue.

Lease Incentives and Amortization

Many of our leases contain provisions which may require us to pay a portion of the lessee’s costs for heavy maintenance, overhaul or replacement of certain high-value components. We account for these expected payments as lease incentives, which are amortized as a reduction of revenue over the life of the lease. We estimate the amount of our portion for such costs, typically for the first major maintenance event for the airframe, engines, landing gear and auxiliary power units, expected to be paid to the lessee based on assumed utilization of the related aircraft by the lessee, the anticipated amount of the maintenance event cost and the estimated amounts the lessee is responsible to pay.

This estimated lease incentive is not recognized as a lease incentive liability at the inception of the lease. We recognize the lease incentive as a reduction of lease revenue on a straight-line basis over the life of the lease, with the offset being recorded as a lease incentive liability which is included in maintenance payments on the balance sheet. The payment to the lessee for the lease incentive liability is first recorded against the lease incentive liability, and any excess above the lease incentive liability is recorded as a prepaid lease incentive asset, which is included in other assets on the balance sheet and continues to amortize over the remaining life of the lease.

Lease acquisition costs related to reconfiguration of the aircraft cabin, other lessee specific modifications and other direct costs are capitalized and amortized into revenue over the initial life of the lease, assuming no lease renewals, and are included in other assets.

Income Taxes

Aircastle uses an asset and liability based approach in accounting for income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement and tax basis of existing assets and liabilities using enacted rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount estimated by us to be realizable. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

Lease Revenue Recognition

We lease flight equipment under net operating leases with lease terms typically ranging from three to seven years. We generally do not offer renewal terms or purchase options in our leases, although certain of our operating leases allow the lessee the option to extend the lease for an additional term. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the initial lease, assuming no renewals. Operating lease rentals that adjust based on a London Interbank Offered Rate (“LIBOR”) index are recognized on a straight-line basis over the period the rentals are fixed and accruable. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status, and revenue is recognized when cash payments are received.

Comprehensive Income

Comprehensive income consists of net income and other gains and losses, net of income taxes, if any, affecting shareholders’ equity that, under U.S. GAAP, are excluded from net income.

Share-Based Compensation

Aircastle recognizes compensation cost relating to share-based payment transactions in the financial statements based on the fair value of the equity instruments issued. Aircastle uses the straight-line method of accounting for compensation cost on share-based payment awards that contain pro-rata vesting provisions.

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Deferred Financing Costs

Deferred financing costs, which are included in borrowings from secured and unsecured financings, net of debt issuance costs, in the Consolidated Balance Sheets, are amortized using the interest method for amortizing loans over the lives of the relevant related debt.

Recent Accounting Pronouncements

On February 25, 2016, the FASB issued ASC 842, Leases (“ASC 842”) which, together with all subsequent amendments, replaced the existing guidance in ASC 840, Leases (“ASC 840”). The accounting for leases by lessors basically remained unchanged from the concepts that existed in ASC 840 accounting. The FASB decided that lessors would be precluded from recognizing selling profit and revenue at lease commencement for any sales-type or direct finance lease that does not transfer control of the underlying asset to the lessee. This requirement aligns the notion of what constitutes a sale in the lessor accounting guidance with that in the revenue recognition standard, which evaluates whether a sale has occurred from the customer’s perspective.

The most significant among the changes in ASC 842 is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases under current U.S. GAAP, existing at, or entered into after, January 1, 2019. The standard will be effective for reporting periods beginning after December 15, 2018. We plan to adopt the standard on its required effective date of January 1, 2019, using the required “modified retrospective” approach and the available practical expedients. We have evaluated the impact of ASC 842 and have determined the standard will not have a material impact on our consolidated financial statements and related disclosures. We do not believe that the adoption of the standard will significantly impact our existing or potential lessees’ economic decisions to lease aircraft.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments and related updates. The standard affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The standard replaces today’s incurred loss model with an expected loss model that requires entities to consider a broader range of information to estimate expected credit losses over the lifetime of the asset. Under the new standard, an allowance for credit losses is recorded which represents amounts not expected to be collected. The standard is applied on a modified retrospective approach. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as early as the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are in the process of determining the impact the standard will have on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement .  The standard modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project.  The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted. We are in the process of determining the impact the standard will have on our related disclosures.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The standard requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use-software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred.  The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted, including adoption in any interim period. We are in the process of determining the impact the standard will have on our consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU No. 2018-17, Consolidation (Topic 810), Targeted Improvements to Related Party Guidance for Variable Interest Entities . The standard changes how all entities evaluate decision-making fees under the variable interest entity guidance. The standard is applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. The standard is effective for annual periods beginning after

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Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

•	Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

•	Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

•	Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

•	The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

•	The income approach uses valuation techniques to convert future amounts to a single present amount based on current market expectation about those future amounts.

•	The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

The following tables set forth our financial assets and liabilities as of December 31, 2018 and 2017 that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.

