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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.00pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.00pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.00pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
11,776 words
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially and adversely affected.
RISKS RELATING TO OUR BUSINESS
Risks Related to Our Operations
We are affected by the risks faced by commercial aircraft operators and MROs because they are our customers.
We operate as a supplier of engines, aircraft and related parts (“aviation equipment”) to commercial aircraft operators and MROs and are indirectly impacted by many of the risks facing commercial aircraft operators and MROs. The ability of each of our lessees to perform their obligations under the relevant lease and the demand to purchase aviation equipment will depend primarily on the lessee’s (or in the case of parts and materials, the purchaser’s) financial condition and cash flow. This may be affected by factors beyond our control, including:
MD&A (Item 7)
8,496 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations (the “MD&A”) is intended to help the reader understand the results of operations and financial condition of the Company. The MD&A is provided as a supplement to, and should be read in conjunction with, the consolidated financial statements and related notes included in Part IV of this Annual Report on Form 10-K and incorporated herein by reference.
A discussion of our results of operations for our fiscal year ended December 31, 2024 compared to the year ended December 31, 2023 is included our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 11, 2025 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Forward-Looking Statements. This Annual Report on Form 10-K, including the MD&A, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding prospects or future results of operations or financial position, made in this Annual Report on Form 10-K are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others: the effects on the airline industry and the global economy of events such as the current high interest rate and inflationary environment; changes in oil prices and other to the world markets; trends in the airline industry and our ability to capitalize on those trends, including growth rates of markets and other economic factors; risks associated with our growth strategies and strategic priorities; risks associated with owning and leasing jet engines and aircraft; our ability to negotiate equipment purchases, sales and leases, to collect outstanding amounts due and to control costs and expenses; managing the risks and impacts of potential and actual security , , privacy or data , including business, service, or operational , the access to or disclosure of data, financial , reputational , increased response and remediation costs, legal and regulatory proceedings or other outcomes; changes in interest rates and availability of capital, both to us and our customers; our ability to continue to meet the changing customer demands; regulatory changes affecting airline operations, aircraft maintenance, accounting standards and taxes; the market value of engines and other assets in our portfolio; and the impact of pandemics or other public health on our business, financial condition, and results of operations. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management’s expectations, are described in detail in Item 1A “Risk Factors” of Part I which, along with the other discussion in this report, describes some, but not all, of the factors that could cause actual results to differ significantly from management’s expectations.
• general economic conditions in the countries in which our customers operate, including changes in gross domestic product;
• demand for air travel and air cargo shipments;
• increased competition;
• the availability of government support, which may be in the form of subsidies, loans (including export/import financing), guarantees, equity investments or otherwise;
• changes in interest rates and the availability and terms of credit available to commercial aircraft operators including covenants in financings, terms imposed by credit card issuers, collateral posting requirements contained in fuel hedging contracts and the ability of airlines and MROs to make or refinance principal payments as they come due;
• geopolitical and other events, including those arising from war, concerns about security, terrorism, war, pandemics and similar public health concerns and political instability;
• changing political conditions, including risk of rising protectionism and imposition of new trade barriers;
• inclement weather and natural disasters;
• environmental compliance and other regulatory costs, including noise regulations, emissions regulations, climate change initiatives, and aircraft age limitations;
• potential and actual cyberattacks, including information hacking, viruses and malware;
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• labor contracts, labor costs and strikes or stoppages at commercial aircraft operators;
• operating costs, including the price and availability of fuel, maintenance costs, and insurance costs and coverages;
• technological developments, including the increasing use of Artificial Intelligence;
• airport access and air traffic control infrastructure constraints;
• industry capacity, utilization and general market conditions; and
• market prices for aviation equipment.
To the extent that our customers are negatively affected by these risk factors, we may experience:
• a decrease in demand for some types of aviation equipment in our portfolio;
• greater credit risks from our customers, and a higher incidence of lessee defaults and corresponding repossessions;
• an inability to quickly lease engines and aircraft on commercially acceptable terms when these become available through our purchase commitments and regular lease terminations;
• shorter lease terms, which may increase our expenses and reduce our utilization rates; and
• fewer opportunities to manage aviation equipment for other companies, and/or less profitable terms.
Our operating results vary and comparisons to results for preceding periods may not be meaningful.
Due to a number of factors, including the risks described in this Item 1A, our operating results may fluctuate. These fluctuations may also be caused by:
• the timing and number of purchases and sales of engines or aircraft;
• the timing and amount of maintenance reserve revenues recorded resulting from the termination of long-term leases, for which significant amounts of maintenance reserves may have accumulated;
• the termination or announced termination of production of particular aircraft and engine types;
• the retirement or announced retirement of particular aircraft models by aircraft operators;
• the operating history of any particular engine, aircraft or engine or aircraft model;
• the length of our operating leases; and
• the timing of necessary overhauls of engines and aircraft.
These risks may reduce our utilization rates, lease margins, maintenance reserve revenues, and proceeds from engine and aircraft sales, and result in higher legal, technical, maintenance, storage and insurance costs related to repossession and the cost of engines being off lease. As a result of the foregoing and other factors, the availability of engines and aircraft for lease or sale periodically experiences cycles of oversupply and undersupply of given engine or aircraft models. The incidence of an oversupply of engines or aircraft may produce substantial decreases in lease rates and the appraised and resale value of aviation equipment and may increase the time and costs incurred to lease or sell engines.
We anticipate that fluctuations from period to period will continue in the future. As a result, we believe that comparisons to results for preceding periods may not be meaningful and that results of prior periods should not be relied upon as an indication of our future performance.
We and our customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.
Licenses and consents
We and our customers operate in a highly regulated industry. A number of our leases require specific governmental or regulatory licenses, consents or approvals. These include consents for certain payments under the leases and for the export, import, or re-export of our engines or aircraft. Failure by our customers or us to obtain certain licenses and approvals could negatively affect our ability to
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conduct our business. In addition, the shipment of goods, services and technology across international borders subjects the operation of our assets to international trade laws and regulations. Moreover, many countries, including the United States, control the export and reexport of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Consents needed in connection with future leasing or sale of our engines or aircraft may not be received timely or have economically feasible terms. Any of these events could adversely affect our ability to lease or sell engines or aircraft. Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. If any such regulations or sanctions affect our customers, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.
Civil aviation regulation
Users of engines and aircraft are subject to general civil aviation authorities, including the FAA and the EASA, who regulate the maintenance of engines and issue airworthiness directives. Airworthiness directives typically set forth special maintenance actions or modifications to certain engine and aircraft types or series of specific engines that must be implemented for the engine or aircraft to remain in service. Also, airworthiness directives may require the lessee to make more frequent inspections of an engine, aircraft, or particular engine parts. Each lessee of an engine or aircraft generally is responsible for complying with all airworthiness directives. However, if the engine or aircraft is off lease, we may be forced to bear the cost of compliance with such airworthiness directives, and if the engine or aircraft is leased, subject to the terms of the lease, if any, we may be forced to share the cost of compliance.
Environmental regulation
Our operations and assets are subject to various U.S. federal, state and local laws and regulations, and non-U.S. laws and regulations related to the protection of the environment. We could incur substantial costs, including capital and other expenditures, complying with such requirements, as well as fines, penalties, or civil or criminal sanctions and third-party claims, if we were to violate or become liable under such laws or regulations. In addition, it is expected that the new U.S. administration will seek to enact changes to numerous areas of law and regulations currently in effect related to our industry. The nature, timing and economic effects of potential changes to the current legal and regulatory framework affecting our business under the current administration remain highly uncertain and may impact our results of operations, costs, or liabilities. There can be no assurance that any changes in laws, regulations or governmental policy will not have an adverse impact on our business.
Governmental regulations of noise and emissions levels may be applicable where the related airframe is registered and where the aircraft is operated. For example, jurisdictions throughout the world have adopted noise regulations which require all aircraft to comply with Stage III noise requirements. In addition to the current Stage III compliance requirements, the U.S. and the ICAO have adopted a more stringent set of Stage IV standards for noise levels which apply to engines manufactured or certified from 2006 onward. At this time, the U.S. regulations do not require any phase-out of aircraft that qualify only for Stage III compliance, but the EU has established a framework for the imposition of operating limitations on non-Stage IV aircraft. These regulations could limit the economic life of our engines and aircraft or reduce their value, could limit our ability to lease or sell the non-compliant engines or aircraft or, if modifications are permitted, require us to make significant additional investments in the engines or aircraft to make them compliant.
The U.S. and other jurisdictions are imposing more stringent limits on the emission of nitrogen oxide, carbon monoxide, and carbon dioxide emissions from engines, consistent with ICAO standards. Although, these limits generally apply only to engines manufactured after 1999, new laws could be passed in the future that also impose limits on older engines, thereby subjecting our older engines to existing or new emissions limitations or indirect taxation. These limits may also impact growth levels in air travel. In 2005, the EU launched an Emissions Trading System limiting greenhouse gas emissions by various industries and persons, including aircraft operators. However, in an April 2023 directive, the European Parliament and European Council adopted components of the European Commission’s “Fit for 55” proposal, which will modify the ETS system by phasing out free emissions allowances for the aviation sector by 2026. The directive entered force in June 2023, and was required to be transposed into national law by member states by December 31, 2023. In addition, the ICAO has adopted the Carbon Offsetting and Reduction Scheme for International Aviation (“CORSIA”), a global market-based scheme aimed at reducing carbon dioxide emissions from international aviation that will become mandatory in 2027. At least 126 countries, including the United States, have indicated that they will participate in the voluntary phase-in of CORSIA from 2024 onwards. Limitations on emissions, such as the ETS and CORSIA, could favor the use of younger, more fuel-efficient aircraft, since they generally produce lower levels of emissions per passenger, which could adversely affect our ability to re-lease or otherwise dispose of less efficient older engines and aircraft on a timely basis, on favorable terms, or at all. Concerns over global warming, climate change, or other environmental issues could result in more stringentlimitations on the operation of older, non-compliant engines and aircraft.
Scrutiny of the airline industry and its potential negative impacts on the environment may result in decreased demand for air travel, which may in turn cause lessees to default on their lease payment obligations to us which would negatively affect our financial condition, cash flow and results of operations.
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The airline industry has also come under increased scrutiny by the press, the public and investors regarding the impact of air travel on the environment, including emissions to the air, discharges to surface and subsurface waters, safe drinking water, aircraft noise, the management of hazardous substances, oils and waste materials and other environmental impacts related to aircraft operations. If such scrutiny results in reduced air travel or increased costs to air travel, it may affect demand for our aircraft and engines, lessees’ ability to make rental and other lease payments and reduce the value we receive for our aircraft and engines upon any disposition, which would negatively affect our financial condition, cash flow and results of operations. In addition, growing demand to transition to lower-carbon technologies, such as sustainable aviation fuels that may be developed over time, may increase our costs or reduce demand for our aircraft or engines or airline travel more generally.
We are subject to governmental regulation and our failure to comply with these regulations could cause the government to withdraw or revoke our authorizations and approvals to do business and could subject us to penalties and sanctions that could harm our business.
