Aircastle LTD (AYR)·Q1 2026 Earnings Summary

Executive Summary

• Q1 2026 delivered strong top-line and profitability: total revenues $259.8M (+26.7% YoY) and net income $49.3M vs $16.1M YoY, supported by ~$30.3M gains on aircraft sales and 99.5% fleet utilization .
• Balance sheet quality improved materially: fleet is ~99% unencumbered and debt is ~98% unsecured after a new $600M unsecured term loan; liquidity stood at ~$2.6B (undrawn lines ~$2.0B, cash ~$0.1B) .
• Trading pipeline remained active: 12 aircraft acquired ($464.8M) and 14 sold (net proceeds ~$226.8M), with momentum into Q2 via purchase-leasebacks with United (MAX-9) and IndiGo (A321neo) .
• Management emphasized a sustained seller’s market and disciplined underwriting despite competitive capital; engines are a monetization focus given market dynamics .
• No formal revenue/EPS guidance; Wall Street consensus via S&P Global was unavailable for AYR; near-term catalysts center on potential rating upgrades and continued PLB execution .

What Went Well and What Went Wrong

What Went Well

• “We’re poised with $2.6B in available liquidity,” enabling continued profitable growth and fast execution in a competitive market .
• Seller’s market and disciplined trading: $30.3M gains on sale of 14 aircraft (avg. age ~19 years); 12 acquisitions with 71% new technology; fleet utilization above 99% for seven consecutive quarters .
• Strategic PLBs and relationships: executed MAX-9 PLBs with United and planned A321neo PLBs with IndiGo, demonstrating relationship-driven sourcing without lowering return standards .

What Went Wrong

• Maintenance revenue declined YoY ($38.1M vs $42.1M), reflecting fewer returns/extensions; impairment charges ($5.1M) and a $3.0M loss on early extinguishment of secured debt trimmed results .
• Interest expense increased ($68.8M vs $64.8M YoY) amid higher average debt and borrowing costs; operating cash flow fell to $127.9M from $147.0M as end-of-lease cash maintenance payments dropped .
• OEM supply constraints and tariffs add macro uncertainty; management is vigilant on near‑term volatility impacting airlines’ capacity planning and asset returns .

Financial Results

KPIs and balance sheet quality

Geography and portfolio

Non-GAAP and notable items (Q1 2026)

• Adjusted EBITDA: $231.9M; adjustments include $5.1M impairment and $3.0M debt extinguishment loss .
• Maintenance revenue and incentive reversals: $38.1M maintenance revenue and $1.1M amortization of lease incentives; $18.7M revenue related to maintenance/security deposit/incentive reversals tied to engines/lease termination .

Guidance Changes

Note: Aircastle did not issue formal quantitative revenue/EPS guidance; management reiterated disciplined growth and balance sheet priorities .

Earnings Call Themes & Trends

Management Commentary

• “Having ample liquidity is another competitive advantage… We’re poised with $2,600,000,000 in available liquidity” .
• “It’s still very much a seller’s market… first quarter gains on sales of $30,000,000 came from the sale of 14 aircraft” .
• “Despite abundant geopolitical stress points, demand for air travel continues to point to sustaining growth in 2025… profitability is improving” .
• “Our fleet of $8,100,000,000 is now 99% unencumbered and our debt is 98% unsecured… weighted average interest rate 5.2%” .

Q&A Highlights

• Ratings upgrade path: CFO articulated pathway to mid‑BBB with agencies; noted asymmetry vs peers and higher historical standards for mid-age fleets, but metrics materially better than pre‑COVID .
• Winning PLB deals vs lower-cost competitors: CEO emphasized relationship strength and discipline—no lowering of return standards to win United transactions .
• Engine monetization: Management increasingly leases engines and disposes fuselages when optimal; engine market valuing stand-alone engines highly .
• Returns/competition: Acquisitions remain competitive; pace of lease rate increases has slowed, but underwriting standards held; balanced risk/return across credits and asset ages .

Estimates Context

• S&P Global consensus for AYR quarterly EPS and revenue was not available; the data service returned actuals only, with no consensus metrics or estimate counts for Q1 2026. Values retrieved from S&P Global.*
• Implication: With no Street consensus, relative-performance framing relies on YoY/Seq comparisons and management’s qualitative assessment rather than estimate beats/misses.

Key Takeaways for Investors

• Balance sheet strength is the core near-term catalyst: 99% unencumbered assets, 98% unsecured debt, and ~$2.6B liquidity support continued PLB and secondary-market activity; rating upgrades (S&P/Moody’s) could compress funding costs further .
• Trading alpha persists: $30.3M Q1 gains and ongoing PLBs with United/IndiGo highlight sourcing and execution advantages in a seller’s market; engine monetization adds optionality .
• Yield and utilization durable: Lease rental revenue up YoY; utilization ~99.5%; portfolio yield for the quarter 9.4% (annualized) suggests healthy cash generation despite rate backdrop .
• Watch interest and maintenance dynamics: Net interest rose and maintenance revenue fell vs prior year as returns slowed; expect continued variability tied to extensions and engine events .
• Macro/tariffs/OEM constraints: Persistent delivery delays and geopolitical/tariff uncertainty likely prolong tight supply, supporting lease rates but warranting conservative underwriting and liquidity buffers .
• Dividend and capital returns: Cash dividends increased (common $30.8M in June); continued shareholder support from Marubeni/Mizuho underpins capital structure flexibility .
• Medium-term thesis: Relationship-led PLBs into top-tier credits, mid-life/new-tech narrow-bodies, and robust engine know-how position AYR to compound NBV and cash flows while pursuing ratings upgrades and funding diversification .

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8‑K press release for Q1 2026 was not available; primary sources used were the Q1 2026 10‑Q, Q1 2026 earnings call transcript, and related 8‑Ks/press releases around financing and prior quarter results .