	Fair Value as of December 31, 2018				Fair Value Measurements at December 31, 2018 Using Fair Value Hierarchy
					Level 1				Level 2				Level 3				Valuation Technique
Assets :
Cash and cash equivalents	$	152,719			$	152,719			$	—			$	—			Market
Restricted cash and cash equivalents	15,134				15,134				—				—				Market
Derivative assets	4,886				—				4,886				—				Market
Total	$	172,739			$	167,853			$	4,886			$	—

	Fair Value as of December 31, 2017				Fair Value Measurements at December 31, 2017 Using Fair Value Hierarchy
					Level 1				Level 2				Level 3				Valuation Technique
Assets :
Cash and cash equivalents	$	211,922			$	211,922			$	—			$	—			Market
Restricted cash and cash equivalents	21,935				21,935				—				—				Market
Derivative assets	3,254				—				3,254				—				Market
Total	$	237,111			$	233,857			$	3,254			$	—

Our cash and cash equivalents, along with our restricted cash and cash equivalents balances, consist largely of money market securities that are considered to be highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities and are therefore classified as Level 1 within our fair value hierarchy. Our interest rate derivative included in Level 2 consists of United States dollar-denominated interest rate cap, and its fair value is based on the market comparisons for similar instruments. We also considered the credit rating and risk of the counterparty providing the interest rate cap based on quantitative and qualitative factors.

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For the years ended December 31, 2018 and 2017 , we had no transfers into or out of Level 3.

We measure the fair value of certain assets and liabilities on a non-recurring basis, when U.S. GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include our investment in unconsolidated joint ventures and aircraft. We account for our investment in unconsolidated joint ventures under the equity method of accounting and record impairment when its fair value is less than its carrying value. We record aircraft at fair value when we determine the carrying value may not be recoverable. Fair value measurements for aircraft in impairment tests are based on an income approach which uses Level 3 inputs, which include the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft.

Our investments in joint ventures are valued using the equity method. Investments are recorded at cost and are adjusted by undistributed earnings and losses and the distributions of dividends and capital. These investments are also reviewed whenever events or circumstances indicate other-than-temporary impairments.

Aircraft Valuation

Transactional Impairments

We did not record any transactional impairments during 2018 . During 2017 , we entered into agreements to sell two Boeing 747-400 production freighter aircraft at the end of their respective leases and one older Boeing 747-400 converted freighter aircraft to its lessee, resulting in impairment charges totaling $ 79,234 , partially offset by maintenance revenue of $ 13,520 . During 2017 , we sold one of the production freighters and the one converted freighter. The agreement to sell the other production freighter was terminated and this aircraft remains on lease.

Annual Recoverability Assessment

We completed our annual recoverability assessment of our aircraft in the second quarter of 2018. We also performed aircraft-specific analyses where there were changes in circumstances, such as approaching lease expirations. No impairments were recorded as a result of our annual recoverability assessment.

The recoverability assessment is a comparison of the carrying value of each aircraft to its undiscounted expected future cash flows. We develop the assumptions used in the recoverability assessment, including those relating to current and future demand for each aircraft type, based on management’s experience in the aircraft leasing industry, as well as information received from third-party sources. Estimates of the undiscounted cash flows for each aircraft type are impacted by changes in contracted and future expected lease rates, residual values, expected scrap values, economic conditions and other factors.

Management believes that the net book value of each aircraft is currently supported by the estimated future undiscounted cash flows expected to be generated by that aircraft, and accordingly, no aircraft were impaired as a consequence of our annual recoverability assessment. However, if our estimates or assumptions change, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in the annual recoverability assessment are appropriate, actual results could differ from those estimates.

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable, amounts borrowed under financings and interest rate derivatives. The fair value of cash, cash equivalents, restricted cash and cash equivalents, accounts receivable and accounts payable approximates the carrying value of these financial instruments because of their short-term nature.

The fair values of our ECA Financings (as described in Note 6 — Variable Interest Entities below) and other secured bank financings are estimated using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements. The fair value of our senior notes is estimated using quoted market prices.

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The carrying amounts and fair values of our financial instruments at December 31, 2018 and 2017 are as follows:

	December 31, 2018								December 31, 2017
	Carrying Amount of Liability				Fair Value of Liability				Carrying Amount of Liability				Fair Value of Liability
Credit Facilities	$	425,000			$	425,000			$	175,000			$	175,000
Unsecured Term Loan	120,000				120,000				120,000				120,000
ECA Financings	189,080				190,216				227,491				232,030
Bank Financings	619,715				623,604				635,443				634,132
Senior Notes	3,450,000				3,446,826				3,200,000				3,367,245

Minimum future annual lease rentals contracted to be received under our existing operating leases of flight equipment at December 31, 2018 were as follows:

Year Ended December 31,	Amount
2019	$	712,286
2020	611,647
2021	502,508
2022	417,322
2023	354,525
Thereafter	512,783
Total	$	3,111,071

The classification of regions in the tables below is determined based on the principal location of the lessee of each aircraft.