Governmental agencies throughout the world, including the FAA, highly regulate the manufacture, repair, and operation of all aircraft operated in the U.S. and equivalent regulatory agencies in other countries, such as the EASA in Europe, regulate aircraft operated in those countries. We include, with the aircraft, engines and related parts that we purchase, lease and sell to our customers, documentation certifying that each part complies with applicable regulatory requirements and meets applicable standards of airworthiness established by the FAA or the equivalent regulatory agencies in other countries. Specific regulations vary from country to country, although regulatory requirements in other countries are generally satisfied by compliance with FAA requirements. With respect to a particular engine or engine component, we utilize FAA and/or EASA certified repair stations to repair and certify engines and components to ensure marketability. The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition, and results of operations. New and more stringent government regulations, if adopted and enacted, could have an adverse effect on our business, financial condition, and results of operations. In addition, certain product sales to foreign countries require approval or licensing from the U.S. government. Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.
Failure to comply with anti-corruption laws, trade controls, economic sanctions and similar laws and regulations could subject us to penalties and other adverse consequences.
Our operations are subject to U.S. and foreign anti-corruption and trade control laws and regulations, such as the Foreign Corrupt Practices Act (“FCPA”) and other anti-bribery laws in other jurisdictions, including the UK Bribery Act 2010, export controls, and economic sanctions programs, including those administered by the U.S. Department of State, U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), and the Bureau of Industry and Security (“BIS”) of the Department of Commerce.
As part of our business, we may deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials in connection with obtaining or retaining business or securing any improper business advantage. In addition, we must comply with various laws and regulations relating to the export of products and technology from the U.S. and other countries having jurisdiction over our operations. Obtaining the necessary export license or other authorization for a particular lease may be time-consuming and may result in the delay or loss of leasing opportunities.
We are also subject to certain economic and trade sanctions programs that are administered by OFAC, which prohibit or restrict transactions to or from, or dealings with, specified countries, their governments, and in certain circumstances, their nationals, and with individuals and entities that are specially designated nationals of those countries. It is possible that, without our knowledge, engines or other equipment that we export end up in the possession of individuals or entities that have been designated by OFAC or are located in a country subject to sanctions.
We have established policies and procedures designed to assist with our compliance with these laws and regulations. However, maintaining and enhancing our policies and procedures in response to changing laws and regulations or business circumstances can be costly and place restrictions on our operations, and we cannot guarantee that the precautions we take will prevent violations of anti-corruption and trade control laws and regulations. Violations of these regulations are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts, and revocations or restrictions of licenses, as well as criminalfines and imprisonment. In addition, the costs associated with responding to a government investigation and remediating any violations can be substantial. Accordingly, violations could adversely affect, among other things, our reputation, business, financial condition, results of operations, and cash flows.
Our aircraft, engines or parts could cause bodily injury or property damage, exposing us to liability claims.
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We are exposed to potential liability claims if the use of our aircraft, engines or parts is alleged to have caused bodily injury or property damage. Our leases require our lessees to indemnify us against these claims and to carry insurance customary in the air transportation industry, including liability, property damage, and all-risk hull insurance on our engines and on our aircraft at agreed upon levels. We can give no assurance that one or more catastrophic events will not exceed insurance coverage limits or that lessees’ insurance will cover all claims that may be asserted against us. Any insurance coverage deficiency or default by lessees under their indemnification or insurance obligations may reduce our recovery of losses upon an event of loss or subject the Company to monetary losses for which recovery is unavailable .
Our financial reporting for lease revenue may be adversely impacted by any future change to lease accounting, as well as any future change to current tax laws or accounting principles pertaining to operating or other lease financing.
Our lessees enjoyfavorable accounting and tax treatment generally by using operating leases. Changes in tax laws or accounting principles that make operating leases less attractive to our lessees could have a material adverse effect on demand for our leases and on our business.
Our consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States. If there are future changes in GAAP with regard to how we and our customers must account for leases, it could change the way we and our customers conduct our businesses and, therefore, could have a potential adverse effect on our business.
We may not be adequately covered by insurance.
By virtue of holding title to engines and aircraft, parties sufferingdamage as a result of the malfunction of an engine or aircraft may assert that lessors are strictly liable for the resulting losses. Such liability may be asserted even where the lessor is not directly controlling the operation of the relevant aircraft. While we maintain contingent insurance covering losses not covered by our lessees’ insurance, such coverage may not be available in circumstances in which the lessees’ insurance coverage is insufficient. In addition, if a lessee is not obligated to maintain sufficient insurance, we may incur the costs of additional insurance coverage during the related lease. Under certain of our debt facilities, we are required to obtain political risk insurance for leases to lessees in specified jurisdictions. We can give no assurance that such insurance will be available at commercially reasonable rates, if at all.
We and our lenders generally are named as additional insureds on liability insurance policies carried by our lessees and are usually the loss payees for damage to our engines and aircraft. However, an uninsured or partially insured claim, or a claim for which third-party indemnification is not available, could have a material adverse effect upon us. A loss of an aircraft in which we lease the airframe, an engine or other leased equipment could result in significant monetary claims for which there may not be sufficient insurance coverage.
Natural disasters, public health emergencies, and other business disruptions could cause significant harm to our customer base, which may materially adversely affect our business, results of operations, and financial condition.
Our U.S. and international operations and warehouse facilities are susceptible to losses and interruptions caused by floods, hurricanes, earthquakes, wildfires, typhoons, and similar natural disasters, public health emergencies, as well as power outages, telecommunications failures, and similar events. Climate change may exacerbate certain of these threats, including the frequency and severity of weather-related events and other natural disasters.
A decrease in air travel, lack of demand for air travel, or downturn in the aviation industry caused by public health emergencies or natural disasters could result in lower utilization of our engine and aircraft assets, which could in turn materially and adversely affect our business, financial condition and results of operations. In addition, the occurrence of natural disasters and health emergency or similar events in any of the regions in which we operate could disrupt and materially and adversely impact the operations of our business.
Cyberattacks or other information security breaches could adversely affect our business, operating results and financial condition.
Our operations are becoming increasingly dependent on information technologies. Threats to our information technology systems continue to grow, and include, among other things, power outages, natural disasters, malware, ransomware, phishing, computer viruses, human error, and unexpectedcomplications as our information technology systems are maintained or upgraded. Significant damage or interruption to our information technology systems, including cyberattacks, could lead to the loss of sensitive information, including that of our customers, suppliers, and employees, result in operational disruption, or require expensive investment to fix or replace our information technology systems. Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs, and liabilities. In turn, this could adversely affect our business strategy, operating results, and financial condition.
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We have been subject to cybersecurity incidents in the past and may be again in the future. Due to the evolving nature and increased sophistication of these cybersecurity threats, the potential impact of any future incident cannot be predicted with certainty. Although we employ a number of measures to prevent, detect and mitigate these threats, even the most well-protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk. Any such incidents could have a material adverse effect on our results of operations and financial condition, especially if we fail to maintain sufficient insurance coverage to cover liabilities incurred or are unable to recover any funds lost in data, security and/or system breaches, and could result in a material adverse effect on our business and results of operations.
Moreover, we may face increased costs as we continue to evolve our cyber defenses in order to contend with changing risks, and possible increased costs of complying with cybersecurity laws and regulations. These costs and losses associated with these risks are difficult to predict and quantify, but could have a significant adverse effect on our operating results.
Risks Related to Our Aviation Assets
The value and lease rates of our engines and aircraft could decline.
The value of a particular model of engine depends heavily on the types of aircraft on which it may be installed and the supply of available engines. We believe engine values tend to be relatively stable so long as there is sufficient demand for the host aircraft. The demand for aircraft depends on numerous factors, including age, technology, and customer preference. We believe the value of an engine begins to decline rapidly once the host aircraft begins to be retired from service and/or is used for spare parts in significant numbers. Certain types of engines and aircraft may be used in significant numbers by commercial aircraft operators that are currently experiencing financial difficulties. If such operators were to file for protection under bankruptcy laws or commence liquidation or similar proceedings, the resulting over-supply of engines and aircraft from these operators could have an adverse effect on the demand for the affected engine and aircraft types and the value of such aviation equipment.
Upon termination of a lease, we may be unable to enter into new leases or sell the affected aviation equipment on acceptable terms.
We directly or indirectly own the aviation equipment that we lease to customers and bear the risk of not recovering our entire investment through leasing and selling the applicable equipment. Upon termination of a lease, we seek to enter a new lease, sell or part-out the applicable aviation equipment. We also selectively sell aviation equipment on an opportunistic basis. We cannot give assurance that we will be able to find, in a timely manner or at all, a lessee or a buyer for aviation equipment coming off-lease or for the associated parts. If we do find a lessee, we may not be able to obtain satisfactory lease rates and terms (including maintenance and redelivery conditions) or rates and terms comparable to our current leases, and we can give no assurance that the creditworthiness of any future lessee will be equal to or better than that of the existing lessees of our equipment. As of December 31, 2025, engines on-lease with lease terms of 12 months or less and engines off-lease constituted approximately 50% of our assets. These engines may frequently need to be remarketed, which could drive up our operating costs associated with such equipment. Such higher operating costs could have a material, adverse impact on our results of operations and profitability.
Although leases of engines account for most of our revenue, leases of aircraft expose us to greater risks than leases of engines and these risks could materially impact our financial condition and results of operations.
We are exposed to a number of risks related to our aircraft leasing activities. For example, leases of aircraft subject us to greater maintenance risks because the maintenance fees we charge may not cover aircraft maintenance costs that may be higher than anticipated. In addition, we face greater credit risk from lessees in this line of business as the assets that we lease to them tend to have higher net book values than individual engines. Moreover, aircraft technology is constantly improving and, as a result, particular models and types of aircraft tend to become less in demand and ultimately obsolete over time as newer, more advanced and efficient aircraft become available. Consequently, we may experience difficulty in leasing or selling aircraft. Any of these risks could have a material adverse impact on our financial condition and results of operations.
We carry the risk of maintenance for our leased assets. Our maintenance reserves may be inadequate or lessees may default on their obligations to perform maintenance, which could increase our expenses.
Under most of our engine and aircraft leases, the lessee makes monthly maintenance reserve payments to us based on the asset’s usage and management’s estimate of maintenance costs. A certain level of maintenance reserve payments on the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL engines are held in related engine reserve restricted cash accounts. Generally, the lessee under long-term leases is responsible for all scheduled maintenance costs, even if they exceed the amounts of
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maintenance reserves paid. As of December 31, 2025, 56 of our leases comprising approximately 20% of the net book value of our on-lease assets do not provide for any monthly maintenance reserve payments to be made by lessees, and we can give no assurance that future leases of our engines or aircraft will require maintenance reserves. In some cases, including engine and aircraft repossessions, we may decide to pay for refurbishments or repairs if the accumulated use fees are inadequate.
We can give no assurance that our operating cash flows and available liquidity reserves, including the amounts held in the reserve restricted cash accounts, will be sufficient to fund necessary engine and aircraft maintenance. Actual maintenance reserve payments by lessees and other cash that we receive may be significantly less than projected as a result of numerous factors, including defaults by lessees. Furthermore, we can provide no assurance that lessees will meet their obligations to make maintenance reserve payments or perform required scheduled maintenance or, to the extent that maintenance reserve payments are insufficient, to cover the cost of refurbishments or repairs.
Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft and our ability to re-lease the engines and aircraft in a timely manner following termination of the leases.
