Bristow Group Inc. (VTOL) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition and results of operations for the fiscal years ended March 31, 2021, 2020 and 2019. This discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes and the other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under “Item 1.A. Risk Factors” and elsewhere in this Annual Report, our actual results may differ materially from those anticipated in these forward-looking statements.

As a result of the adoption of fresh-start accounting, the Company’s consolidated financial statements subsequent to October 31, 2019 (“Successor”) may not be comparable to the consolidated financial statements prior to October 31, 2019 (“Predecessor”). The results of operations as reported in the Consolidated Financial Statements are reported separately for each of these periods in accordance with accounting principles generally accepted in the United States of America ("GAAP"), however, the results of operations for the periods from April 1, 2019 to October 31, 2019 (Predecessor) and from November 1, 2019 to March 31, 2020 (Successor), cannot adequately be compared against the twelve months ended March 31, 2021, without combining the 2019 Predecessor and Successor periods. The combined results for the year ended March 31, 2020, which are referred to herein as results for the "year ended March 31, 2020," represent the sum of the reported amounts for the Predecessor periods from April 1, 2019 through October 31, 2019, and the Successor period from October 31, 2019 through March 31, 2020. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared on a pro forma basis in accordance with Article 11 of Regulation S-X.

In the discussions that follow, the terms “Current Year” and “Prior Year” refer to the twelve months ended March 31, 2021 (Successor) and 2020 (Combined), respectively. For discussion of year-to-year comparisons between the twelve months ended March 31, 2020 (Combined) and the twelve months ended March 31, 2019 (Predecessor), see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s joint proxy and consent solicitation statement/prospectus (File No. 333-237557), filed with the SEC on May 5, 2020 (the “Joint Proxy Statement/Prospectus”).

Overview

We are the leading global provider of vertical flight solutions, primarily providing aviation services to a broad base of major integrated, national and independent energy companies and government agencies. Our helicopters are primarily used to transport personnel to, from and between offshore oil and gas production platforms, drilling rigs and other installations. In the fiscal years ended March 31, 2021, 2020 and 2019, approximately 72%, 73% and 69%, respectively, of our operating revenues were derived from oil and gas services.

We conduct our business out of one segment, aviation services, and serve customers in Australia, Brazil, Canada, Chile, Colombia, Guyana, India, Mexico, Nigeria, Norway, Spain, Suriname, Trinidad, the U.K. and U.S.

In addition to providing aviation services to the offshore energy industry, we also provide commercial SAR services in multiple countries and public sector SAR services in the U.K. In the fiscal years ended March 31, 2021, 2020 and 2019, approximately 20%, 18% and 18%, respectively, of our operating revenues were derived from U.K. SAR services while approximately 8%, 9% and 13% were from fixed wing and other services.

Recent Developments

Achievement of Part CAMO Designation

In March 2021, Bristow became the first helicopter operator in the UK to achieve the Continued Airworthiness Management Organization certification (“Part CAMO”), a new mandatory international aviation safety standard designed to ensure the airworthiness of our aircraft, well ahead of the required compliance date of August 2021, underscoring our commitment to safety and industry leadership.

Part CAMO includes new procedures, which for the first time formally require the establishment, implementation and maintenance of a management system that includes safety management and compliance monitoring of those responsible for

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airworthiness operations as determined by the Civil Aviation Authority, following European Aviation Safety Agency guidelines. While the use of a management system has been mandatory for operators for several years, Part CAMO includes a comprehensive requirement for airworthiness organizations.

Closing of $400 Million Senior Secured Notes and Repayment of Term Loans

In February 2021, we closed a private offering of $400 million aggregate principal amount of 6.875% senior secured notes due 2028 (the “6.875% Senior Notes”). We used a portion of the net proceeds from the offering of the 6.875% Senior Notes, together with cash on hand, to repay approximately $152.0 million with respect to our secured equipment term loan with Macquarie Bank Limited and approximately $200.7 million with respect to our term loans with PK AirFinance S.à r.l. (collectively, the "Term Loans"). We also used a portion of the net proceeds together with cash on hand, to redeem our 7.750% Senior Notes due 2022 with an aggregate principal amount of approximately $132.0 million outstanding. This transaction strengthens our financial position and enhances our strategic and operational flexibility. This new financing results in a simpler capital structure, extends our debt maturities, reduces mandatory amortization requirements, and significantly reduces operational friction costs, all of which we believe enhances Bristow's credit profile and future access to capital.

COVID-19

The COVID-19 pandemic has resulted in a global crisis, with many countries placing restrictions on national and international travel and instituting other measures, including, among other things, reducing or eliminating public gatherings by placing limits on such events, shuttering non-essential stores and services, encouraging voluntary quarantines and imposing involuntary quarantines, in an effort to reduce and slow the spread of COVID-19. The long-term impact of COVID-19 on the global economy is not yet known, but it has had a significant influence on economic activity and likely will continue to have a significant impact on the global economy in the near-to-medium-term, which in turn can cause volatility in global markets, generally, and in oil and natural gas prices, more specifically. Financial markets have also experienced significant volatility.

The outbreak of COVID-19 caused a significant decrease in oil and natural gas prices in the first half of 2020 resulting from demand weakness and oversupply, which has adversely affected demand for our services. Ongoing economic repercussions of the COVID-19 pandemic may further depress the oil and gas market in the future, which may lead to additional decreases in capital spending by oil and natural gas companies.

