Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Transfers, Net

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Fair Value Measurements

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).

Assets Measured at Fair Value on a Recurring Basis

The following tables set forth our financial assets as of February 29, 2024 and February 28, 2023, that we measured at fair value on a recurring basis by level within the fair value hierarchy. Assets 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 February 29, 2024		Fair Value Measurements at February 29, 2024 Using Fair Value Hierarchy
			Level 1		Level 2		Level 3		Valuation Technique
Assets:
Cash and cash equivalents	$	129,977	$	129,977	$	—	$	—	Market

Investments, at fair value
Investment in debt securities	$	5,029	$	—	$	—	$	5,029	Income

Investment in equity securities	5,131		1,687		—		3,444		Market/Income


Total investments, at fair value	$	10,160	$	1,687	$	—	$	8,473


	Fair Value as of February 28, 2023		Fair Value Measurements at February 28, 2023 Using Fair Value Hierarchy
			Level 1		Level 2		Level 3		Valuation Technique
Assets:
Cash and cash equivalents	$	231,861	$	231,861	$	—	$	—	Market

Investments, at fair value
Investment in debt securities	$	5,029	$	—	$	—	$	5,029	Income
Investment in equity securities	5,790		2,346		—		3,444		Market/Income


Total investments, at fair value	$	10,819	$	2,346	$	—	$	8,473

Our cash and cash equivalents consist largely of money market securities that are highly liquid and easily tradable. These securities are valued using inputs observable in active markets for identical securities (Level 1). Our investments in debt and equity securities consist of notes and shares received as a result of claims settlements from various airline customers that had entered into bankruptcy proceedings or similar-type restructurings. Our investment in equity securities that are traded in an active market have been valued using quoted market prices (Level 1). Our investments in other equity securities and debt securities for which there is no active market or there is limited market data have been valued using the income approach (Level 3).

For the years ended February 29, 2024 and February 28, 2023, we had no transfers into or out of Level 3.

Assets Measured at Fair Value on a Non-recurring Basis

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 the carrying amounts of these assets may not be recoverable. Assets subject to these measurements include our aircraft and investment in unconsolidated joint venture.

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 the average of the market approach (Level 2 or 3), which includes third party appraisal data, and an income approach (Level 3), which includes the Company’s assumptions and appraisal data as to future cash proceeds from leasing and selling aircraft discounted using the Company’s weighted average cost of capital. Level 3 valuations contain significant non-observable inputs. See “Aircraft Valuation” below for further information.

We account for our investment in unconsolidated joint venture under the equity method of accounting. Our investment is recorded at cost and is adjusted by undistributed earnings and losses and the distributions of dividends and capital. This investment is reviewed for impairment whenever events or changes in circumstances indicate the fair value is less than its carrying value and the decline is other-than-temporary.

Financial Instruments

Our financial instruments, other than cash, consist principally of cash equivalents, accounts receivable, investments in debt and equity securities, accounts payable and secured and unsecured financings. The fair value of 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 value of our investments, which consist of debt and equity securities, have been valued using either quoted market prices to the extent such securities are traded in an active market (Level 1), or using the income approach for those securities where there is no active market or there is limited market data (Level 3). The fair value of our senior notes is estimated using quoted market prices (Level 1), whereas all our other financings are valued using a discounted cash flow analysis, based on our current incremental borrowing rates for similar types of borrowing arrangements (Level 2).

The carrying amounts and fair values of our financial instruments at February 29, 2024 and February 28, 2023, were as follows:


	February 29, 2024				February 28, 2023
Assets	Carrying Amount of Asset		Fair Value of Asset		Carrying Amount of Asset		Fair Value of Asset
Investments, at fair value(1)	$	10,160	$	10,160	$	10,819	$	10,819
Other investments, net(2)	5,079		5,079		—		—

Liabilities	Carrying Amount of Liability		Fair Value of Liability		Carrying Amount of Liability		Fair Value of Liability
Credit Facilities	$	20,000	$	20,000	$	20,000	$	20,000
Unsecured Term Loan	—		—		155,000		151,449

Term Financings	883,451		885,139		761,283		739,804
Senior Notes	3,850,000		3,738,146		3,700,000		3,524,563

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(1)See Assets Measured at Fair Value on a Recurring Basis.

(2)As of February 29, 2024, we had a $3.2 million allowance for credit losses on certain investments in debt securities that are carried at amortized cost – see Note 15.

Aircraft Valuation

Impairment of Flight Equipment

During the year ended February 29, 2024, the Company recorded impairments charges totaling $55.2 million. Of the total impairments, $39.5 million were transactional impairments related to scheduled aircraft lease expirations and engine redeliveries during the year ended February 29, 2024. The Company recognized $48.0 million of maintenance revenue for these aircraft and engines. See “Annual Recoverability Assessment” below for further information regarding impairment charges recognized as part of our annual fleet review.

During the year ended February 28, 2023, the Company wrote off the remaining book values of 8 narrow-body and 1 freighter aircraft in Russia which have not been returned to us. As a result, the Company recorded impairment charges totaling $31.9 million during the year ended February 28, 2023. The Company also recognized $20.3 million of maintenance and other revenue for these 9 aircraft related to payments received on maintenance and general security letters of credit.

In addition to the asset write-offs above, during the year ended February 28, 2023, the Company recorded impairment charges totaling $53.7 million primarily related to the scheduled lease expirations of 3 narrow-body aircraft and lease terminations of 2 narrow-body aircraft, as well as 1 wide-body aircraft resulting from our annual fleet review. The Company recognized $58.9 million of maintenance and lease rentals received in advance into revenue for these aircraft during the year ended February 28, 2023.

Annual Recoverability Assessment

We performed our annual recoverability assessment of all our aircraft during the third quarter of fiscal 2023. As a result, of our annul fleet review, we recorded impairment charges of $9.5 million related to 3 narrow-body aircraft, as well as 1 spare engine.

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 and maintenance payments, transition costs, estimated down time, and estimated residual or scrap values for an aircraft. In the event that an aircraft does not meet the recoverability test, the aircraft will be adjusted to fair value, resulting in an impairment charge.

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, such as the location of the aircraft and accessibility to records and technical documentation.

If our estimates or assumptions change, including those related to our customers that have entered judicial insolvency proceedings or similar-type proceedings or restructurings, we may revise our cash flow assumptions and record future impairment charges. While we believe that the estimates and related assumptions used in our recoverability assessments are appropriate, actual results could differ from those estimates.

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Asset Impairment Charges

39,500

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Number of Impaired Aircraft | aircraft

3

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Number of Impaired Aircraft | aircraft

1

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Number of Impaired Aircraft | aircraft

3

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]