The value and income producing potential of an engine or aircraft depends heavily on it being maintained in accordance with an approved maintenance system and complying with all applicable governmental directives and manufacturer requirements. In addition, for an engine or aircraft to be available for service, all records, logs, licenses and documentation relating to maintenance and operations of the engine or aircraft must be maintained in accordance with governmental and manufacturer specifications.
Pursuant to our leases, the lessees are primarily responsible for maintaining the engines or aircraft, keeping related records and complying with governmental directives and manufacturer requirements. Certain lessees have experienced, and may experience in the future, difficulties meeting their maintenance and recordkeeping obligations as specified by the terms of our leases.
Our ability to determine the condition of the engines or aircraft and whether the lessees are properly maintaining our assets is generally limited to the lessees’ reporting of monthly usage and any maintenance performed, confirmed by periodic inspections performed by us and third parties. A lessee’s failure to meet its maintenance or recordkeeping obligations under a lease could result in:
• grounding of the related engine or aircraft;
• repossession that would likely cause us to incur additional and potentially substantial expenditures to restore the engine or aircraft to an acceptable maintenance condition;
• a need to incur additional costs and devote resources to recreate the records prior to the sale or lease of the engine or aircraft;
• loss of lease revenue while we perform refurbishments or repairs and recreate records; and
• a lower lease rate and/or shorter lease term under a new lease entered into by us following repossession of the engine or aircraft.
Any of these events may adversely affect the value of the engine or aircraft, unless and until remedied, and reduce our revenues and increase our expenses. If aviation equipment is damaged during a lease and we are unable to recover our damages from the lessee or though insurance, we may incur a loss.
The advent of superior engine and aircraft technology and higher production levels could cause our existing portfolio of aviation equipment to become outdated and therefore less desirable.
As manufacturers introduce technological innovations and new types of engines and aircraft, certain engines and aircraft in our existing portfolio of aviation equipment may become less desirable to potential lessees or purchasers. This next generation of engines and aircraft is expected to deliver improved fuel consumption and reduced noise and emissions with lower operating costs compared to current-technology aircraft.
The introduction of new models of engines and aircraft and the potential resulting overcapacity in supply, could adversely affect the residual values and the lease rates for our engines and aircraft, our ability to lease or sell our engines and aircraft on favorable terms, or at all, or result in us recording future impairment charges.
Our customers face intense competition and some carriers are in troubled financial condition.
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As a general matter, commercial aircraft operators with weak capital structures are more likely than well-capitalized operators to seek operating leases, and, at any time, investors should expect some lessees and sub-lessees to experience payment difficulties. As a result of such commercial aircraft operators’ weak financial condition and lack of liquidity, a portion of lessees over time may be significantly in arrears in their rental or maintenance payments and may default on their lease obligations. Given the size of our portfolio of engines and aircraft, we expect that from time to time some lessees will be slow in making, or will fail to make, their payments in full under their leases. As of December 31, 2025, we had an aggregate of approximately $3.8 million in lease rent and $3.3 million in maintenance reserve payments more than 30 days past due, compared to $3.9 million in lease rent and $3.6 million in maintenance reserve payments more than 30 days past due as of December 31, 2024. Our inability to collect receivables or to repossess engines, aircraft or other leased equipment in the event of a default by a lessee could have a material adverse effect on us.
We may not correctly assess the credit risk of each lessee or may not be in a position to charge risk-adjusted lease rates, and lessees may be unable to meet their financial and other obligations under our leases in the future. A delayed, reduced, or missed rental payment from a lessee may decrease our revenues and cash flow and may adversely affect our ability to make payments on our indebtedness or to comply with financial covenants in our loan documents (see “Our Financing Facilities Impose Restrictions on our Operations”). While we typically experience some level of delinquency under our leases, default levels may increase over time, particularly as our portfolio of engines and aircraft ages or if economic conditions deteriorate.
Various airlines have filed for bankruptcy in the U.S. and in foreign jurisdictions, with some seeking to restructure their operations and others ceasing operations entirely. In the case of airlines that are restructuring, such airlines often reduce their flights or eliminate the use of certain types of aircraft and the related engine types. Applicable bankruptcy laws often allow these airlines to terminate leases early and to return our engines or aircraft without meeting the contractual return conditions. In that case, we may not be paid the full amount, or any part, of our claims for these lease terminations. Alternatively, we might negotiate agreements with those airlines under which the airline continues to lease the engine or aircraft, but under modified lease terms. If requests for payment restructuring or rescheduling are made and granted, reduced or deferred rental payments may be payable over all or some part of the remaining term of the lease, although the terms of any revised payment schedules may be unfavorable and such payments may not be made. In the case of an airline which has ceased operations entirely, in addition to the risk of nonpayment, we face the enhanced risk of deterioration or total loss of an engine or aircraft while it is under uncertain custody and control. In that case, we may be required to take legal action to secure the return of the engine or aircraft and its records or, alternatively, to negotiate a settlement under which we can immediately recover the engine or aircraft and its records in exchange for waiving subsequent legal claims.
We may not be able to repossess an engine or aircraft when the lessee defaults, and even if we are able to repossess the engine or aircraft, we may have to expend significant funds in the repossession, remarketing and leasing of the asset.
When a lessee defaults and such default is not cured in a timely manner, we typically seek to terminate the lease and repossess the engine or aircraft. If a defaulting lessee contests the termination and repossession or is under court protection, enforcement of our rights under the lease may be difficult, expensive and time-consuming. We may not realize any practical benefits from our legal rights, and we may need to obtain consents to export the engine or aircraft. As a result, the relevant asset may be off-lease or not producing revenue for a prolonged period. In addition, we will incur direct costs associated with repossessing our engine or aircraft. These costs may include legal and similar costs, the direct costs of transporting, storing and insuring the engine or aircraft, and costs associated with necessary maintenance and recordkeeping to make the asset available for lease or sale. During this time, we will realize no revenue from the leased engine or aircraft, and we will continue to be obligated to pay any debt financing applicable to the asset. If an engine is installed on an airframe, the airframe may be owned by an aircraft lessor or other third party. Our ability to recover engines installed on airframes may depend on the cooperation of the airframe owner.
Risks Related to Our Orders of New Engines
We have committed to purchase new engines in 2026 with an aggregate value of up to $244.5 million. Our ability to lease these assets on favorable terms, if at all, may be adversely affected by risks to the commercial airline industry generally. If we are unable to obtain commitments for the remaining deliveries or otherwise satisfy our contractual obligations to the engine manufacturers, we will be subject to several potential risks, including:
• forfeiting advance deposits, 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 engines, which could result in monetary damages and strained relationships with lessees;
• failing to realize the benefits of purchasing and leasing the engines; and
• risking harm to our business reputation, which would make it more difficult to purchase and lease engines in the future on agreeable terms, if at all.
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Risks Related to Our Capital Structure
Our level of indebtedness and significant debt service obligations could adversely affect our financial condition or our ability to fulfill our obligations, including the notes, and make it more difficult for us to fund our operations.
As of December 31, 2025, we had $2.7 billion of indebtedness outstanding. In addition, on such date, we had approximately $350.0 million of borrowing availability under our revolving credit facility. Our level of indebtedness could have important negative consequences to you and us, including: we may have difficulty servicing our indebtedness; we may have difficulty obtaining financing in the future for working capital, capital expenditures, acquisitions or other purposes; we will need to use a portion of our available cash flow to pay interest and principal on our debt, which will reduce the amount of money available to finance our operations and other business activities; our debt level increases our vulnerability to general economic downturns and adverse industry conditions; our debt level could limit our flexibility in planning for, or reacting to, changes in our business and in our industry in general; our leverage could place us at a competitive disadvantage compared to our competitors that have less debt; and our failure to comply with the financial and other restrictive covenants in our debt instruments which, among other things, may require us to maintain specified financial ratios and will limit our ability to incur debt and sell assets, could result in an event of default that, if not cured or waived, could have a material adverse effect on our business or prospects.
Our future growth and profitability will depend on our ability to acquire aviation equipment and make other strategic investments. As a result, our inability to obtain sufficient capital to finance these acquisitions would constrain our ability to grow our portfolio and to increase our revenues.
Our business is capital intensive and highly leveraged. Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow against our portfolio of engines, aircraft, and strategic investments is dependent, in part, on the appraised value of such engines, aircraft, and investments. If the appraised value of our portfolio declines, we may be required to either refrain from borrowings or reduce the principal outstanding under certain of our debt facilities.
A significant increase in our cost to acquire engines and aircraft, or in our cost of strategic investments, due to increased interest expense or cost of capital will make it more difficult for us to make accretive acquisitions. The disruptions may also adversely affect our ability to raise additional capital to fund our continued growth. Although we have adequate debt commitments from our lenders, assuming they are willing and able to meet their contractual obligation to lend to us, market disruptions may adversely affect our ability to raise additional equity capital to fund future growth, requiring us to rely on internally generated funds. This would lower our rate of capital investment which, in turn, could materially and adversely affect the business and the Company's results of operations.
We can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or expand our credit facilities, could result in increased funding costs and would limit our ability to:
• meet the terms and maturities of our existing and future debt facilities;
• add new equipment to our portfolio;
• fund our working capital needs and maintain adequate liquidity; and
• finance other growth initiatives.
Our financing facilities impose restrictions on our operations.
We have, and expect to continue to have, various credit and financing arrangements with third parties. These financing arrangements are secured by all or substantially all of our assets. Our existing credit and financing arrangements require us to meet certain financial condition tests. Our revolving credit facility prohibits our purchasing or redeeming stock, or declaring or paying dividends on shares of any class or series of our common or preferred stock if an event of default under such facility has or will occur and remains uncured. The agreements governing our debt, including the issuance of notes by WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX, as well as the loans under our senior secured warehouse credit facility, also include restrictive financial covenants. A breach of those and other covenants could, unless waived or amended by our creditors, result in a cross-default to other indebtedness and an acceleration of all or substantially all of our debt. We have obtained waivers and amendments to our financing agreements in the past, but we cannot provide any assurance that we will receive such waivers or amendments in the future if we request or require them. If our outstanding debt is accelerated at any time, we likely would have little or no cash or other assets available after payment of our debts, which could cause the value or market price of our outstanding equity securities to decline significantly and we would have few, if any, assets available for distributions to our equity holders in liquidation.
We are exposed to interest rate risk on our leases, which could have a negative impact on our margins.
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We are affected by fluctuations in interest rates. Our lease rates are generally fixed, and a portion of our debt bears variable rate interest based on one-month term Secured Overnight Financing Rate (“SOFR”), so changes in interest rates directly affect our lease margins. From time to time, we seek to reduce our interest rate volatility and uncertainty through hedging with interest rate derivative contracts with respect to a portion of our debt. Our lease margins, earnings and cash flows may be adversely affected by increases in interest rates. To the extent we do not have hedges or other derivatives in place, or if our hedges or other derivatives do not mitigate our interest rate exposure from an economic standpoint, we would be adversely affected by increasing interest rates. One-month term SOFR was approximately 3.87% and 4.37% on December 31, 2025 and 2024, respectively.
An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability.
A significant portion of our outstanding debt bears interest at floating rates. As a result, to the extent we have not hedged against rising interest rates, an increase in the applicable benchmark interest rates would increase our cost of servicing our debt and could materially and adversely affect our results of operations, financial condition, liquidity, and cash flows.
