This management's discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto appearing elsewhere in this report. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods, and our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to those described under ''Risk Factors'' and included in our Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC.

Certain items in this Quarterly Report on Form 10-Q (this ''report''), and other information we provide from time to time, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to our ability to acquire, sell and lease aircraft, issue aircraft lease-backed securities or raise other long-term debt, pay and grow dividends, extend, modify or replace existing financing and increase revenues, earnings and EBITDA. Words such as ''anticipate(s),'' ''expect(s),'' ''intend(s),'' ''plan(s),'' ''target(s),'' ''project(s),'' ''predict(s),'' ''believe(s),'' ''may,'' ''will,'' ''would,'' ''could,'' ''should,'' ''seek(s),'' ''estimate(s)'' and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements; Aircastle Limited can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this report. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from Aircastle Limited's expectations include, but are not limited to, our continued ability to obtain additional capital to finance our working capital needs and our growth and to refinance our short-term debt financings with longer-term debt financings; our ability to acquire aircraft at attractive prices; our ability to find new ways to raise capital, including managing investment funds; our continued ability to obtain favorable tax treatment in Bermuda, Ireland and other jurisdictions; our ability to pay or maintain dividends; our ability to lease aircraft at favorable rates; an adverse change in the value of our aircraft; the possibility that conditions to closing of certain transactions will not be satisfied; general economic conditions and economic conditions in the markets in which we operate; competitive pressures within the industry and/or markets in which we operate; high fuel prices and other factors affecting the creditworthiness of our airline customers; interest rate fluctuations; margin calls and termination payments on our interest rate hedges; our ability to obtain certain required licenses and approvals; the impact of future terrorist attacks or wars on the airline industry; our concentration of customers, including geographical concentration; and other risks detailed from time to time in Aircastle Limited's filings with the Securities and Exchange Commission ( the ''SEC''), including ''Risk Factors'' as previously disclosed in Aircastle's 2007 Annual Report on Form 10-K, and in our other filings with the SEC, press releases and other communications. In addition, new risks and uncertainties emerge from time to time, and it is not possible for Aircastle to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. Aircastle Limited expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

The Company's Internet website can be found at www.aircastle.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act are available free of charge through our website under ''Investors - SEC Filings'' as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

The information on the Company's website is not part of, or incorporated by reference, into this report, or any other report we file with, or furnish to, the SEC.

OVERVIEW

We are a global company that acquires and leases high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. High-utility aircraft are generally modern, operationally efficient jets with a large operator base and long useful lives. As of March 31, 2008, our aircraft portfolio consisted of 136 aircraft that were leased to 59 lessees located in 31 countries, including two aircraft being converted to freighter configuration, one of which is subject to a lease that will commence upon completion of the conversion, and managed through our offices in the United States, Ireland and Singapore. The weighted average (by net book value) age of the aircraft in the portfolio from the date of original delivery by manufacturer to March 31, 2008, was 10.2 years. The weighted average (by net book value) remaining lease term for aircraft we owned at March 31, 2008 was 5.2 years with scheduled expirations ranging from 2008 through 2020. Typically, our aircraft are subject to net operating leases whereby the lessee is generally responsible for maintaining the aircraft and paying operational, maintenance and insurance costs, although, in a majority of cases, we are obligated to pay a portion of specified maintenance or modification costs. We also make investments in other aviation assets, including debt investments secured by commercial jet aircraft. As of May 2, 2008, we had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $4.3 billion and $1.3 billion, respectively, for a total of approximately $5.6 billion. Our revenues and income from continuing operations for the three months ended March 31, 2008 were $135.0 million and $31.6 million, respectively.

Our acquisition strategy is flexible and allows us to take advantage of the best available market opportunities and funding structures. Going forward, we are evaluating initiatives which leverage our extensive experience acquiring and managing aviation investments and include:

[[Image Removed]] [[Image Removed]] [[Image Removed]]
(1) managed funds or other entities to invest in aircraft,

[[Image Removed]] [[Image Removed]] [[Image Removed]]

                  (2)               investing in aircraft when we can add value
                                    and produce above average risk-adjusted
                                    returns; and

(3) investing in our own securities, if appropriate.