Geographic concentration of lease rental revenue earned from flight equipment held for lease was as follows:

	Year Ended December 31,
Region	2018			2017			2016
Asia and Pacific	36	%		37	%		40	%
Europe	28	%		24	%		23	%
Middle East and Africa	11	%		12	%		12	%
North America	9	%		8	%		6	%
South America	16	%		19	%		19	%
Total	100	%		100	%		100	%

The following table shows the number of lessees with lease rental revenue of at least 5% and their combined total percentage of lease rental revenue for the years indicated:

Year Ended December 31,	2018				2017				2016
	Number of Lessees		Combined % of Lease Rental Revenue		Number of Lessees		Combined % of Lease Rental Revenue		Number of Lessees		Combined % of Lease Rental Revenue
Largest lessees by lease rental revenue	3		18 %		4		24 %		4		25 %

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The following table sets forth revenue attributable to individual countries representing at least 10% of total revenue (including maintenance revenue) in any year based on each lessee’s principal place of business for the years indicated:

Year Ended December 31,	2018						2017						2016
Country	Revenue				% of Total Revenue		Revenue				% of Total Revenue		Revenue				% of Total Revenue
Brazil (1)	$	116,527			13 %		$	—			— %		$	—			— %
Indonesia (2)	—				— %		—				— %		83,087				11 %

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(1)	For the year ended December 31, 2018 , total revenue included $ 72,242 of maintenance revenue related to early lease terminations with Avianca Brazil. Total revenue attributable to Brazil was less than 10% for the years ended December 31, 2017 and 2016 .

(2)	Total revenue attributable to Indonesia was less than 10% for the years ended December 31, 2018 and 2017 .

Geographic concentration of net book value of flight equipment (including flight equipment held for lease and net investment in finance and sales-type leases, or “net book value”) was as follows:

	December 31, 2018						December 31, 2017
Region	Number of Aircraft			Net Book Value %			Number of Aircraft			Net Book Value %
Asia and Pacific	78			36	%		59			30	%
Europe	87			27	%		92			32	%
Middle East and Africa	17			8	%		15			9	%
North America	35			10	%		32			10	%
South America	16			10	%		25			19	%
Off-lease	15		(1)	9	%		1		(2)	—	%
Total	248			100	%		224			100	%

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(1)	Consisted of eleven Airbus A320-200 aircraft and two Airbus A330-200 aircraft which we are marketing for lease or sale, and one Boeing B737-800 along with one Boeing B777-300ER aircraft, which are subject to lease commitments.

(2)	Consisted of one Airbus A321-200 aircraft, which was delivered on lease to a customer during the second quarter of 2018 .

The following table sets forth net book value attributable to individual countries representing at least 10% of net book value based on each lessee’s principal place of business as of:

	December 31, 2018						December 31, 2017
Region	Net Book Value			Net Book Value %	Number of Lessees		Net Book Value			Net Book Value %	Number of Lessees
India	$	865,046		12 %	4		$	—		— %	—

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At December 31, 2018 , our net investment in finance and sales-type leases consisted of 29 aircraft. The following table lists the components of our net investment in finance and sales-type leases at December 31, 2018 :

	Amount
Total lease payments to be received	$	236,993
Less: Unearned income	( 118,936		)
Estimated residual values of leased flight equipment (unguaranteed)	351,123
Net investment in finance and sales-type leases	$	469,180

At December 31, 2018 , minimum future lease payments on finance and sales-type leases are as follows:

We have joint ventures with an affiliate of Ontario Teachers’ Pension Plan (“Teachers’”) and with the leasing arm of the Industrial Bank of Japan, Limited.

At December 31, 2018 , the net book value of both joint ventures’ thirteen aircraft was $ 601,652 .

		Amount
Investment in joint ventures at December 31, 2016		$	72,977
Investment in joint ventures		2,994
Earnings from joint ventures, net of tax		7,611
Distributions		( 6,600		)
Investment in joint ventures at December 31, 2017		76,982
Investment in joint ventures		4,115
Loss from joint ventures, net of tax		( 8,086		)
Distributions		( 3,900		)
Investment in joint ventures at December 31, 2018		$	69,111

The Company has recorded in its Consolidated Balance Sheet a $ 13,565 guarantee liability in Maintenance payments and a $ 5,100 guarantee liability in Security deposits representing its share of the respective exposures. As of December 31, 2018 , Teachers’ stated its intention, as majority shareholder, to liquidate all assets of its joint venture with the Company. Accordingly, we recognized our share of the undistributed loss in this joint venture of $ 9,041 during the year ended December 31, 2018 , the loss of which is attributable to fair value adjustments recorded by the joint venture and anticipated liquidation costs.