In addition, we regularly refinance our indebtedness. If interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity, and cash flows could be materially and adversely affected.
We have risks in managing our portfolio of engines to meet customer needs.
The relatively long life cycles of aircraft and jet engines can be shortened by world events, government regulation, or customer preferences. We seek to manage these risks by trying to anticipate demand for particular engine and aircraft types, maintaining a portfolio mix of engines that we believe is diversified, will have long-term value, and will be sought by lessees in the global market for jet engines, and by selling engines and aircraft that we expect will experience obsolescence or declining usefulness in the foreseeable future.
Each of the WEST finance vehicles and our senior secured warehouse credit facility have various limitations on how we, as servicer, are allowed to manage the trusts. These restrictions include, but are not limited to, total replacement funds held during a given 12-month period and lifetime of the trust, below value dispositions as well as limitations on sales subject to part out agreements.
These limitations on our ability to sell equipment in our portfolio could diminish our ability to manage and optimize our portfolio of airline equipment and, as a result, could have a material and adverse impact on our results of operations, financial condition, liquidity, and cash flows.
Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.
In addition to being capital intensive and highly leveraged, our business also requires that we maintain sufficient liquidity to enable us to contribute the non-financed portion of engine and aircraft purchases as well as to service our payment obligations to our creditors as they become due, despite the fact that the timing and amounts of payments under our leases do not match the timing under our debt service obligations. Our restricted cash is unavailable for general corporate purposes. Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash, and available credit under our credit facilities. Our liquidity could be adversely impacted if we are subjected to one or more of the following: a significant decline in lease revenues, a material increase in interest expense that is not matched by a corresponding increase in lease rates, a significant increase in operating expenses, or a reduction in our available credit under our credit facilities. If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired as could our ability to make dividend payments or other distributions to our equity holders. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Position, Liquidity and Capital Resources.”
Inflation may adversely affect us by increasing costs beyond what we can recover through price increases.
In prior years, inflation rates have increased throughout the U.S. economy. Increased inflation rates can adversely affect us by increasing our costs of labor, goods, and other operating costs and may reduce demand for air travel. In addition, inflation is often accompanied by higher interest rates, which could reduce the fair value of our outstanding debt obligations. In an inflationary environment, depending on airline industry and other economic conditions, we may be unable to raise prices enough to keep up with the rate of inflation, which would reduce our profit margins. We have experienced, and continue to experience, increases in the prices of labor and other costs of providing service. Continued inflationary pressures could impact our profitability and have a material adverse effect on our business, results of operations and financial condition.
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Risks Related to The Common Stock Trading Price
The Company’s common stock trading price may be affected by numerous factors that may impose a financial risk on the Company’s stockholders.
The trading price of our common stock may fluctuate due to many factors, including but not limited to the following:
• risks relating to our business described in this Annual Report;
• sales or purchases of our securities by a few stockholders or even a single significant stockholder;
• general economic conditions;
• changes in accounting mandated under GAAP;
• quarterly variations in our operating results;
• our financial condition, performance and prospects;
• changes in dividends on our common stock;
• changes in financial estimates by us;
• the level, direction and volatility of interest rates and expectations of changes in rates;
• the market for securities similar to our common stock;
• changes in our capital structure, including additional issuances by us of debt or equity securities; and
• failure to maintain effective internal controls over financial reporting.
As it relates to changes in dividends on our common stock, the declaration and payment of future dividends are dependent on many factors, including, but not limited to, our financial condition, and are at the discretion of the Company’s Board of Directors. If the Company fails to meet expectations related to dividends, the price of the Company’s common stock may decline. In addition, the U.S. stock markets have experienced price and volume volatility that have affected many companies’ stock prices, often for reasons unrelated to the operating performance of those companies.
Risks Related to Our Foreign Operations
A substantial portion of our lease revenue comes from foreign customers, subjecting us to divergent regulatory requirements.
For the year ended December 31, 2025, approximately 69% of our lease rent revenue was generated by leases to foreign customers. Such international leases present risks to us because certain foreign laws, regulations, and judicial procedures may not be as protective of lessor rights as those which apply in the U.S. We are also subject to risks of foreign laws that affect the timing and access to courts and may limit our remedies when collecting lease payments and recovering assets. We also can give no assurance that political instability abroad and changes in the policies of foreign nations will not present expropriation risks in the future that are not covered by insurance.
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Substantially all of our leases require payments in U.S. dollars but many of our customers operate in other currencies; if foreign currencies devalueagainst the U.S. dollar, our lessees may be unable to make their payments to us.
Substantially all of our current leases require that payments be made in U.S. dollars. If the currency that our lessees typically use in operating their businesses devaluesagainst the U.S. dollar, those lessees could encounter difficulties in making payments in U.S. dollars. Furthermore, many foreign countries have currency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases may provide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon conversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and increase the volatility of our earnings. If payments on our leases are made in foreign currency, our risks and hedging costs will increase.
We operate globally and are affected by our customers’ local and regional economic and other risks.
We believe that our customers’ growth and financial condition are driven by economic growth in their service areas. The largest portion of our foreign lease revenues comes from the Asia-Pacific and European regions. Some of these airline operations are among the most heavily regulated in the world. At the same time, low-cost carriers have exerted substantial competitive and financial pressure on major Asia-Pacific and European airlines. Low-cost carriers are having similar effects in North America and elsewhere.
We are also exposed to the specific economic, geopolitical and political conditions and associated risks of the Asia-Pacific and European regions. These risks can include economic recessions, regional impacts of epidemic diseases, burdensome local regulations, armed conflicts or, in extreme cases, increased risks of requisition or other loss of our engines and aircraft and risks of wide-ranging sanctions prohibiting us from leasing in certain jurisdictions. These risks can be exacerbated in jurisdictions where we have a concentration of customers or assets. An adverse geopolitical, political or economic event in any region or country in which our lessees or our engines and aircraft are concentrated could affect the ability of our lessees to meet their obligations to us, expose us to legal or political risks associated with the affected jurisdictions, or impact our ability to recover our assets all of which could have a material and adverse effect on our financial condition, cash flows, liquidity and results of operations and our ability to comply with financial covenants.
We have 69 lessees in 37 countries, and our business is exposed to geopolitical and economic risks beyond our control. Currently, global markets are experiencing volatility and uncertainty connected to the United States-Israel-Iran war and U.S intervention in Venezuela. Following the February 2026 missile strikes in Iran, there has been increased instability, including airspace closures in the Middle East, damage to airports, the de facto closure of Strait of Hormuz, a waterway that transports approximately 20% of the world’s petroleum. The duration and impact of these ongoing armed conflicts, and the potential of these conflicts spreading to more regions is uncertain and could adversely affect the global economy, financial markets, our customers and in turn us. Any such disruptions may also heighten the impacts of other risks described in this Annual Report.
We may not be able to enforce our rights as a creditor if a lessee files for bankruptcy outside of the U.S.
When a debtor seeks protection under the United States Bankruptcy Code (“Bankruptcy Code”), creditors are automatically stayed from enforcing their rights. In the case of U.S.-certificated airlines, Section 1110 of the Bankruptcy Code provides certain relief to lessors of aircraft equipment. Section 1110 has been the subject of significant litigation, and we can give no assurance that Section 1110 will protect our investment in aircraft or engines in the event of a lessee’s bankruptcy. In addition, Section 1110 does not apply to lessees located outside of the U.S. and applicable foreign laws may not provide comparable protection.
Liens on our engines or aircraft could exceed the value of such assets, which could negatively affect our ability to repossess, lease or sell a particular engine or aircraft.
Liens that secure the payment of repairers’ charges or other liens may, depending on the jurisdiction, attach to engines and aircraft. Engines also may be installed on airframes to which liens unrelated to the engines have attached. These liens may secure substantial sums that may, in certain jurisdictions or for limited types of liens, exceed the value of the particular engine or aircraft to which the liens have attached. In some jurisdictions, a lien may give the holder the right to detain or, in limited cases, sell or cause the forfeiture of the engine or aircraft. Such liens may have priority over our interest as well as our creditors’ interests in the engines or aircraft, either because they have such priority under applicable local law or because our creditors’ security interests are not filed in jurisdictions outside the U.S. These liens and lien holders could impair our ability to repossess and lease or sell the engines or aircraft. We cannot give assurance that our lessees will comply with their obligations to discharge third-party liens on our assets. If they do not, we may, in the future, find it necessary to pay the claims secured by such liens to repossess such assets.
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In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not be able to exercise our ownership rights over the engine.
In some jurisdictions, an engine affixed to an aircraft may become an accession to the aircraft, so that the ownership rights of the owner of the aircraft supersede the ownership rights of the owner of the engine. If an aircraft is security for the owner’s obligations to a third party, the security interest in the aircraft may supersede our rights as owner of the engine. This legal principle could limit our ability to repossess an engine in the event of a lessee bankruptcy or lease default while the aircraft with the engine installed remains in such a jurisdiction. We may suffer a loss if we are not able to repossess engines leased to lessees in these jurisdictions.
Changes to trade policy, tariff, sanction and import/export regulations may have a material adverse effect on our business, financial condition and results of operations.
Changes in U.S. or international, political, regulatory and economic conditions or in laws and policies governing foreign trade and investment in the territories or countries where we currently conduct our business, could adversely affect our business. The executive branch of the U.S. government has instituted or proposed changes in trade policies that include the negotiation or termination of trade agreements, the imposition of higher tariffs on imports into the U.S., economic sanctions on corporations or countries, and other government regulations affecting trade between the U.S. and other countries that will affect the manner in which we conduct our business. Trading partners of the U.S. have also implemented and threatened to implement retaliatory tariffs and/or other impediments to trade.
As a result of new or threatened tariffs, sanctions and/or impediments to trade, both from the U.S. and other countries, there may be greater restrictions and economic disincentives on international trade. The new or threatened tariffs, sanctions and other changes in trade policy could trigger retaliatory actions by affected countries, and certain foreign governments have instituted or are considering imposing tariffs and/or economic sanctions on certain U.S. goods. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. A significant portion of our business could be impacted by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, or economic sanctions). Such changes have the potential to adversely impact the U.S. economy or certain sectors thereof, our industry, and the global demand for our products and services, and as a result, could have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Our Competition and Corporate Structure
Intense competition in our industry, particularly with major companies with substantially greater financial, personnel, marketing and other resources, could cause our revenues and business to suffer.
The engine and aircraft leasing and related services industry is highly competitive and global. Our primary competitors include AerCap Holdings N.V., Shannon Engine Support Ltd., Pratt & Whitney, Rolls-Royce Partners Finance, Engine Lease Finance Corporation, FTAI Aviation LTD., MTU Aero Engines Holding AG, SMBC Aero Engine Lease B.V., and StandardAero, Inc.
Our primary competitors generally have significantly greater financial, personnel and other resources, as well as a physical presence in more locations, than we do. In addition, competing engine lessors may have lower costs of capital and may provide financial or technical services or other inducements to customers, including the ability to sell or lease aircraft, offer maintenance and repair services, or provide other forms of financing that we do not provide. We cannot give assurance that we will be able to compete effectively or that competitive pressures will not adversely affect us.