We intend to pay regular quarterly dividends to our shareholders. On March 24, 2008, our board of directors declared a regular quarterly dividend of $0.25 per common share, or an aggregate of $19.6 million, for the three months ended March 31, 2008, which was paid on April 15, 2008 to holders of record on March 31, 2008. These dividends may not be indicative of the amount of any future dividends.

Segments

Historically we reported separate segment information for the operations of our Aircraft Leasing and Debt Investments segments. Beginning in the first quarter of 2008, in conjunction with the sale of two of our debt investments as described below, our Chief Operating Decision Maker, who is the Company's Chief Executive Officer, began reviewing and assessing the operating performance of our business on a consolidated basis as the sale caused the operational results and asset levels of our remaining debt investments to be immaterial to our business and operations. As a result, we now operate in a single segment.

In February 2008, we sold two of our debt investments for $65.3 million, plus accrued interest. We repaid the outstanding balance of $52.3 million, plus accrued interest, under the related repurchase agreement. Additionally, we terminated the related interest rate swap, with notional amounts of $39.0 million at December 31, 2007 and $33.0 million as of the termination date, related to the repurchase agreement and paid breakage fees and accrued interest of approximately $1.0 million, resulting in a loss of $0.9 million, which is included in interest expense on the consolidated statement of income.

Our reduction in debt investments was done in order to deploy our capital more efficiently and to reduce short-term repurchase agreement borrowings and interest rate exposure on our hedged repurchase agreements related to these debt investments.

Revenues

Revenues are comprised primarily of operating lease rentals on flight equipment held for lease. The amount of rent we receive depends on various factors, including the type, size and age of the aircraft in our portfolio. Lease rental revenue is recognized on a straight-line basis over the term of the lease. Our aircraft lease agreements generally provide for the periodic payment of a fixed amount of rent over the life of the lease. However, the amount of rent we receive may vary due to several factors, including the credit worthiness of our lessees and the occurrence of delinquencies and defaults. Our lease rental revenues are also affected by the extent to which aircraft are off-lease and our ability to remarket aircraft that are nearing the end of their leases in order to minimize their off-lease time. Our success in re-leasing aircraft is affected by market conditions relating to our aircraft and by general industry trends. An increase in the percentage of off-lease aircraft or a reduction in lease rates upon remarketing would negatively impact our revenues. We also earn interest income from our debt investments.

We had 14 aircraft that we owned at December 31, 2007 with leases originally scheduled to expire in 2008 and, as of May 2, 2008, we had executed leases or renewals, with respect to all 14 of these aircraft. For these 14 aircraft, the weighted average lease term for the new leases or renewals will be more than six years with monthly lease rates that will be approximately 14% higher than the previous rentals. Additionally, two aircraft with lease expiration dates in 2008 are committed for sale upon return from the existing lessee.

For our 20 owned aircraft originally having lease expiries in 2009, we have executed lease renewals, or commitments to lease or renew, on nine aircraft and are actively marketing the remaining aircraft.

Since June 2007, we purchased three off-lease Boeing 747-400 aircraft. In June 2007, we also entered in a passenger to freighter conversion agreement for these aircraft. The first two aircraft were purchased in June and August 2007, and were placed on short-term interim leases until their scheduled freighter conversion processes begin during the second and fourth quarters of 2008, respectively. We purchased the third aircraft during the fourth quarter of 2007, and its freighter conversion process was completed at the end of March 2008 and it was delivered to a lessee. We have executed a long-term, post-conversion lease for one of the remaining aircraft, and are actively marketing the third aircraft for lease upon completion of its freighter conversion process, currently scheduled for February 2009.

In the first quarter of 2008, we acquired one off-lease aircraft. This aircraft was subject to a lease that we entered into in 2007; however, the lessee failed to accept delivery of the aircraft and we terminated the lease in March 2008. In April 2008, we entered into a new lease for this aircraft with another customer and we expect to deliver the aircraft under the new lease in the second quarter of 2008. We also acquired an aircraft in satisfaction of a debt instrument and leased the aircraft to a follow-on lease during the first quarter of 2008; however, in April 2008, the follow-on lessee defaulted under the lease and later filed for bankruptcy protection in the U.S. We are actively marketing this aircraft. For the balance of 2008, we have commitments to acquire three additional off-lease aircraft, for which we have lease commitments or letters of intent for all of these aircraft.

