Aircastle Announces Fourth Quarter and Full Year 2016 Results

First Quarter 2017 Dividend of $0.26 per Common Share Declared

Key Financial Metrics

• Total revenues were $204.7 million for the fourth quarter of 2016 and $773.0 million for the full year
• Total lease rental1 revenues were $191.7 million for the fourth quarter and $742.4 million for the full year
• Net income was $67.7 million, or $0.86 per diluted common share for the fourth quarter, and $151.5 million, or $1.92 per diluted common share, for the full year
• Adjusted net income2 was $70.5 million, or $0.90 per diluted common share for the fourth quarter, and $168.5 million, or $2.14 per diluted common share, for the full year
• Adjusted EBITDA2 was $220.5 million for the fourth quarter and $768.0 million for the full year
• Cash ROE2 of 12.3% in 2016; 8.7% net cash interest margin

Highlights

• 206 aircraft owned and managed for joint ventures
• Acquired 60 aircraft in 2016 for $1.6 billion, including 57 narrow-body aircraft
• Sold 30 aircraft in 2016 for $755.9 million; sales included seven wide-body and three freighter aircraft; gain on sale was $39.1 million for the full year
• Strong lease placement progress during the fourth quarter, including three Singapore A330s; total of two aircraft remaining to place on lease in 2017
• Raised $1.3 billion in new financing during 2016 from funding sources worldwide
• Declared our 43rd consecutive quarterly dividend

1 Includes finance and sales-type lease revenue 2 Non-GAAP items reconciled in the Appendix

Aircastle Limited (the "Company" or "Aircastle") (NYSE: AYR) reported fourth quarter 2016 net income of $67.7 million, or $0.86 per diluted common share and adjusted net income of $70.5 million, or $0.90 per diluted common share. Net income for the year ended December 31, 2016 was $151.5 million, or $1.92 per diluted common share, and adjusted net income was $168.5 million, or $2.14 per diluted common share. The fourth quarter results included lease rental revenues of $191.7 million, an increase of 3%, versus $185.7 million in the fourth quarter of 2015. For the full year 2016, lease rental revenues were $742.4 million, versus $741.1 million in 2015.

"The Board is very pleased with Aircastle's strong 2016 financial performance, and the outstanding effort put forth by the leadership team," said Peter V. Ueberroth, Aircastle's Chairman of the Board, speaking on behalf of the Board of Directors.

Mr. Ueberroth added, "We are all looking forward to Ron Wainshal's full recovery and to his speedy return to the helm of our organization. The Company's management is deep and capable, and under the current leadership of Mike Inglese as acting CEO, we are highly confident the team will capably execute Aircastle's business plan."

Commenting on Aircastle's results, Mike Inglese, Acting Chief Executive Officer, stated, "During the fourth quarter and full year 2016, Aircastle achieved solid earnings growth and generated a strong cash return on equity. At the same time, we seized on opportunities in a dynamic market environment, further expanding the fleet and significantly improving asset quality as we continue to de-risk the business."

Mr. Inglese continued, "Aircastle took important steps to profitably grow the Company in 2016, with an emphasis on capitalizing on attractive narrow-body opportunities. Specifically, we completed $1.6 billion in aircraft acquisitions during the year, with more than $600 million closing in the fourth quarter. Profitable sales also remained a priority for Aircastle in 2016, as we sold 30 aircraft and further reduced our exposure to the wide-body and freighter markets."

Mr. Inglese concluded, "We enter 2017 in a strong position with a lot of flexibility. We have significantly transformed our portfolio to focus on narrow-body aircraft, continued to successfully place aircraft and have limited capital commitments. Our success raising $1.3 billion in financing during 2016 has also provided Aircastle with significant liquidity to continue to grow the Company and opportunistically provide value-added solutions to potential sellers of aircraft."

Financial Results

(in thousands, except share data)	Three Months Ended December 31,				Year Ended December 31,
	2016		2015		2016		2015
Total Revenues	$ 204,653		$ 208,267		$ 772,958		$ 819,202
Adjusted EBITDA	$ 220,493		$ 210,972		$ 767,953		$ 832,105
Net income	$ 67,724		$ 50,641		$ 151,453		$ 121,729
Per common share - Diluted	$ 0.86		$ 0.63		$ 1.92		$ 1.50
Adjusted net income	$ 70,525		$ 54,264		$ 168,527		$ 142,271
Per common share - Diluted	$ 0.90		$ 0.67		$ 2.14		$ 1.75

Fourth Quarter Results

Total revenues for the fourth quarter were $204.7 million, a decline of $3.6 million, driven by lower maintenance revenue and lease end termination fees. Maintenance revenues in the fourth quarter of 2015 were $2.9 million higher versus the current year's fourth quarter due to an unscheduled lease termination with an airline in Russia in the prior year.

Net income for the quarter was $67.7 million, up $17.1 million year-over-year, while adjusted net income was $70.5 million, an increase of $16.3 million. The improvement in both was due to a $16.1 million reduction in non-cash impairment charges along with higher gains on the sale of flight equipment of $9.2 million, partially offset by higher interest expense of $7.7 million.

Adjusted EBITDA for the fourth quarter was $220.5 million, up $9.5 million, due to $9.2 million of higher gains on sale of flight equipment in 2016 versus 2015.

Full Year Results

Lease rental revenues totaled $742.4 million, an increase of $1.3 million versus the previous year. Total revenues in 2016 were $773.0 million, a decline of $46.2 million versus the previous year. The decrease in total revenues was driven by a $37.5 million reduction in maintenance revenues and a $10.4 million decline in lease end termination fees due to a lower number of aircraft that came off lease during 2016 compared to the previous year.

Net income for the full year was $151.5 million, up $29.7 million year-over-year, while adjusted net income was $168.5 million, an increase of $26.3 million. The improvements were primarily driven by a $91.3 million reduction in non-cash aircraft impairment charges, partially offset by lower maintenance revenues, lower gain on sale and lower lease termination fees, which declined a combined $66.8 million.

Adjusted EBITDA for the full year was $768.0 million, down $64.2 million versus 2015, reflecting a $37.5 million decline in maintenance revenue, lower gains from the sale of flight equipment of $18.9 million, and a $10.4 million decrease in lease termination fees mainly associated with the disposal of freighter aircraft during 2015.

Aviation Assets

During 2016, we acquired 60 aircraft for $1.6 billion, including 28 aircraft for $635.8 million during the fourth quarter. The average age of the aircraft acquired during 2016 was 7.4 years and the leases had an average remaining term of approximately 5.4 years. Of the 60 aircraft purchased during the year, 57 aircraft were narrow-bodies.

We currently have acquired or committed to acquire three aircraft in 2017 for $137.3 million. Including our order commitment with Embraer for 25 E-2 aircraft, we have commitments to acquire a total of 28 aircraft for $1.1 billion through 2021.

During 2016, we sold 30 aircraft for net proceeds of $755.9 million, and realized a gain on the sale of flight equipment of $39.1 million. The average age of the aircraft sold during 2016, excluding sales to our joint ventures, was 15.0 years.

In the fourth quarter of 2016, we completed the sale of eleven aircraft, including two wide-body and one freighter aircraft. Full year sales included seven wide-body and three freighter aircraft. Our portfolio sales reduced our freighter exposure to eight aircraft, accounting for 8% of our total fleet net book value.

As of December 31, 2016, Aircastle owned 193 aircraft having a net book value of $6.5 billion. We also managed thirteen aircraft with a net book value of $689 million on behalf of our joint ventures with Ontario Teachers' Pension Plan and IBJ Ltd. of Japan.

Owned Aircraft	As of December 31, 2016(1)				As of December 31, 2015(1)				As of December 31, 2014(1)
Total Flight Equipment Held for Lease ($ mils.)	$	6,508			$	6,068			$	5,686
Unencumbered Flight Equipment Held for Lease ($ mils.)	$	4,614			$	3,928			$	3,341
Number of Aircraft	193				162				148
Number of Unencumbered Aircraft	156				118				95
Weighted Average Fleet Age (years)(2)	7.9				7.5				8.4
Weighted Average Remaining Lease Term (years)(2)	5.1				5.9				5.4
Weighted Average Fleet Utilization for the year ended(3)	98.9%				99.3%				99.6%
Portfolio Yield for the year ended(4)	12.4%				12.7%				13.4%
Net Cash Interest Margin(5)	8.7%				9.2%				10.1%
Managed Aircraft on behalf of Joint Ventures
Flight Equipment	$ 689				$ 484				$ 505
Number of Aircraft	13				5				5
(1)	Calculated using net book value of flight equipment held for lease and net investment in finance leases 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. Based on the growing level of finance and sales-type lease revenue, management revised the calculation of portfolio yield to include our net investment in finance and sales-type leases in the average net book value and to include the interest income and cash collections on our net investment in finance and sales-type leases in lease rentals.
(5)	Net Cash Interest Margin = Lease rental yield plus finance lease revenue and collections minus interest on borrowings, net of settlements on interest rate derivatives, and other liabilities / average NBV of flight equipment for the period calculated on a quarterly basis, annualized.

2016 Financing Activity

We raised $1.3 billion of new financing during 2016. This included $500 million of Senior Notes due in 2023, $434 million of secured bank financing in Europe and a $135 million unsecured revolving credit facility in the Asian market. We also raised $120 million of unsecured financing with Japanese banks and increased the size of our existing revolving credit facility by $75 million to $675 million. The capital raised during the year provides us with an enhanced liquidity profile and significant financial flexibility.

Common Dividend

On February 9, 2017, Aircastle's Board of Directors declared a first quarter 2017 cash dividend on its common shares of $0.26 per share, payable on March 15, 2017 to shareholders of record on February 28, 2017. Since 2011, Aircastle has increased the dividend seven times for a total increase of 260% over that period.

Conference Call

In connection with this earnings release, management will host an earnings conference call on Tuesday, February 14, 2017 at 10:00 A.M. Eastern time. All interested parties are welcome to participate on the live call. The conference call can be accessed by dialing (877) 741-4244 (from within the U.S. and Canada) or (719) 325-4834 (from outside of the U.S. and Canada) ten minutes prior to the scheduled start and referencing the passcode "7920472".

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

For those who are not available to listen to the live call, a replay will be available until 1:00 P.M. Eastern time on Thursday, March 16, 2017 by dialing (888) 203-1112 (from within the U.S. and Canada) or (719) 457-0820 (from outside of the U.S. and Canada); please reference passcode "7920472".