There is no organized market for the spare engines or the aircraft we purchase. Typically, we purchase engines and aircraft from commercial aircraft operators, engine manufacturers, MROs and other suppliers. We rely on our representatives, advertisements, and reputation to generate opportunities to purchase and sell engines and aircraft. The market for purchasing engine and aircraft portfolios is highly competitive, generally involving an auction bidding process. We can give no assurance that engines and aircraft will continue to be available to us on acceptable terms and in the types and quantities we seek consistent with the diversification requirements of our debt facilities and our portfolio diversification goals.
Substantially all of our assets are pledged to our creditors.
Substantially all of our assets are pledged to secure our obligations to creditors. Our revolving credit and senior secured warehouse credit banks have a lien on all of our assets, including our residual interests in WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL. Due to WEST III’s, WEST V’s, WEST VI’s, WEST VII’s, WEST VIII’s, WEST IX’s, and WWFL’s bankruptcy remote structures, that interest is subject to the prior payments of WEST III’s, WEST V’s, WEST VI’s, WEST VII’s, WEST VIII’s, WEST IX’s, and WWFL’s debt and other obligations. Therefore, our rights and the rights of our creditors to participate in any distribution of the assets of WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL upon liquidation, reorganization, dissolution or winding up will be subject to the prior claims of WEST III’s, WEST V’s, WEST VI’s,
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WEST VII’s, WEST VIII’s, WEST IX’s, and WWFL’s creditors. Similarly, the rights of our shareholders are subject to satisfaction of the claims of our lenders and other creditors.
We experience risks related to customer concentration.
While we strive to ensure we lease our assets to a diverse group of participants in the commercial aviation industry, we can be subject to customer concentration risks. For instance, in 2025, one customer accounted for approximately 13% of total lease rent revenue, and in 2024, two customers accounted for approximately 11%, each, of total lease rent revenue. In addition, as of December 31, 2025, one customer accounted for 15% of total receivables, and as of December 31, 2024, one customer accounted for 11% of total receivables. To the extent that any customer that leases a significant number of our assets experiences financial or other hardships it could have an adverse effect on our results of operations and financial condition.
We may be unable to manage the expansion of our operations.
We can give no assurance that we will be able to manage effectively the current and potential expansion of our operations, or that if we are successful expanding our operations that our systems, procedures, or controls will be adequate to support our operations, in which event our business, financial condition, results, and cash flows could be adversely affected.
Any acquisition or expansion involves various risks, which may include some or all of the following:
• incurring or assuming additional debt;
• diversion of management’s time and attention from ongoing business operations;
• future charges to earnings related to the possible impairment of goodwill and the write down of other intangible assets;
• risks of unknown or contingent liabilities;
• difficulties in the assimilation of operations, services, products and personnel;
• unanticipated costs and delays;
• risks that the acquired business does not perform consistently with our growth and profitability expectations;
• risks that growth will strain our infrastructure, staff, internal controls, and management, which may require additional personnel, time, and expenditures; and
• potential loss of key employees and customers.
Any of the above factors could have a material adverse effect on us.
We are effectively controlled by one principal stockholder who has the power to contest the outcome of most matters submitted to the stockholders for approval and to affect our stock prices adversely if he were to sell substantial amounts of his common stock.
Charles F. Willis, IV, who is the founder of WLFC and currently serves as our Executive Chairman, has served as a Director since our establishment in 1985, served as Chief Executive Officer from 1985 until 2022, served as President until 2011, and has served as Chairman of the Board of Directors from 1996 until 2022, when he became Executive Chairman.
As of December 31, 2025, Mr. Willis beneficially owned or had the ability to direct the voting of 3,075,576 shares of our common stock, representing approximately 40% of the issued shares of our common stock. As a result, Mr. Willis effectively controls the Company and has the power to contest the outcome of substantially all matters submitted to our stockholders for approval, including the election of the Company’s Board of Directors. This concentration of ownership and decision making may make it more difficult for other stockholders to effect substantial changes in our company and may also have the effect of delaying, preventing or expediting, as the case may be, a change in control of our Company. In addition, future sales by Mr. Willis of substantial amounts of the Company’s common stock, or the potential for such sales, could adversely affect the prevailing market price of the Company’s common stock.
Our business might suffer if we were to lose the services of certain key employees.
Our business operations depend upon our key employees, including our executive officers. Loss of any of these employees, particularly our Executive Chairman, could have a material adverse effect on our business as our key employees have specialized knowledge of our industry and customers and would be difficult to replace.
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We are the servicer and administrative agent for the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX facilities and the servicer agent for WWFL, and our cash flows would be materially and adversely affected if we were removed from these positions.
We are the servicer and administrative agent with respect to engines in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX facilities and the servicer agent with respect to engines in WWFL. We receive monthly fees of 11.5% as servicer (3.5% of which is subordinated in each case) and 2.0% as administrative agent of the aggregate net rents actually received by WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX on their engines. We receive monthly fees of 8.0% as servicer (3.5% of which is subordinated in each case) of the aggregate net rents actually received by WWFL for WWFL engines. We may be removed as servicer and or administrative agent of our WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL facilities by an affirmative vote of a requisite number of the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL note holders. Such vote could happen upon the occurrence of certain specified events as outlined in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL servicing and or administrative agency agreements.
As of December 31, 2025, we were in compliance with the financial covenants set forth in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL servicing and or administrative agency agreements. There can be no assurance that we will be in compliance with these covenants in the future or will not otherwise be terminated as servicer and or administrative agent for the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and or WWFL facilities. If we are removed from such role with those facilities, our expenses would increase as our consolidated VIE’s WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL would have to hire an outside provider to replace the servicer and administrative agent functions, and we would be materially and adversely affected. Consequently, our business, financial condition, results of operations and cash flows would be adversely affected.
Provisions in Delaware law and our charter and bylaws might prevent or delay a change of control.
Certain provisions of law, our amended certificate of incorporation, bylaws and amended rights agreement could make the following more difficult: (1) an acquisition of us by means of a tender offer, a proxy contest or otherwise, and (2) the removal of incumbent officers and directors.
Our Board of Directors has authorized the issuance of shares of Series A Preferred Stock, by us and to Development Bank of Japan Inc. (“DBJ”), with American Stock Transfer and Trust Company serving as rights agent. The rights agreement could make it more difficult to proceed with and tends to discourage a merger, tender offer or proxy contest. Our amended certificate of incorporation also provides that stockholder action can be taken only at an annual or special meeting of stockholders and may not be taken by written consent and, in certain circumstances relating to acquisitions or other changes in control, requires an 80% super majority vote of all outstanding shares of our common stock. Our bylaws also limit the ability of stockholders to raise matters at a meeting of stockholders without giving advance notice.
Risks Related to Our Investment Fund Partnerships
Valuations for the investment fund partnerships are inherently uncertain and are not an indicator for actual realizations.
We have entered into two investment partnerships that we do not consolidate but that do affect our financial results. We value the illiquid investments held by our investment fund partnerships based on our estimate of their fair value as of the valuation date, which is based, among other things, third-party appraisals and or interest rates that approximate prevailing market rates through observable inputs. Furthermore, we will recognize carried interest, based in part, on these estimated fair values. As these valuations are inherently uncertain, they may fluctuate greatly from period to period. There can be no assurance that the investment values that we record from time to time will ultimately be realized. If investment values turn out to be materially different, fund investors may lose confidence which could, in turn, result in liquidation of the fund or difficulties in raising additional capital.
disruptions
successfully
breaches
cyberattacks
breaches
breaches
disruptions
unauthorized
loss
damage
unfavorable
crises
greater
OVERVIEW
General . Our core business is acquiring and leasing commercial aircraft and aircraft engines and related aircraft equipment pursuant to operating leases, all of which we sometimes collectively refer to as “equipment.” As of December 31, 2025, the majority of our leases were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable under the guidance provided by ASC 842 and investments in sales-type leases. As of December 31, 2025, we had 69 lessees in 37 countries. Our portfolio is continually changing due to acquisitions and sales. As of December 31, 2025, we had $2,801.7 million of equipment held in our operating lease portfolio, $139.9 million of notes receivable, $30.6 million of maintenance rights, and $16.6 million of investments in sales-type leases, which represented, in aggregate, 363 engines, 20 aircraft, one marine vessel and other leased parts and equipment. As of December 31, 2025, we also managed 116 engines and related equipment on behalf of third parties.
Willis Aero is a wholly-owned and vertically-integrated subsidiary whose primary focus is the sale of aircraft engine parts and materials through the acquisition or consignment of aircraft engines. As of December 31, 2025, we had $56.6 million in spare parts inventory.
In 2011 we entered into an agreement with Mitsui & Co., Ltd. to participate in a joint venture formed as a Dublin-based Irish limited company, WMES, for the purpose of acquiring and leasing jet engines. Each partner holds a 50% interest in the joint venture. WMES owned a lease portfolio of 65 engines, one aircraft, and other parts and equipment with a net book value of $575.3 million at December 31, 2025. Our investment in the joint venture was $78.9 million as of December 31, 2025.
In 2014 we entered into an agreement with CASC to participate in CASC Willis, a joint venture based in Shanghai, China. Each partner holds a 50% interest in the joint venture. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on meeting the fast-growing demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. CASC Willis owned a lease portfolio of six engines with a net book value of $50.4 million as of December 31, 2025. Our investment in the joint venture was $21.6 million as of December 31, 2025.
We actively manage our portfolio and structure our leases to maximize the residual values of our leased assets. Our leasing business focuses on popular Stage IV commercial jet engines manufactured by CFMI, General Electric, Pratt & Whitney, Rolls Royce, and International Aero Engines. These engines are the most widely used engines in the world, powering Airbus, Boeing, Bombardier, and Embraer aircraft.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to residual values, estimated asset lives, impairments, bad debts, and credit losses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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We believe the following critical accounting policies, grouped by our activities, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:
Leasing-Related Activities . Revenue from leasing of aircraft equipment is recognized as operating lease revenue on a straight-line basis over the terms of the applicable lease agreements. Where collection cannot be reasonably assured, for example, upon a lessee bankruptcy, we do not recognize revenue until cash is received. We also estimate and charge to income provisions for bad debts and credit losses based on our experience in the business and with each specific customer and the level of past due accounts. The financial condition of our customers may deteriorate and result in actual losses exceeding the estimated allowances. In addition, any deterioration in the financial condition of our customers may adversely affect future lease revenues. As of December 31, 2025, the majority of our leases were operating leases with the exception of certain failed sale-leaseback transactions classified as notes receivable under the guidance provided by ASC 842 and investments in sales-type leases. Under these leases, we retain title to the leased equipment, thereby retaining the potential benefit and assuming the risk of the residual value of the leased equipment.
We generally depreciate engines on a straight-line basis over 15 years to a 55% residual value. Aircraft and airframes are generally depreciated on a straight-line basis over 13 to 20 years to a 17% residual value. The marine vessel is depreciated on a straight-line basis over an estimated useful life of 18 years to a 15% residual value. Other leased parts and equipment are generally depreciated on a straight-line basis over 14 to 15 years to a 25% residual value. When we pay for major overhauls, which improve functionality or extend the original useful life, they are capitalized and depreciated over the shorter of the estimated period to the next overhaul (“deferral method”) or the remaining useful life of the equipment. We do not accrue for planned major maintenance. For equipment which is unlikely to be repaired at the end of its current expected life, and is likely to be disassembled upon lease termination, we depreciate the equipment over its estimated life to a residual value based on an estimate of the wholesale value of the parts after disassembly. As of December 31, 2025, 19 engines having a net book value of $34.3 million were depreciated under this policy with estimated remaining useful lives up to 51 months.
Asset Valuation . Long-lived assets and certain identifiable intangibles to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable, and long-lived assets and certain identifiable intangibles to be disposed of are reported at the lower of carrying amount or fair value less cost to sell. When a long-lived asset is written down and moved to equipment held for sale from equipment held for lease, it is no longer depreciated.
On a quarterly basis, management monitors the lease portfolio for events which may indicate that a particular asset may need to be evaluated for potential impairment. These events may include a decision to part-out or sell an asset, knowledge of specific damage to an asset, or supply/demand events which may impact the Company’s ability to lease an asset in the future. On an annual basis, even absent any such ‘triggering event’, we evaluate the carrying value of the assets in our lease portfolio to determine if any impairment exists.
Impairment may be identified by several factors, including, comparison of estimated sales proceeds or forecasted undiscounted cash flows over the life of the asset with the asset’s book value, as well as appraisals from third parties. If the forecasted undiscounted cash flows are less than the book value, the asset is written down to its fair value. When evaluating for impairment, we test at the individual asset level ( e.g. , engine or aircraft), as each asset generates its own stream of cash flows, including lease rents, maintenance reserves and repair costs.
We must make assumptions which underlie the most significant and subjective estimates in determining whether any impairment exists. Those estimates, and the underlying assumptions, are as follows:
• Fair value – we determine fair value by reference to independent appraisals, quoted market prices ( e.g. , an offer to purchase) and other factors, including but not limited to current data from airlines, engine manufacturers and MRO providers, as well as specific market sales and repair cost data.
• Future cash flows – when evaluating the future cash flows that an asset will generate, we make assumptions regarding the lease market for specific engine models, including estimates of market lease rates and future demand. These assumptions are based upon lease rates that we are obtaining in the current market as well as our expectation of future demand for the specific engine/aircraft model.
If the forecasted undiscounted cash flows and fair value of our long-lived assets decrease in the future, we may incur impairment charges. Write-downs of equipment to their estimated fair values totaled $32.9 million for the year ended December 31, 2025, primarily reflecting an adjustment of the carrying value of 28 engines. As of December 31, 2025, included within equipment held for lease and equipment held for sale was $78.2 million in remaining book value of 29 assets which were previously written down.
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Write-downs of equipment to their estimated fair values totaled $11.2 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of one airframe and 11 engines. As of December 31, 2024, included within equipment held for lease and equipment held for sale was $50.8 million in remaining book value of 16 assets which were previously written down.
Management continuously monitors the aviation industry and evaluates any trends, events and uncertainties involving airlines, individual aircraft and engine models, as well as the engine leasing and sale market which would materially affect the methodology or assumptions employed by WLFC. We do not consider there to be any trends, events or uncertainties that currently exist or that are reasonably likely to occur that would materially affect our methodology or assumptions. However, should any arise, we will adjust our methodology and our disclosure accordingly.
Spare parts inventory is stated at the lower of cost or net realizable value. An impairment charge for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns, future sales expectations, and salvage value.
RECENT ACCOUNTING PRONOUNCEMENTS
The most recent adopted and to be adopted accounting pronouncements are described in Note 1(x) to our Consolidated financial statements included in this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024
Revenue is summarized as follows:
Year Ended December 31,
% Change
(dollars in thousands)
Lease rent revenue
Maintenance reserve revenue
Spare parts and equipment sales
Interest revenue
Gain on sale of leased equipment
Gain on sale of financial assets
Maintenance services revenue
Other revenue
Total revenue
Lease Rent Revenue . Lease rent revenue consists of rental income from long-term and short-term engine leases, aircraft leases, and other leased parts and equipment. Lease rent revenue increased by $53.4 million, or 22.4%, to $291.6 million for the year ended December 31, 2025 from $238.2 million for the year ended December 31, 2024. The increase is primarily due to an increase in the average size of the portfolio as compared to that of the prior period as well as an increase in average utilization from 83% to 85% (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) of equipment held in our operating lease portfolio.
One customer accounted for approximately 13% of total lease rent revenue during the year ended December 31, 2025. Two customers accounted for approximately 11%, each, of total lease rent revenue during the year ended December 31, 2024.
As of December 31, 2025, the Company had $2,801.7 million of equipment held in our operating lease portfolio, $139.9 million of notes receivable, $30.6 million of maintenance rights, and $16.6 million of investments in sales-type leases. As of December 31, 2024, the Company had $2,635.9 million of equipment held in our operating lease portfolio, $183.6 million of notes receivable, $31.1 million of maintenance rights, and $21.6 million of investments in sales-type leases. Average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) was approximately 85% and 83% for the years ended December 31, 2025 and 2024, respectively.
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Maintenance Reserve Revenue . Maintenance reserve revenue for the year ended December 31, 2025 increased $18.1 million, or 8.4%, to $232.0 million from $213.9 million for the year ended December 31, 2024. Long-term maintenance revenue was $44.5 million for the year ended December 31, 2025 compared to $39.4 million for the year ended December 31, 2024. Long-term maintenance revenue is influenced by end of lease compensation and the realization of long-term maintenance reserves associated with engines coming off lease. Engines on lease with “non-reimbursable” usage fees generated $187.5 million of short-term maintenance revenues for the year ended December 31, 2025 compared to $174.5 million for the year ended December 31, 2024, an increase of $13.0 million, or 7.4%. The increase in short-term maintenance reserve revenue was influenced by an increase in the number of engines on short-term lease conditions, the timing of recognition of in-substance fixed payments, and the systematic, contractual increase in the hourly and cyclical usage rates on our engines.
Spare Parts and Equipment Sales . Spare parts and equipment sales for the year ended December 31, 2025 increased by $68.4 million, or 252.3%, to $95.5 million compared to $27.1 million for the year ended December 31, 2024. Spare part sales were $37.7 million and $26.1 million for the years ended December 31, 2025 and 2024, respectively, an increase of $11.6 million or 44.4%. The increase in spare parts sales reflects the demand for surplus material as operators seek to extend the lives of their current generation engine portfolios. Equipment sales for the year ended December 31, 2025 were $57.8 million related to the sale of four engines. Equipment sales for the year ended December 31, 2024 were $1.0 million related to the sale of one engine.
Interest Revenue . Interest revenue increased by $2.4 million, or 20.6%, to $14.1 million for the year ended December 31, 2025, from $11.7 million for the year ended December 31, 2024. The increase primarily reflects interest revenue recognized on new notes receivable that were entered into during the latter half of 2024. Notes receivable result from failed sale-leasebacks in which the Company was the buyer-lessor.
Gain on Sale of Leased Equipment . During the year ended December 31, 2025, we sold 38 engines, five airframes, and other parts and equipment from the lease portfolio for a net gain of $54.0 million. During the year ended December 31, 2024, we sold 35 engines, eight airframes, and other parts and equipment from the lease portfolio for a net gain of $45.1 million.
Gain on Sale of Financial Assets. During the year ended December 31, 2025, we sold two investments in sales-type lease assets for a net gain of $0.4 million. There was no gain on sale of financial assets during the year ended December 31, 2024.
Maintenance Services Revenue . Maintenance services revenue predominantly represents fleet management, engine and aircraft storage and repair services, and revenue related to management of fixed base operator services to third-party customers. Maintenance services revenue increased 5.5% year over year, reflecting organic growth in the business partially offset by the sale of the fleet management business on June 30, 2025 to our joint venture WMES.
Other Revenue. Other revenue increased by $8.1 million, or 89.0%, to $17.2 million for the year ended December 31, 2025 from $9.1 million in 2024. Other revenue consists primarily of managed service fee revenue related to the servicing of engines for the WMES lease portfolio. The increase for the year ended December 31, 2025 compared to that of the prior year primarily reflects increased managed service revenue. These services include management of the WMES lease portfolio, which occurs on an ongoing basis, as well as marketing, procurement, and financing arrangement, which occurs on a transactional basis.
Depreciation and Amortization Expense . Depreciation and amortization expense increased $19.1 million, or 20.7%, to $111.6 million for the year ended December 31, 2025 compared to $92.5 million for the year ended December 31, 2024. The increase is primarily due to an increase in the size of our lease portfolio, the timing of placing acquired engines on lease, and to a lesser extent, an increase in accelerated depreciation on older engine models.
Cost of Spare Parts and Equipment Sales . Cost of spare parts and equipment sales increased by $69.4 million to $92.3 million for the year ended December 31, 2025 compared to $22.9 million in the prior year period, reflecting the increase in spare parts and equipment sales. Cost of spare parts sales were $36.6 million and $22.8 million for the year ended December 31, 2025 and December 31, 2024, respectively, reflecting the increase in spare parts sales. Cost of equipment sales were $55.7 million for the year ended December 31, 2025, compared to $0.1 million for the year ended December 31, 2024, reflecting the increase in equipment sales.
Cost of Maintenance Services. Cost of maintenance services increased by $3.4 million, or 14.1%, to $27.9 million for the year ended December 31, 2025, compared to $24.5 million for the year ended December 31, 2024. The increase is primarily related to an increase in personnel costs as a result of expansion of our aircraft disassembly and repair services.
Write-down of Equipment. Write-downs of equipment to their estimated fair values totaled $32.9 million for the year ended December 31, 2025, primarily reflecting an adjustment of the carrying value of 28 engines. Write-downs of equipment to their estimated fair values totaled $11.2 million for the year ended December 31, 2024, primarily reflecting an adjustment of the carrying value of one airframe and 11 engines.
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General and Administrative Expenses . General and administrative expenses increased by $48.0 million, or 32.7%, to $194.7 million for the year ended December 31, 2025 compared to $146.8 million in 2024. The increase primarily reflects a $23.7 million increase in personnel costs, which included an increase of $15.3 million in share-based compensation and an increase of $4.2 million in wages. Of the $15.3 million increase in share-based compensation, $5.3 million related to the acceleration of the vesting of shares upon the resignation of our former General Counsel, and the remainder primarily related to the appreciation of the market value of the Company’s equity as well as share awards to new personnel to support the continued growth of the Company. Further, there was a $12.6 million increase in consultant fees, which was influenced by costs associated with the Company’s sustainable aviation fuel project, which the Company decided to cease investment in and pursue strategic alternatives for, including, a potential sale, as well as a $4.7 million increase in legal fees primarily associated with finance and strategic initiatives related to the Company’s new investment partnerships.
Technical Expense . Technical expenses consist of the non-capitalized cost of engine repairs, engine thrust rental fees, outsourced technical support services, sublease engine rental expense, engine storage, and freight costs. These expenses increased by $9.1 million, or 40.8%, to $31.4 million for the year ended December 31, 2025, compared to $22.3 million in 2024, primarily due to an increased level of engine repair activity as compared to that of the prior period.