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Aircastle consolidates four VIEs of which it is the primary beneficiary. The operating activities of these VIEs are limited to acquiring, owning, leasing, maintaining, operating and, under certain circumstances, selling the six aircraft discussed below.

ECA Financings

Aircastle, through various subsidiaries, each of which is owned by a charitable trust (such entities, collectively the “Air Knight VIEs”), has entered into six different twelve -year term loans, which are supported by guarantees from Compagnie Francaise d’ Assurance pour le Commerce Extérieur (“COFACE”), the French government sponsored export credit agency (“ECA”). We refer to these COFACE-supported financings as “ECA Financings.”

Aircastle is the primary beneficiary of the Air Knight VIEs, as we have the power to direct the activities of the VIEs that most significantly impact the economic performance of such VIEs and we bear the significant risk of loss and participate in gains through a finance lease. The activity that most significantly impacts the economic performance is the leasing of aircraft of which our wholly owned subsidiary is the servicer and is responsible for managing the relevant aircraft. There is a cross collateralization guarantee between the Air Knight VIEs. In addition, Aircastle guarantees the debt of the Air Knight VIEs.

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The outstanding amounts of our secured and unsecured term debt financings were as follows:

	At December 31, 2018											At December 31, 2017
Debt Obligation	Outstanding Borrowings				Number of Aircraft			Interest Rate		Final Stated Maturity		Outstanding Borrowings
Secured Debt Financings:
ECA Financings (1)	$	189,080			6			3.02% to 3.96%		12/03/21 to 11/30/24		$	227,491
Bank Financings (2)	619,715				25			2.27% to 5.03%		06/12/19 to 01/19/26		635,443
Less: Debt Issuance Costs	( 10,338		)									( 13,060		)
Total secured debt financings, net of debt issuance costs and discounts	798,457				31							849,874
Unsecured Debt Financings:
Senior Notes due 2018	—							4.625 %		12/15/18		400,000
Senior Notes due 2019	500,000							6.250 %		12/01/19		500,000
Senior Notes due 2020	300,000							7.625 %		04/15/20		300,000
Senior Notes due 2021	500,000							5.125 %		03/15/21		500,000
Senior Notes due 2022	500,000							5.500 %		02/15/22		500,000
Senior 5.00% Notes due 2023	500,000							5.000 %		04/01/23		500,000
Senior 4.40% Notes due 2023	650,000							4.400 %		09/25/23		—
Senior Notes due 2024	500,000							4.125 %		05/01/24		500,000
Unsecured Term Loan	120,000							4.337 %		04/28/19		120,000
Revolving Credit Facilities	425,000							4.006 %		12/27/21 to 06/27/22		175,000
Less: Debt issuance costs and discounts	( 32,104		)									( 31,268		)
Total unsecured debt financings, net of debt issuance costs and discounts	3,962,896											3,463,732
Total secured and unsecured debt financings, net of debt issuance costs and discounts	$	4,761,353										$	4,313,606

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(1)	The borrowings under these financings at December 31, 2018 have a weighted-average rate of interest of 3.58 % .

(2)	The borrowings under these financings at December 31, 2018 have a weighted-average fixed rate of interest of 4.73 % .

Secured Debt Financing:

Bank Financings

On October 11, 2018, we entered into a full recourse $ 115,000 secured bank financing with National Bank of Australia in relation to five Boeing 737-800 aircraft on lease with a customer in North America. This financing bears interest at a fixed rate of 4.55 % and matures in December 2024.

Unsecured Debt Financings:

Senior 4.40% Notes due 2023

On September 25, 2018, Aircastle issued $ 650,000 aggregate principal amount of Senior Notes due 2023 (the “Senior 4.40% Notes due 2023”) at an issue price of 99.831 % . The Senior 4.40% Notes due 2023 will mature on September 25, 2023 and bear interest at the rate of 4.40 % per annum, payable semi-annually on March 25 and September 25 of each year, commencing on March 25, 2019. Interest accrues on the Senior 4.40% Notes due 2023 from September 25, 2018.

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Prior to August 25, 2023, we may redeem all or part of the aggregate principal amount of the Senior 4.40% Notes due 2023 at any time at a redemption price equal to the greater of (a) 100 % of the principal amount of the notes redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date and (b) the sum of the present values of 100 % of the principal amount of the notes redeemed and the remaining scheduled payments of interest on the notes from the redemption date through August 25, 2023 (computed using a discount rate equal to the Treasury Rate (as defined in the indenture governing the Senior 4.40% Notes due 2023) as of such redemption date plus 0.25 % ). In addition, on or after August 25, 2023, we may redeem all or part of the aggregate principal amount of the Senior 4.40% Notes due 2023 at a redemption price equal to 100 % , plus accrued and unpaid interest thereon to, but not including, the redemption date. If the Company undergoes a change of control (as defined in the indenture governing the Senior 4.40% Notes due 2023) and, as a result of the change of control, the rating of the Senior 4.40% Notes due 2023 is downgraded to below an investment grade rating by certain rating agencies in the manner specified in the indenture governing the Senior 4.40% Notes due 2023, it must offer to repurchase the Senior 4.40% Notes due 2023 at 101 % of the principal amount, plus accrued and unpaid interest to, but not including, the purchase date. The Senior 4.40% Notes due 2023 are not guaranteed by any of the Company’s subsidiaries or any third-party.

