AIRT

Air T, Inc. (AIRT) 10-K Summary: Fiscal Year Ended March 31, 2026

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended March 31, 2026. Air T, Inc. is a holding company operating in five segments: Overnight Air Cargo, Ground Support Equipment, Commercial Aircraft/Engines/Parts, Digital Solutions, and Regional Airline. The reporting period is significantly impacted by the acquisition of Regional Express Holdings Pty Ltd ("Rex"), an Australian regional airline, on December 18, 2025. Rex is now reported as a new segment, "Regional Airline."

Key Financial Metrics

Note: Net Income includes a non-cash bargain purchase gain of $111.2 million from the Rex acquisition. Without this gain, the Company would have reported a pre-tax loss of approximately $25.2 million.

Material Changes vs. Prior Period

• Revenue Growth: Driven primarily by the inclusion of Rex ($55.3 million revenue for ~3.5 months) and a 21% increase in Ground Support Equipment revenue ($47.2 million). This was partially offset by a 25% decline in Commercial Aircraft, Engines, and Parts revenue due to lower trading volumes at Contrail.
• Operating Loss: The shift from operating income to a $11.2 million operating loss is primarily due to the initial consolidation of Rex, which contributed a $14.2 million operating loss during the stub period. This loss included $8.8 million in depreciation/amortization and $5.4 million in non-recurring acquisition/integration costs.
• Debt Expansion: Total debt increased by nearly $100 million to fund the Rex acquisition and working capital needs. New financing includes a $40 million Senior Secured Note (11.5% interest) and assumption of Commonwealth Facility debt (approx. $71.2 million face value, recorded at $22.2 million fair value).
• Segment Performance:
  • Overnight Air Cargo: Flat revenue ($123.7 million) and operating income ($6.2 million). FedEx remains the dominant customer (35% of consolidated revenue).
  • Ground Support Equipment: Strong performance with $4.1 million operating income (vs. $1.2 million loss prior year) driven by deicing equipment sales.
  • Commercial Aircraft: Revenue declined to $86.9 million, but operating income remained stable at $6.2 million due to a $7.0 million gain on the sale of two aircraft.

Guidance, Outlook, Risks, and Unusual Items

• Unusual Items: The $111.2 million bargain purchase gain is a non-cash accounting item resulting from the fair value of net assets acquired exceeding consideration transferred. It does not represent cash flow or operating income.
• Outlook & Liquidity: Management believes it has sufficient liquidity to meet obligations for at least 12 months. However, the Company is highly leveraged, and future cash flows may be insufficient to meet debt service obligations without refinancing or additional financing.
• Key Risks:
  • FedEx Dependency: 35% of consolidated revenue comes from FedEx. Dry-lease agreements expire August 31, 2026, and can be terminated with 90 days' notice. Renewal is critical.
  • Rex Integration: Risks include failure to meet "Rex Regional Commitments" (service levels/fleet reactivation), which could trigger higher interest rates on Commonwealth debt. Labor disputes are also a risk, as 76% of Rex's workforce is unionized.
  • Debt Covenants: The Company must maintain specific financial ratios (e.g., debt service coverage). Failure to comply could accelerate debt.
  • Market Volatility: Exposure to fuel prices (Rex), foreign exchange (AUD/USD), and aviation industry cyclicality.

Investor Verification Checklist

• FedEx Contract Renewal: Verify the status of negotiations for the dry-lease agreements expiring August 31, 2026, given the 90-day termination clause.
• Rex Fleet Reactivation: Monitor progress on returning Saab 340 aircraft to service to meet Commonwealth Facility commitments and avoid penalty interest rates.
• Debt Service Coverage: Review upcoming quarterly reports to ensure compliance with debt covenants, particularly given the high interest rates on new debt (11.5% - 12.0%).
• Operating Cash Flow: Assess the sustainability of operations without the one-time bargain purchase gain, noting the $25.0 million cash used in operating activities for the year.
• Inventory Valuation: Review the $77.1 million inventory balance, particularly in the Commercial Aircraft segment, for potential write-downs given market conditions.