Revenues from operating lease rentals for the three months ended March 31, 2007 and 2008 were $67.4 million and $133.7 million, respectively. Our operating lease revenues increased significantly from 2007 to 2008 primarily as a result of continued aircraft acquisitions during 2007 and 2008 which caused our aircraft fleet to grow from 77 aircraft at March 31, 2007, to 136 aircraft at March 31, 2008, all but one of which were on lease.

Revenues from interest income on our debt investments are recognized using the effective interest method. Certain investments which represent residual interests are accounted for using a level

yield methodology based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. Such assumptions include the rate and timing of principal and interest. Interest income from our debt investments for the three months ended March 31, 2007 were $2.6 million as compared to $1.3 million for the three months ended March 31, 2008. The decrease in interest income of $1.3 million was primarily due to the sale of two of our debt investments in early February, 2008.

Operating Expenses

Operating expenses are comprised of depreciation of flight equipment held for lease, interest expense, selling, general and administrative expenses, or SG&A, and other expenses. As we continue to grow, we expect that depreciation of flight equipment held for lease and interest expense will grow with revenue growth. We also expect that SG&A will decline as a percentage of our total assets and of our revenues as we leverage our existing infrastructure over a greater revenue base.

Since our operating lease terms generally require the lessee to pay for operating, maintenance and insurance costs, our portion of other expenses relating to aircraft reflected in our statement of income has been nominal.

Income Tax Provision

We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 28, 2016, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda. Consequently, the provision for income taxes recorded relates to income earned by certain subsidiaries of the Company which are located in or earn income in jurisdictions that impose income taxes, primarily Ireland and the United States.

All of our aircraft-owning subsidiaries that are recognized as corporations for U.S. tax purposes are non-U.S. corporations. These non-U.S. subsidiaries generally earn income from sources outside the United States and therefore typically are not subject to U.S. federal, state or local income taxes. However, certain of these non-U.S. subsidiaries own aircraft that operate to, from or within the U.S. and therefore may be subject to federal, state and local income taxes. We also have a U.S-based subsidiary which provides management services to our non-U.S. subsidiaries and is subject to U.S. federal, state and local income taxes.

Acquisitions and Dispositions

As of May 2, 2008, we had acquired and committed to acquire aviation assets having an aggregate purchase price equal to $4.3 billion and $1.3 billion, respectively, or a total of approximately $5.6 billion.

We believe the large and growing aircraft market generates additional acquisition opportunities. Our approach is predicated on sourcing investments we believe to be accretive to shareholders. Currently, our investment focus is primarily on high-utility commercial jet aircraft for the passenger and freighter markets, although we also intend to continue to explore investment opportunities for asset-backed aviation assets, such as debt investments. Our business strategy has been to pursue acquisitions through multiple channels across the world, such as sale-leasebacks with airlines and purchases from operating lessors, banks and other aircraft owning entities. We also explore opportunities to purchase aircraft from manufacturers. Going forward, we may seek to make investments through investment vehicles involving third party investors. Our ability to successfully and efficiently acquire and integrate additional aviation assets on favorable terms, including our ability to source capital to fund acquisitions, will significantly impact our financial results and growth prospects.

We evaluate our portfolio periodically with a view to deploying capital in a manner that we expect will maximize shareholder value. Although our focus is not on trading assets, from time to time

we may sell aircraft or debt investments in order to manage our portfolio exposure and in cases where we believe that capital can be better deployed. We analyze each aircraft as its lease expiration approaches to determine whether to offer it for sale or lease and also analyze aircraft sale opportunities on a portfolio-wide basis as market conditions evolve.

On January 22, 2007, we entered into the GAIF Acquisition Agreement, pursuant to which we agreed to acquire 38 aircraft for an aggregate base purchase price of approximately $1.595 billion, subject to certain agreed adjustments. In November 2007, we agreed with GAIF to remove two aircraft from the GAIF Acquisition Agreement and in March 2008, we removed one additional aircraft from the GAIF Acquisition Agreement, reducing the total number of aircraft to be acquired to 35, with an aggregate base purchase price of approximately $1.452 billion. For certain of the aircraft, we agreed to make accelerated payments to the relevant sellers and acquire their rights and obligations under the seller's purchase or freighter conversion agreements, with final payment and delivery of the aircraft to us being made upon delivery by the manufacturer or seller, or completion of the conversion process. We acquired 28 aircraft in 2007, two aircraft during the first quarter of 2008 and one in April 2008 related to this transaction and, of the remaining four aircraft, we expect to acquire three in 2008 and one in February 2009. We have made accelerated payments to the relevant GAIF seller in relation to all of the aircraft remaining to be delivered in 2008 and 2009.