The net proceeds from the issuance were used to repay amounts drawn under our existing revolving credit facility and for general corporate purposes.

On December 15, 2018, we paid off our Senior Notes due 2018.

Revolving Credit Facilities

On June 27, 2018, we entered into an amendment that increased the size of one of our unsecured revolving facilities from $ 675,000 to $ 800,000 , extended its maturity by more than two years to June 2022 and decreased the interest rate from LIBOR plus 2.25 % to LIBOR plus 1.50 % .

On December 27, 2018, we entered into a $ 250,000 three -year, unsecured revolving credit facility with a group of banks based in Asia. It can be increased to a maximum of $ 350,000 . This facility bears interest at a rate of LIBOR plus 1.50 % and matures in December 2021. The facility contains provisions similar to our existing credit facilities, including a $ 750,000 minimum net worth covenant.

As a condition to this new facility, on January 9, 2019, we terminated our existing $ 135,000 revolving credit facility with a group of banks based in Asia. Under the terms of this facility, we were not contractually able to draw upon this facility at December 31, 2018 .

At December 31, 2018 , we had $ 425,000 outstanding under our revolving credit facilities and had $ 625,000 available.

Maturities of the secured and unsecured debt financings over the next five years and thereafter are as follows:

Year Ending December 31,	Amount
2019	$	729,804
2020	400,384
2021	602,451
2022	1,021,820
2023	1,395,948
Thereafter	653,388
Total	$	4,803,795

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On March 21, 2017, the Board of Directors adopted the Aircastle Limited Amended and Restated 2014 Omnibus Incentive Plan (the “Amended and Restated 2014 Plan”). The Amended and Restated 2014 Plan was approved by shareholders at the Company’s 2017 Annual General Meeting of Shareholders on May 19, 2017.

The maximum number of Common Shares reserved for issuance under the Amended and Restated 2014 Plan is 6,750,000 Common Shares. Restricted common shares outstanding under prior plans in the amount of 487,177 shares will continue to vest subject to the terms and conditions of the prior plans and the applicable awards agreements which are included in the below table.

The purposes of the Amended and Restated 2014 Plan are to provide an incentive to selected officers, employees, non-employee directors, independent contractors, and consultants of the Company or its affiliates whose contributions are essential to the growth and success of the business of the Company and its affiliates, to strengthen the commitment of such persons to the Company and its affiliates, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its affiliates. To accomplish such purposes, the Company may grant options, share appreciation rights, restricted shares, restricted share units, share bonuses, other share-based awards, cash awards or any combination of the foregoing. The Amended and Restated 2014 Plan provides that grantees of restricted common shares will have all of the rights of shareholders, including the right to receive dividends, other than the right to sell, transfer, assign or otherwise dispose of the shares until the lapse of the restricted period. Generally, the restricted common shares vest over three to five -year periods based on continued service and are being expensed on a straight-line basis over the requisite service period of the awards. The terms of the grants provide for accelerated vesting under certain circumstances, including termination without cause following a change of control.

A summary of the fair value of non-vested restricted common shares for the years ended December 31, 2018 , 2017 and 2016 is as follows:

Non-vested Shares	Shares (in thousands)			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2015	651.4			$	18.81
Granted	336.7			16.58
Canceled	( 9.0	)		18.21
Vested	( 302.4	)		18.50
Non-vested at December 31, 2016	676.7			17.84
Granted	315.5			22.41
Canceled	( 4.2	)		20.36
Vested	( 469.6	)		18.60
Non-vested at December 31, 2017	518.4			19.92
Granted	291.9			21.88
Canceled	( 16.8	)		21.27
Vested	( 306.3	)		19.52
Non-vested at December 31, 2018	487.2			$	21.30

The fair value of the restricted common shares granted in 2018 , 2017 and 2016 were determined based upon the market price of the shares at the grant date.

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Performance Share Units

During 2018 , the Company issued performance share units (“PSUs”) to certain employees. These awards were made under the Amended and Restated 2014 Plan and a prior plan. The PSUs are denominated in share units without dividend rights, each of which is equivalent to one common share, and are subject to market and performance conditions and time vesting.