Net Finance Costs . Net finance costs increased by $30.4 million, or 29.0%, to $135.1 million for the year ended December 31, 2025, from $104.8 million for the year ended December 31, 2024, primarily due to an overall higher level of debt obligations. Interest expense associated with the Company’s credit facility increased by $9.7 million for the year ended December 31, 2025, due to an increase in the average outstanding balance of the credit facility for the year ended December 31, 2025, as compared to that of the prior year. We recognized incremental interest expense of $4.7 million for the year ended December 31, 2025 associated with Willis Warehouse Facility LLC (“WWFL”), as the senior secured warehouse facility did not close until May 2024, $17.8 million of additional interest expense associated with WEST VIII notes payable, which did not close until June 2025, and loss on debt extinguishment of $3.1 million associated with the refinancing of WEST IV and WEST VII notes. Additionally, derivative-related receipts were $5.8 million for the year ended December 31, 2025, as compared to $12.0 million for the year ended December 31, 2024 as certain interest rate swap positions were terminated and certain interest rate metrics fluctuated. Partially offsetting these increases in interest expense were savings resulting from the full repayment of the WEST IV notes payable and the partial repayments of the WEST VII notes payable.
Gain on Sale of Business. During the year ended December 31, 2025, a wholly-owned subsidiary of the Company, entered into a Share Purchase Agreement (the “SPA”), by and between Willis Asset Management Limited (“WAML”) and WMES. Pursuant to the SPA, WAML sold the entire issued share capital of Bridgend Asset Management Limited (“BAML”), a United Kingdom-based aviation consultancy business, to WMES for a total purchase price of $45.0 million subject to certain working capital adjustments. The transaction closed on June 30, 2025, resulting in a gain on sale of business of approximately $43.0 million for the Company.
Income Tax Expense . Income tax expense for the year ended December 31, 2025 increased by $2.8 million, or 6.4% to $46.8 million from $44.0 million for 2024. The effective tax rate for the year ended December 31, 2025 and December 31, 2024 was 29.2% and 28.8%, respectively. The Company’s effective tax rate differed from the U.S. federal statutory rate of 21.0% primarily due to executive compensation exceeding $1.0 million as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), as well as the sale of the Company’s entire issued share capital of BAML, a discrete item due to the unusual and infrequent nature of the sale. H.R. 1., also known as the One Big Beautiful Bill Act (“OBBBA”), was enacted on July 4, 2025. The provisions of the OBBBA impacted certain tax deductions, including bonus depreciation, limiting the Company’s ability to benefit from the Section 250 deduction.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
We analyze our financial data to evaluate the health of our business and assess our performance. As appropriate, in addition to income or loss from operations under GAAP, we use Adjusted EBITDA, a non-GAAP financial measure, to evaluate our business. We believe that this non-GAAP financial measure provides meaningful supplemental information regarding our performance as it excludes certain items that may not be indicative of our recurring operating results. We also believe that investors, in addition to management, benefit from referring to this non-GAAP financial measure in assessing our performance, when viewed together with our GAAP results. While items excluded from Adjusted EBITDA may be recurring in nature and should not be disregarded in evaluating performance, it can be useful to exclude such items as they can vary significantly between periods and or not be indicative of current or future operating results.
Because non-GAAP financial measures are not standardized, our calculation of Adjusted EBITDA may differ from similarly titled non-GAAP measures, if any, reported by other companies. This non-GAAP financial measure should not be considered in insolation from, or as a substitute for, financial information performed in accordance with GAAP.
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We define Adjusted EBITDA as net income attributable to common shareholders, excluding (i) income tax expense, (ii) interest expense, (iii) preferred stock dividends/costs, (iv) loss on debt extinguishment, (v) depreciation and amortization expense, (vi) stock compensation expense, (vii) write-down of equipment, (viii) acquisition, financing and divestitures related expenses, and (ix) other items not indicative of our ongoing operating performance.
Adjusted EBITDA was approximately $459.1 million and $393.7 million for the years ended December 31, 2025 and 2024, respectively. The increase in Adjusted EBITDA of $65.4 million was primarily driven by the changes noted in the Results of Operations section above. See below for the reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income attributable to common shareholders.
Year Ended December 31,
(in thousands)
Net income attributable to common shareholders
Add: Income tax expense
Add: Interest expense
Add: Preferred stock dividends/costs
Add: Loss on debt extinguishment
Add: Depreciation and amortization expense
Add: Stock compensation expense (1)
Add: Write-down of equipment
Add: Acquisition, financing and divestitures related expenses
(Less) Add: Other (2)
Adjusted EBITDA
1. In 2025, upon the resignation of our former General Counsel, $5.3 million of stock compensation expense relates to the acceleration of vesting of shares.
2. In 2025, the Company recognized $43.0 million in relation to the gain on sale of the BAML business. In 2025 and 2024, the Company recognized $13.8 million and $1.9 million, respectively, in non-recurring project expenses associated with the sustainable aviation fuels project.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2025, the Company had $546.9 million of cash, cash equivalents, and restricted cash. At December 31, 2025, $12.6 million in cash and cash equivalents and restricted cash were held in foreign subsidiaries.
We generate significant cash flow from our core business as evidenced by our net cash provided by operating activities, which was $283.2 million in 2025. Beyond cash provided through operations, we generally fund the growth of our business through a combination of equity and borrowings secured by our equipment lease portfolio. Cash of approximately $1.7 billion and $1.3 billion in the years ended December 31, 2025 and 2024, respectively, was derived from this borrowing activity. In these same time periods $1.2 billion and $0.8 billion, respectively, was used to pay down related debt.
Our credit facility and senior secured warehouse credit facility are our primary source of capital to grow our business. We also access the ABS and other markets to establish term fixed rate debt financing to better match our long-lived assets. The ABS market continues to be open for issuers like the Company. Refer to Note 5 of the consolidated financial statements for a detailed discussion of the Company’s debt obligations.
Preferred Stock Dividends
In October 2016, the Company sold and issued to DBJ an aggregate of 1,000,000 shares of the Company’s Series A Preferred Stock, $0.01 par value per share (the “Series A-1 Preferred Stock”) at a purchase price of $20.00 per share.
In September 2017, the Company sold and issued to DBJ an aggregate of 1,500,000 shares of the Company’s Series A-2 Preferred Stock, $0.01 par value per share (the “Series A-2 Preferred Stock”) at a purchase price of $20.00 per share.
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In September 2024, the Company entered into a Series A Preferred Stock Purchase Agreement with DBJ, which refinanced and expanded the Company’s Series A-1 and Series A-2 Preferred Stock into one $65.0 million Series A Preferred Stock series (the “Series A Preferred Stock”), which accrues quarterly dividends at the rate per annum of 8.35% per share. The net proceeds after deducting issuance costs were $13.1 million.
Prior to issuing the new Series A Preferred Stock, the Company’s Series A-1 Preferred Stock accrued quarterly dividends at the rate per annum of 8.5% per share and the Series A-2 Preferred Stock accrued quarterly dividends at the rate per annum of 6.5% per share. During the years ended December 31, 2025 and 2024, the Company paid total preferred stock dividends of $5.7 million and $3.5 million, respectively.
Cash Flows Discussion
Cash flows provided by operating activities were $283.2 million and $284.4 million in the years ended December 31, 2025 and 2024, respectively. The $1.2 million, or 0.4%, decrease in operating cash flows was primarily driven by a $24.3 million decrease in payments on sales-type leases, a period over period $19.6 million decrease in cash flows from changes in accounts receivable, and a period over period $28.3 million decrease in cash flows from changes in other assets. Partially offsetting the decreases was a period over period $44.5 million increase in cash flows from changes in inventory. These changes reflect significant inventory purchases made in the prior year to meet the high demand for spare parts. Spare parts sales were $37.7 million and $26.1 million for the years ended December 31, 2025 and 2024, respectively, an increase of $11.6 million, or 44%, from 2024. Cash flows from operations are driven significantly by payments made under our lease agreements, which comprise lease revenue, security deposits, and maintenance reserves, and are offset by interest expense and general and administrative costs. Cash received as maintenance reserve payments for some of our engines on lease are partially restricted by our debt arrangements. The lease revenue stream, in the short term, is at fixed rates while a portion of our debt is at variable rates. If interest rates increase, it is unlikely we could increase lease rates in the short term and this would cause a reduction in our earnings and operating cash flows. Revenue and maintenance reserves are also affected by the amount of equipment off lease. Average utilization (based on net book value of equipment held for operating lease, maintenance rights, and notes receivable and investments in sales-type leases net of allowances) was approximately 85% and 83% for the years ended December 31, 2025 and 2024, respectively.
Cash flows used in investing activities were $256.4 million for the year ended December 31, 2025 and primarily reflected $524.6 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year) and $31.1 million for the purchase of property, equipment and furnishings, which was primarily related to leasehold improvements, partly offset by $269.7 million in proceeds from sales of equipment (net of selling expenses) and $21.9 million from sale of business. Cash flows used in investing activities were $764.9 million for the year ended December 31, 2024 and primarily reflected $830.5 million for the purchase of equipment held for operating lease (including capitalized costs and prepaid deposits made during the year), and $101.8 million related to leases entered into during 2024 which were classified as a note receivable under ASC 842, partly offset by $171.2 million in proceeds from sales of equipment (net of selling expenses).
Cash flows provided by financing activities for the year ended December 31, 2025 were $387.6 million and primarily reflected $1,661.0 million in proceeds from the issuance of debt obligations, partly offset by $1,221.5 million in principal payments on debt obligations, $19.3 million in cancellation of restricted stock units in satisfaction of withholding tax, $14.6 million in new debt issuance costs, and $8.7 million in common stock cash dividends paid. Cash flows provided by financing activities for the year ended December 31, 2024 were $445.0 million and primarily reflected $1,305.7 million and $13.1 million in proceeds from the issuance of debt obligations and preferred stock, respectively, partially offset by $840.0 million in principal payments, $11.6 million in new debt issuance costs, and $10.7 million in common stock cash dividends paid.
Debt Obligations and Covenant Compliance
At December 31, 2025, debt obligations totaled $2,700.3 million, net of unamortized debt issuance costs and note discounts, payable with interest rates varying between approximately 3.1% and 8.0%. Substantially all of our assets are pledged to secure our obligations to creditors. For further information on our debt instruments, see Note 5 “Debt Obligations” in Part II, Item 8 of this Form 10-K.
In December 2025, the Company and its direct, wholly-owned subsidiary WEST IX, closed WEST IX’s offering of $392.9 million in aggregate principal amount of fixed rate notes. The WEST IX Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $337.4 million and the Series B Notes issued in an aggregate principal amount of $55.5 million. The WEST IX Notes are secured by, among other things, WEST IX’s direct and indirect ownership interests in a portfolio of aircraft engines and airframes. The Series A Notes and Series B Notes have a fixed coupon of 5.16% and 5.70%, respectively, an expected maturity of approximately six years and a final maturity of 25 years. The Series A Notes and Series B Notes were issued at a price of 99.99937% and 99.99686% of par, respectively.
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In June 2025, the Company and its direct, wholly-owned subsidiary WEST VIII, closed WEST VIII’s offering of $596.0 million in aggregate principal amount of fixed rate notes. The WEST VIII Notes were issued in two series, with the Series A Notes issued in an aggregate principal amount of $524.0 million and the Series B Notes issued in an aggregate principal amount of $72.0 million. The WEST VIII Notes are secured by, among other things, WEST VIII’s direct and indirect ownership interests in a portfolio of aircraft engines and airframes. The Series A Notes and Series B Notes have a fixed coupon of 5.58% and 6.07%, respectively, an expected maturity of approximately six years and a final maturity of 25 years. The Series A Notes and Series B Notes were issued at a price of 99.99721% and 99.99711% of par, respectively.