On June 20, 2007, we entered into the Airbus A330 Agreement, under which we agreed to acquire from Airbus fifteen new A330-200 aircraft, or the New A330 Aircraft. Pre-delivery payments for each aircraft are payable to Airbus and are refundable to us only in limited circumstances. We agreed to separate arrangements with Rolls-Royce PLC, or Rolls-Royce, and Pratt & Whitney, or P&W, pursuant to which we committed to acquire aircraft engines for the New A330 Aircraft. We agreed to acquire six shipsets of Trent 772B engines from Rolls-Royce and were granted options to acquire an additional four shipsets. We also committed to acquire five shipsets of PW4170 engines from P&W, and were granted options to acquire an additional five shipsets. Each shipset consists of two engines. The New A330 Aircraft are scheduled for delivery between June 2010 and November 2011, with five scheduled for delivery in 2010. Under limited circumstances, we have the right to change certain delivery positions from A330-200 freighter configuration aircraft to A330-200 passenger configuration aircraft.

The following table sets forth certain information with respect to the aircraft acquired or to be acquired by us as of March 31, 2008:

AIRCASTLE AIRCRAFT INFORMATION (dollars in millions)

[[Image Removed]]
[[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]
                                                                                                                                                                                                 Aircraft
                  [[Image Removed]] [[Image Removed]]                                  Owned                                  [[Image Removed]] [[Image Removed]]                       Committed to be Acquired as                       [[Image Removed]] [[Image Removed]]
                                                                                  Aircraft as of                                                                                               of March 31,
                                                                                 March 31, 2008(1)                                                                                              2008(2)(5)                                                                                                     Total
Flight Equipment  [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
Held for Lease                                                                          $             3,981 [[Image Removed]]                                                                       $               195 [[Image Removed]]                                                                       $             4,176 [[Image Removed]]
Number of         [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
Aircraft                                                                [[Image Removed]]               136 [[Image Removed]]                                                       [[Image Removed]]                 5 [[Image Removed]]                                                       [[Image Removed]]               141 [[Image Removed]]
Number of Lessees [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                59 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 2 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                61 [[Image Removed]]
Number of         [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
Countries                                                               [[Image Removed]]                31 [[Image Removed]]                                                       [[Image Removed]]                 2 [[Image Removed]]                                                       [[Image Removed]]                32 [[Image Removed]]
Weighted Average
Age - Passenger   [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
(years)(3)(6)                                                           [[Image Removed]]              10.3 [[Image Removed]]                                                       [[Image Removed]]              16.8 [[Image Removed]]                                                       [[Image Removed]]              10.4 [[Image Removed]]
Weighted Average
Age - Freighter   [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
(years)(3)(6)                                                           [[Image Removed]]               9.7 [[Image Removed]]                                                       [[Image Removed]]                 - [[Image Removed]]                                                       [[Image Removed]]               8.4 [[Image Removed]]
Weighted Average
Age - Combined    [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
(years)(3)(6)                                                           [[Image Removed]]              10.2 [[Image Removed]]                                                       [[Image Removed]]               4.5 [[Image Removed]]                                                       [[Image Removed]]               9.9 [[Image Removed]]
Weighted Average
Remaining
Passenger Lease   [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
Term
(years)(4)(6)                                                           [[Image Removed]]               4.1 [[Image Removed]]                                                       [[Image Removed]]               5.0 [[Image Removed]]                                                       [[Image Removed]]               4.1 [[Image Removed]]
Weighted Average
Remaining Cargo   [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
Lease Term
(years)(4)(6)                                                           [[Image Removed]]               8.7 [[Image Removed]]                                                       [[Image Removed]]              12.0 [[Image Removed]]                                                       [[Image Removed]]               9.2 [[Image Removed]]
Weighted Average
Remaining
Combined Lease    [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
. . .