The PSUs granted in 2018 vest at the end of a three -year performance period which ends on December 31, 2020. Half of the PSUs vest on achieving relative total stockholder return goals (the “TSR PSUs”) while the other half vest on attaining annual Adjusted Return on Equity goals (the “AROE PSUs”). The table below shows the PSU awards issued during 2018 , including the number of common shares underlying the awards at the time of issuance:

	Minimum			Target			Maximum
TSR PSUs	—			169,631			339,262
AROE PSUs	—			169,626			339,252
Total	—			339,257			678,514

The fair value of the time-based TSR PSUs was determined at the grant date using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and dividend yield. To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical time frame equal to the time from the valuation date until the end date of the performance period. The number of TSR PSUs that will ultimately vest is based on the percentile ranking of the Company’s TSR among the S&P Midcap 400 Index. The number of shares that will ultimately vest will range from 0 % to 200 % of the target TSR PSUs.

The following table summarizes the assumption ranges used in calculating the fair value of TSR PSUs during the following periods:

	Year Ended December 31,
	2018		2017		2016
Volatility	24.8% to 32.6%		29.4% to 32.6%		29.4% to 31.7%
Dividend yield	4.3% to 4.9%		4.3%		4.3%
Risk-free interest rate	0.8% to 2.6%		0.8% to 1.5%		0.8% to 1.1%

The number of shares vesting from the AROE PSUs at the end of the three -year performance period will depend on the Company’s Adjusted Return on Equity as measured against the targets set by the Compensation Committee annually during the performance period, consistent with the business plan approved by the Board. The fair value of the 2018 AROE PSUs was determined based on the closing market price of the Company’s common shares on the date of grant reduced by the present value of expected dividends to be paid. The number of shares that will ultimately vest will range from 0 % to 200 % of the target AROE PSUs.

During 2018 , the Company granted a target of 229,557 PSUs of which, 169,631 are TSR PSUs and 59,926 are AROE PSUs. As of December 31, 2018 , the remaining target AROE PSUs will be considered granted upon the Compensation Committee’s setting the target AROE for the respective periods:

	Remaining AROE Target PSUs
	2019			2020
2017 PSUs	35,807			—
2018 PSUs	59,926			49,774

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The following table summarizes the activities for our unvested PSUs for 2018 :

	Unvested Performance Stock Units
	Number of Units of TSR PSUs			Number of Units of AROE PSUs			TSR PSUs Weighted Fair Value on Date of Grant ($)				AROE PSUs Weighted Fair Value on Date of Grant ($)
Unvested at December 31, 2015	—			—			$	—			$	—
Granted	143,414			47,802			25.07				19.18
Unvested at December 31, 2016	143,414			47,802			25.07				19.18
Granted (1)	107,426			116,721			25.00				20.37
Vested	( 50,899	)		( 57,637	)		24.83				20.02
Canceled/Forfeited (2)	—			( 1,697	)		—				20.55
Unvested as of December 31, 2017	199,941			105,189			$	25.09			$	20.02
Granted (1)	169,631			266,244			22.15				19.65
Vested	—			( 129,522	)		—				20.14
Canceled/Forfeited (2)	( 92,515	)		( 26,006	)		25.20				19.99
Unvested as of December 31, 2018	277,057			215,905			$	23.16			$	19.47
Expected to vest after December 31, 2018	277,057			215,905			$	23.16			$	19.47

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(1)	Also includes shares above target.

(2)	Represents performance share units that were below target and as a result were forfeited.

During 2018 , the Company incurred share-based compensation expense of $ 5,100 related to restricted common shares and $ 6,388 related to PSUs.

As of December 31, 2018 , the Company has unrecognized compensation cost, adjusted for actual forfeitures, of $ 4,694 related to non-vested restricted common shares and $ 6,128 related to PSUs, which is expected to be recognized over a weighted average period of 1.65 years.

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The following table sets forth the quarterly dividends declared by our Board of Directors for the three years ended December 31, 2018 :

We include all common shares granted under our incentive compensation plan which remain unvested (“restricted common shares”) and contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid (“participating securities”), in the number of shares outstanding in our basic and diluted EPS calculations using the two-class method. All of our restricted common shares are currently participating securities. Our unvested PSUs are contingently issuable shares which are included in our diluted earnings per share calculations which do not include voting or dividend rights. The PSUs that vested as of December 31, 2018 are included in basic and diluted EPS as issued shares.

Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings allocated to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, distributed and undistributed earnings are allocated to both common shares and restricted common shares based on the total weighted average shares outstanding during the period as follows:

	Year Ended December 31,
	2018			2017			2016
Weighted-average shares:
Common shares outstanding	77,447,263			78,219,458			78,161,494
Restricted common shares	476,726			556,592			653,944
Total weighted-average shares	77,923,989			78,776,050			78,815,438
Percentage of weighted-average shares:
Common shares outstanding	99.39	%		99.29	%		99.17	%
Restricted common shares	0.61	%		0.71	%		0.83	%
Total	100.00	%		100.00	%		100.00	%

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The calculations of both basic and diluted earnings per share for the years ended December 31, 2018 , 2017 and 2016 are as follows:

