The Company leases equipment to third parties, primarily through Contrail. Leases for aircraft and engines to aviation customers typically have terms ranging from one and four years under operating lease agreements. The Company depreciates aircraft and engines on a straight-line basis over the assets' useful life from the acquisition date to an estimated residual value.

For the assets currently on lease, there are no options for the lessees to purchase the assets at the end of the lease term. Depreciation expense relating to equipment leases during the fiscal years ended March 31, 2026 and 2025 was $0.7 million and $1.5 million, respectively.

Future minimum undiscounted rental payments to be received do not include contingent rentals that may be received under certain leases because amounts are based on usage. Earned contingent rent on equipment leases totaled approximately $0.5 million and $1.1 million during the fiscal years ended March 31, 2026 and 2025, respectively. Future minimum lease payments under the leased equipment are $0.2 million.

On August 26, 2024, Contrail executed the operating agreement for CASP Leasing I, LLC ("CASP"), a newly-created and 95% owned subsidiary of Contrail. Shortly thereafter, on August 29, 2024, CASP entered into two purchase agreements to acquire, and subsequently lease, two Airbus Model A321-111 aircraft. On July 15, 2025, CASP completed the sale of these two aircraft, including their associated engines, for a total contracted sales price exceeding $25.0 million. In connection with the sale, CASP executed assignment, assumption, and amendment agreements under the existing leases, thereby transferring all lessor rights and obligations to the purchaser. After applying purchase price adjustments for deposits and rent payments as described in the sale and purchase agreements, CASP received net closing proceeds of $19.9 million and recognized a gain of $7.0 million which is presented as gain on sale of aircraft on lease on the consolidated statements of income (loss).

The Company leases offices to third parties with lease terms of up to twenty-nine years under operating lease agreements. For the offices currently on lease, there are no options for the lessees to purchase the spaces at the end of the leases. Our contractual obligations for offices currently on lease can include termination and renewal options. We utilize the reasonably certain threshold criteria in determining which options our customers will exercise.

The Company recognized rental and other revenues related to operating lease payments of $1.7 million, of which variable lease payments were $0.7 million, during both fiscal years ended March 31, 2026 and 2025. Future minimum rental payments to be received do not include variable lease payments that may be received under certain leases because amounts are based on usage. The following table sets forth the undiscounted cash flows for future minimum base rents to be received from customers for office leases in effect as of March 31, 2026: