AIR T INC

11. Lessee Arrangements

The Company has operating leases for the use of real estate, machinery, and office equipment. The majority of our leases have a lease term of 2 to 5 years; however, we have certain leases with longer terms of up to 30 years. Many of our leases include options to extend the lease for an additional period. The lease term for all of the Company’s leases includes the non-cancellable period of the lease, plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise, or an option to extend the lease controlled by the lessor that is considered likely to be exercised.

Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments. Variable payments are typically operating costs associated with the underlying asset and are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs. Our leases do not contain residual value guarantees.

The Company has elected to combine lease and non-lease components as a single component and not to recognize leases on the balance sheet with an initial term of one year or less.

The interest rate implicit in lease contracts is typically not readily determinable, and as such the Company utilizes the incremental borrowing rate to calculate lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The components of lease cost for the three months ended June 30, 2026 and 2025 are as follows (in thousands):

Amounts reported in the condensed consolidated balance sheets for leases where we are the lessee as of June 30, 2026 and March 31, 2026 were as follows (in thousands):

During the three months ended June 30, 2026, the Company had ROU assets that were obtained in exchange for new operating lease liabilities in the amount of $3.8 million.

The Company has an operating lease between entities under common control where the useful life of certain leasehold improvements exceeds the related lease term. As of June 30, 2026, the remaining lease term on the operating lease wasthree years, five months and the useful life of leasehold improvements that exceeded the lease term ranged from three years, seven months tothree years, eleven months. As of June 30, 2026, the unamortized balance of such leasehold improvements was $0.2 million.

Maturities of lease liabilities under non-cancellable leases where we are the lessee as of June 30, 2026 are as follows (in thousands):