	Year Ended December 31,
	2018				2017				2016
Earnings per common share — Basic:
Income from continuing operations	$	247,919			$	147,874			$	151,453
Less: Distributed and undistributed earnings allocated to restricted common shares (1)	( 1,517		)		( 1,045		)		( 1,257		)
Income from continuing operations available to common shareholders — Basic	$	246,402			$	146,829			$	150,196
Weighted-average common shares outstanding — Basic	77,447,263				78,219,458				78,161,494
Net income per common share — Basic	$	3.18			$	1.88			$	1.92
Earnings per common share — Diluted:
Income from continuing operations	$	247,919			$	147,874			$	151,453
Less: Distributed and undistributed earnings allocated to restricted common shares (1)	( 1,517		)		( 1,045		)		( 1,257		)
Income from continuing operations available to common shareholders — Diluted	$	246,402			$	146,829			$	150,196
Weighted-average common shares outstanding — Basic	77,447,263				78,219,458				78,161,494
Effect of diluted shares (2)	301,356				153,983				42,785
Weighted-average common shares outstanding — Diluted	77,748,619				78,373,441				78,204,279
Net income per common share — Diluted	$	3.17			$	1.87			$	1.92

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(1)	For the years ended December 31, 2018 , 2017 and 2016 , distributed and undistributed earnings to restricted shares was 0.61 % , 0.71 % and 0.83 % , respectively, of net income. The amount of restricted share forfeitures for all periods present was immaterial to the allocation of distributed and undistributed earnings.

(2)	For the years ended December 31, 2018 , 2017 and 2016 , dilutive shares represented contingently issuable shares related to the Company’s PSUs .

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. The Company received an assurance from the Bermuda Minister of Finance that it would be exempted from local income, withholding and capital gains taxes until March 2035. Consequently, the provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that impose income taxes, primarily the United States and Ireland.

The sources of income from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended December 31, 2018 , 2017 and 2016 were as follows:

	Year Ended December 31,
	2018				2017				2016
U.S. operations	$	8,104			$	2,801			$	2,230
Non-U.S. operations	253,543				143,504				154,275
Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	$	261,647			$	146,305			$	156,505

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The components of the income tax provision from continuing operations for the years ended December 31, 2018 , 2017 and 2016 consisted of the following:

	Year Ended December 31,
	2018				2017				2016
Current:
United States:
Federal	$	2,446			$	6,503			$	2,004
State	( 136		)		1,913				587
Non-U.S.	3,828				6,574				3,560
Current income tax provision	6,138				14,990				6,151
Deferred:
United States:
Federal	2,901				( 5,474		)		1,350
State	759				( 1,161		)		( 157		)
Non-U.S.	( 4,156		)		( 2,313		)		4,963
Deferred income tax provision (benefit)	( 496		)		( 8,948		)		6,156
Total	$	5,642			$	6,042			$	12,307

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 , 2017 and 2016 consisted of the following:

	Year Ended December 31,
	2018				2017				2016
Deferred tax assets:
Non-cash share-based payments	$	2,182			$	1,899			$	2,183
Net operating loss carry forwards	48,660				22,804				47,538
Other	1,795				1,272				1,902
Total deferred tax assets	52,637				25,975				51,623
Deferred tax liabilities:
Accelerated depreciation	( 95,107		)		( 62,379		)		( 92,734		)
Other	( 338		)		354				( 1,227		)
Total deferred tax liabilities	( 95,445		)		( 62,025		)		( 93,961		)
Net deferred tax liabilities	$	( 42,808	)		$	( 36,050	)		$	( 42,338	)

The Company had $ 57,036 of net operating loss (“NOL”) carry forwards available at December 31, 2018 to offset future taxable income subject to U.S. graduated tax rates. If not utilized, $ 54,265 of these carry forwards will expire by 2038, with $ 2,771 of these carry forwards having no expiration date. The Company also had NOL carry forwards of $ 377,383 with no expiration date to offset future Irish and Mauritius taxable income. In 2017, NOLs of $ 223,758 were utilized as a result of gains from the sale and transfer of aircraft in Singapore. We have a five -year Singapore corporate tax reduction from the statutory rate of 17 % to 8 % through June 30, 2022. Deferred tax assets and liabilities are included in Other assets and Accounts payable and accrued liabilities, respectively, in the accompanying Consolidated Balance Sheets.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings. As of December 31, 2018 we have elected to permanently reinvest our accumulated undistributed U.S. earnings of $ 29,716 . Accordingly, no U.S. withholding taxes have been provided. Withholding tax of $ 1,486 would be due if such earnings were remitted.

Our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are primarily non-U.S. corporations. These subsidiaries generally earn income from sources outside the United States and typically are not

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subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland, Mauritius and the U.S. are subject to tax in those respective jurisdictions.