In October 2024, the Company entered into a new, $1.0 billion, five-year, revolving credit facility with a consortium of lenders, refinancing its $500.0 million credit facility. The purpose of the revolving credit facility is to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement. As of December 31, 2025 and 2024, $350.0 million and $307.0 million were available under this facility, respectively. On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the revolving credit facility. Under the revolving credit facility, some subsidiaries except WEST III, WEST IV, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL jointly and severally guarantee payment and performance of the terms of the loan agreement. The guarantee would be triggered by a default under the agreement.
In May 2024, WWFL entered into a non-recourse, senior secured warehouse credit agreement with the Bank of Utah as security trustee and administrative agent and Bank of America, N.A. as facility agent. The secured credit agreement provides for an initial committed amount of up to $500.0 million. The warehouse credit agreement was amended in July 2025 to among other things, (i) extend the availability period of the commitments to May 2027, (ii) extend the final repayment date to May 2030, (iii) provide more favorable asset advance rates to WWFL, and (iv) reduce fees. The purpose of the senior secured warehouse credit facility is to finance the acquisition of equipment for lease as well as for general working capital purposes, with the amounts drawn under the facility not to exceed that which is allowed under the borrowing base as defined by the credit agreement. As of December 31, 2025, $417.3 million was available under this facility. On a quarterly basis, the interest rate is adjusted based on the Company’s leverage ratio, as calculated under the terms of the senior secured warehouse credit facility. Pursuant to the secured warehouse credit facility, some subsidiaries except WEST III, WEST V, WEST VI, WEST VII, WEST VIII, and WEST IX jointly and severally guarantee payment and performance of the terms of the loan agreement. The guarantee would be triggered by a default under the agreement.
The assets of WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL are not available to satisfy the Company’s obligations other than the obligations specific to that WEST entity or WWFL. WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL are consolidated for financial statement presentation purposes. WEST III’s, WEST V’s, WEST VI’s, WEST VII’s, WEST VIII's, WEST IX's, and WWFL’s abilities to make distributions and pay dividends to the Company are subject to the prior payments of their debt and other obligations and their maintenance of adequate reserves and capital. Under WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL, cash is collected in restricted accounts, which is used to service the debt and any remaining amounts, after debt service and defined expenses, are distributed to the Company. Additionally, a portion of maintenance reserve payments and lease security deposits are formulaically accumulated in restricted accounts and are available to fund future maintenance events and to secure lease payments, respectively. The WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL indentures require that a minimum threshold of maintenance reserve and security deposit balances be held in restricted cash accounts.
Virtually all of the Company’s debt requires ongoing compliance with the covenants of each financing, including debt and tangible net worth ratios, minimum interest coverage ratios, and other eligibility criteria including asset type, customer and geographic concentration restrictions. The Company also has certain negative financial covenants such as liens, advances, changes in business, sales of assets, dividends and stock repurchases. Compliance with these covenants is tested either monthly, quarterly, or annually, as required, and the Company was in full compliance with all financial covenant requirements at December 31, 2025.
At December 31, 2025, we were in compliance with the covenants specified in our revolving credit facility, including the Interest Coverage Ratio requirement of at least 2.25 to 1.00, and the Total Leverage Ratio requirement of not greater than 4.25 to 1.00. The Interest Coverage Ratio, as defined in the credit facility, is the ratio of earnings before interest, taxes, depreciation and amortization and other one-time charges to consolidated interest expense. The Total Leverage Ratio, as defined in the credit facility, is the ratio of total indebtedness to tangible net worth. At December 31, 2025, we were in compliance with the covenants specified in the WEST III, WEST V, WEST VI, WEST VII, WEST VIII, WEST IX, and WWFL indentures and servicing and other debt related agreements.
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Contractual Obligations and Commitments
Repayments of our gross debt obligations primarily consist of scheduled installments due under term loans and are funded by the use of unrestricted cash reserves and from cash flows from ongoing operations. The table below summarizes our contractual commitments at December 31, 2025:
Payment due by period (in thousands)
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
Debt obligations
Interest payments under debt obligations
Purchase obligations
Operating lease obligations
Total
From time to time, we enter into contractual commitments to purchase engines directly from original equipment manufacturers. We are currently committed to purchasing 18 additional new LEAP-1B engines and 28 additional new LEAP-1A engines for an aggregate total of $857.4 million by 2030. Further, we are currently committed to purchasing six PW1133 engines for approximately $104.0 million in 2026. Our purchase agreements generally contain terms that allow the Company to defer or cancel purchase commitments in certain situations. These deferrals or cancellations would not result in penalties or increased costs other than any potential increase due to the normal year-over-year change in engine list prices, which is akin to ordinary inflation.
In December 2020, we entered into definitive agreements for the purchase of 25 Pratt & Whitney aircraft engines. As part of the purchase, we have committed to certain future overhaul and maintenance services which are anticipated to range between $106.6 million and $131.9 million by 2030.
$176.9 million of variable interest payments due under debt obligations, scheduled above, are estimated by applying the interest rates applicable at December 31, 2025 to the remaining debt, adjusted for the estimated debt repayments identified in the table above. Actual interest payments made will vary due to actual changes in the rates for one-month term SOFR.
We believe our equity base, internally generated funds, existing debt facilities, and access to capital markets are sufficient to maintain our level of operations through 2026. A decline in the level of internally generated funds could result if the amount of equipment off-lease increases, there is a decrease in availability under our existing debt facilities, or there is a significant step-up in borrowing costs. Such decline would impair our ability to sustain our level of operations. If we are not able to access additional capital, our ability to continue to grow our asset base consistent with historical trends will be impaired and our future growth limited to that which can be funded from internally generated capital.
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MANAGEMENT OF INTEREST RATE EXPOSURE
At December 31, 2025, $732.7 million of our borrowings were on a variable rate basis at rates tied to one-month term SOFR. Our equipment leases are generally structured at fixed rental rates for specified terms. Increases in interest rates could narrow or result in a negative spread between the rental revenue we realize under our leases and the interest rate that we pay under our borrowings. Historically, we have entered into interest rate derivative instruments to mitigate our exposure to interest rate risk; such investments are not intended to speculate or trade in derivative products. As of December 31, 2025, the Company had five interest rate swap agreements, with a total notional amount of $334.5 million. During 2021, the Company entered into four fixed-rate interest swap agreements, each having notional amounts of $100.0 million, two of which matured during the year ended December 31, 2024 and two of which had remaining terms of one month as of December 31, 2025. During the year ended December 31, 2024, the Company entered into three fixed-rate interest swap agreements, each having notional amounts of $50.0 million, two of which were terminated during the year ended December 31, 2025 and one of which had a remaining term of 41 months as of December 31, 2025. During the year ended December 31, 2024, the Company also entered into one fixed-rate interest swap agreement, having a notional amount of $75.0 million. During the year ended December 31, 2025, this fixed-rate interest swap agreement was partially terminated, reducing its notional amount to $34.5 million. It had a remaining term of 41 months as of December 31, 2025. During the year ended 2025, the Company entered into one fixed-rate interest swap agreement, having a notional amount of $50.0 million, and with a remaining term of 46 months as of December 31, 2025. The derivative instruments were each designated as cash flow hedges at inception and recorded at fair value. The net fair value of the interest rate swaps as of December 31, 2025 was $0.1 million, representing an asset of $0.4 million and a liability of $0.3 million, and reflected within Other assets and Accounts payable and accrued expenses on the Consolidated Balance Sheets, respectively. The net fair value of the interest rate swaps as of December 31, 2024 was $11.0 million, representing an asset and reflected within Other assets on the Consolidated Balance Sheets.
We record derivative instruments at fair value as either an asset or liability. We have used derivative instruments (primarily interest rate swaps) to manage the risk of interest rate fluctuation. While substantially all of our derivative transactions are entered into for the purposes described above, hedge accounting is only applied when specific criteria have been met and it is practical to do so. In order to apply hedge accounting, the transaction must be designated as a hedge and the hedge relationship must be highly effective. The hedging instrument’s effectiveness is assessed utilizing regression at the inception of the hedge and either regression or qualitative analysis on at least a quarterly basis throughout its life. All of the transactions that we have designated as hedges are accounted for as cash flow hedges. The effective portion of the gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of other comprehensive income and is reclassified into earnings in the period during which the transaction being hedged affects earnings. The ineffective portion of these hedges flows through earnings in the current period. The Company recorded an adjustment to interest expense of $(5.8) million and $(12.0) million during the years ended December 31, 2025 and 2024, respectively, from derivative investments.
For any interest rate swaps that we enter into, we will be exposed to risk in the event of non-performance of the interest rate hedge counter-parties. We anticipate that we may hedge additional amounts of our floating rate debt in the future.
RELATED PARTY TRANSACTIONS
Joint Ventures
In May 2025, WAML, a wholly-owned subsidiary of the Company entered into a SPA, by and between WAML and WMES. Pursuant to the SPA, WAML sold the entire issued share capital of BAML, a United Kingdom-based aviation consultancy business, to WMES for a total purchase price of $45.0 million subject to certain working capital adjustments. The transaction closed on June 30, 2025, resulting in a gain on sale of business of approximately $43.0 million for the Company.
“Other revenue” on the Consolidated Statements of Income includes management fees earned of $7.8 million and $4.8 million during the years ended December 31, 2025 and 2024, respectively, related to the servicing of engines for the WMES lease portfolio. The Company recognized $3.0 million as a financial arrangement fee from WMES for assisting with the establishment of their new revolving credit facility.
During 2025, the Company sold four engines and one airframe to WMES for a total of $52.7 million, which resulted in a total gain of $3.7 million for the Company. Additionally, during 2025, the Company sold three engines to WMES for $55.6 million, which resulted in a trading profit of $1.4 million for the Company and is included in Spare parts and equipment sales and Cost of spare parts and equipment sales on the Company’s Consolidated Statements of Income. During 2024, the Company sold four engines to WMES for $50.5 million, which resulted in a net gain of $12.7 million for the Company.
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During 2025, the Company purchased one engine from WMES for $7.2 million. During 2024, the Company did not purchase any engines from WMES.
During 2025, the Company sold two engines to CASC Willis for $13.6 million, which resulted in a total gain of $1.5 million for the Company. During 2024, the Company did not sell any engines to CASC Willis.
As of December 31, 2025 and December 31, 2024, the Company subleased one WMES engine to a third party, with WMES as the head lessor. As of December 31, 2025 and 2024, the Right-of-Use (“ROU”) asset and lease liability balances under the lease were $0.1 million, each, and $1.6 million, each, respectively.
During 2025, the Company paid WMES $1.2 million for fleet management services, which WMES provided in connection with its purchase of BAML.
Other
During 2025 and 2024, the Company paid approximately $0.1 million, each, to Mikchalk Lake, LLC, an entity in which our Executive Chairman retains an ownership interest. These expenses were for lodging and other business-related services and were approved by the Board’s Independent Directors.
During 2025, in a transaction approved by a Special Committee of the Board’s Independent Directors, the Company purchased 30,000 shares of common stock directly from our Executive Chairman. The purchase price was $126.2782 per share, a 2% discount to the volume weighted average price on December 4, 2025.