We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations at December 31, 2018 , 2017 and 2016 consisted of the following:

	Year Ended December 31,
	2018				2017				2016
Notional U.S. federal income tax expense at the statutory rate:	$	54,946			$	51,207			$	54,777
U.S. state and local income tax, net	525				168				182
Non-U.S. operations:
Bermuda	( 41,064		)		( 21,517		)		( 31,250		)
Ireland	( 2,567		)		( 2,348		)		( 276		)
Singapore	( 3,232		)		( 15,839		)		( 7,519		)
Other low tax jurisdictions	( 3,246		)		( 5,581		)		( 3,877		)
Non-deductible expenses in the U.S.	157				( 236		)		525
Other	123				188				( 255		)
Provision for income taxes	$	5,642			$	6,042			$	12,307

The provision for income taxes includes a tax benefit of $ 3,008 related to the Singapore rate reduction from 10 % to 8 % .

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

We conduct business globally and, as a result, the Company and its subsidiaries or branches are subject to foreign, U.S. federal and various state and local income taxes, as well as withholding taxes. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Ireland and the United States. With few exceptions, the Company and its subsidiaries or branches remain subject to examination for all periods since inception.

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The following table shows the components of interest, net for the years ended December 31, 2018 , 2017 and 2016 :

	Year Ended December 31,
	2018				2017				2016
Interest on borrowings, net settlements on interest rate derivatives, and other liabilities (1)	$	221,987			$	223,260			$	228,774
Amortization of deferred losses related to interest rate derivatives	1,166				2,202				9,662
Amortization of deferred financing fees and debt discount (2)	14,627				19,435				18,508
Interest expense	237,780				244,897				256,944
Less: Interest income	( 2,943		)		( 3,411		)		( 1,140		)
Less: Capitalized interest	( 333		)		( 255		)		( 144		)
Interest, net	$	234,504			$	241,231			$	255,660

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(1)	Includes a loan termination gain of $ 838 and loan termination fees of $ 2,058 related to the sale of aircraft during the years ended December 31, 2018 and 2017 , respectively.

(2)	Includes $ 300 and $ 4,005 in deferred financing fees written off related to the sale of aircraft during the years ended December 31, 2018 and 2017 , respectively.

Rent expense, primarily for the corporate office and sales and marketing facilities, was $ 2,865 , $ 2,143 and $ 1,951 for the years ended December 31, 2018 , 2017 and 2016 , respectively.

As of December 31, 2018 , Aircastle is obligated under non-cancelable operating leases relating principally to office facilities in Stamford, Connecticut; Dublin, Ireland; and Singapore for future minimum lease payments as follows:

Year Ending December 31,	Amount
2019	$	2,517
2020	1,608
2021	1,639
2022	1,670
2023	1,701
Thereafter	7,851
Total	$	16,986

At December 31, 2018 , we had commitments to acquire 35 aircraft for $ 1,328,553 , including 25 Embraer E2 aircraft.

Remaining commitments, including $ 117,034 of progress payments, contractual price escalations and other adjustments for these aircraft at December 31, 2018 , net of amounts already paid, are as follows:

Year Ending December 31,	Amount
2019	$	415,955
2020	293,367
2021	619,231
2022	—
2023	—
Thereafter	—
Total	$	1,328,553

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The following table describes the principal components of Other assets on our Consolidated Balance Sheets as of:

	December 31,
	2018				2017
Deferred income tax asset	$	912			$	497
Lease incentives and premiums, net of amortization of $47,304 and $41,246, respectively	99,079				74,515
Flight equipment held for sale	11,707				707
Aircraft purchase deposits and progress payments	39,948				23,704
Fair value of interest rate cap	4,886				3,254
Note receivable (1)	4,292				10,000
Other assets (2)	53,537				28,533
Total other assets	$	214,361			$	141,210

______________

(1)	Related to the sale of aircraft during the year ended December 31, 2017.

(2)	Includes progress payments for Embraer E2 aircraft order.

The following table describes the principal components of Accounts payable, accrued expenses and other liabilities recorded on our Consolidated Balance Sheets as of:

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Quarterly results of our operations for the years ended December 31, 2018 and 2017 are summarized below:

	Fourth Quarter				Third Quarter				Second Quarter				First Quarter
2018
Revenues	$	292,566			$	190,829			$	204,276			$	202,680
Net income	$	103,837			$	36,332			$	50,203			$	57,547
Basic earnings per share:
Net income	$	1.36			$	0.47			$	0.64			$	0.73
Diluted earnings per share:
Net income	$	1.35			$	0.46			$	0.64			$	0.73
2017
Revenues	$	196,643			$	213,053			$	237,059			$	205,032
Net income (loss)	$	55,120			$	57,431			$	( 7,116	)		$	42,439
Basic earnings (loss) per share:
Net income (loss)	$	0.70			$	0.73			$	( 0.09	)		$	0.54
Diluted earnings (loss) per share:
Net income (loss)	$	0.70			$	0.73			$	( 0.09	)		$	0.54

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