Together with our customers, we have implemented several measures at our bases, based upon guidance from local public health authorities, to help protect employees and customers, including, but not limited to, measures to restrict access to sites, medical screenings/questionnaires prior to all flights, enhanced sanitization of aircraft and equipment, modification of aircraft and special protocols on travel and passenger transport, and we are also monitoring developments that may require or cause us to modify actions as appropriate. Many of our employees are deemed “essential” in the regions in which they operate and therefore may continue performing their jobs notwithstanding guidance or orders of general applicability issued by governments requiring businesses to close, persons to shelter in place, borders to close and other similar actions. In addition, we have developed and are offering customers COVID-19 medevac transport in certain regions. As of May 2021, a number of our personnel in certain parts of the world have received the COVID-19 vaccine.

Merger Involving Bristow Group Inc. and Era Group Inc.

On January 23, 2020, Era, Merger Sub and Old Bristow entered into the Merger Agreement. On June 11, 2020, the Merger contemplated by the Merger Agreement was consummated and Merger Sub merged with and into Old Bristow, with Old Bristow continuing as the surviving corporation and as a direct wholly owned subsidiary of Era. Following the Merger, Era changed its name to Bristow Group Inc., and Old Bristow changed its name to Bristow Holdings U.S. Inc.

The Merger was accounted for as an acquisition by Old Bristow of Era even though Era was the legal acquirer and remains the ultimate parent of the Company. As a result, upon the closing of the Merger, Old Bristow’s historical financial statements replaced Era’s historical financial statements for all periods prior to the completion of the Merger, and the financial condition, results of operations, comprehensive income and cash flows of Era have been included in those financial statements since June 12, 2020. Therefore, any information in this MD&A that is presented as of dates or for periods prior to the completion of the Merger relates only to Old Bristow, and not the Company. Effective upon the closing of the Merger, the Company changed its fiscal year-end from December 31 to March 31, to correspond with Old Bristow’s fiscal year-end.

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For pro forma consolidated financial statements of the Company giving effect to the Merger, refer to the unaudited pro forma combined financial information filed as Exhibit 99.2 to our fiscal year 2020 Financial Statements.

Lines of Service

Oil and Gas. The offshore oil and gas market is highly cyclical with demand highly correlated to the price of oil and gas, which tends to fluctuate depending on many factors, including global economic activity, levels of inventory and overall demand. In addition to the price of oil and gas, the availability of acreage and local tax incentives or disincentives and requirements for maintaining interests in leases affect activity levels in the oil and gas industry. Price levels for oil and gas by themselves can cause additional fluctuations by inducing changes in consumer behavior. The four main regions where we offer oil and gas transportation services are Europe Caspian, Americas, Africa and Asia Pacific.

U.K. SAR Services. Since 2015, we have been providing SAR services in the U.K. on behalf of the MCA using a mix of U.K. SAR configured S-92s and AW189s. The recently extended U.K. SAR contract will run through December 31, 2026.

Fixed Wing Services. Our fixed wing services are currently operating in Australia and Nigeria, providing regular passenger transport (scheduled airline service with individual ticket sales) and charter services.

Other Activities and Services. In order to diversify sources of our earnings and cash flow, we deploy a number of helicopters in support of other industries and activities, one of which includes entering into lease arrangements for our helicopters with operators primarily located in international markets such as Mexico, India, Chile and Spain. The helicopters are contracted to local helicopter operators, which often prefer to lease helicopters rather than purchase them. Leasing affords us the opportunity to access new markets without significant initial infrastructure investment and generally without ongoing operating risk.

Market Outlook

The offshore oil and gas market is highly cyclical with demand linked to the price of oil and gas. The prices of oil and gas are critical factors in our customers’ investment and spending decisions. The price of crude oil had been range-bound for a number of years and then the COVID-19 pandemic further devastated the global oil and gas industry, which negatively impacted the cash flow of our customers and has led them to reduce capital and operational expenditures from prior levels, including reductions related to offshore exploration, development and production activities. This resulted in reduced oil and gas project sanctioning and total committed spending during the 2020 calendar year. Postponed plans and total sanctioning by oil and gas producers is however expected to recover in late 2021 and cause the total value of final investment decisions (FIDs) to double next year and exceed pre-pandemic levels in 2022 according to Rystad Energy Research published in September 2020.

We generate a vast majority of our operating revenues from contracts supporting our oil and gas customers’ offshore production operations, which have long-term transportation requirements. Production activities are typically less cyclical than the exploration and development activities. Production platforms remain in place over the long-term and are relatively unaffected by economic cycles, as the marginal cost of operation is low. If there are additional declines in the price of oil and gas, there could be a delay or cancellation of planned offshore projects impacting our operations in future periods.

The remainder of our oil and gas revenues primarily comes from transporting personnel to, from and between offshore drilling rigs. Deepwater activity continues to be a significant segment of the global offshore oil and gas markets and typically involves significant capital investment and multi-year development plans. Such projects are generally underwritten by the energy companies using relatively conservative assumptions relating to oil and gas prices. Although these projects are considered to be less susceptible to short-term fluctuations in the price of oil and gas compared to shorter cycle projects, persistently low crude oil prices over the last several years caused these companies to reevaluate their future capital expenditures with respect to deepwater projects and resulted in the rescaling, delay or cancellation of planned offshore projects, which could continue to impact our operations in future periods.

The SAR market is continuing to evolve, and we believe further outsourcing of public SAR services and other government contract work will become available to the private sector in the future, although the timing of these opportunities is uncertain. The duration of these contracts generally lasts for ten or more years with options for renewal. Additionally, advances in offshore wind turbine technology, wind farm development, and operating costs are now cost competitive with other forms of power generation hence creating opportunities for our business. The UK, Germany and China represent the largest portions of

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the current installed base of wind farms, but the U.S., Taiwan, Japan, Korea and Vietnam are expected to ramp up installations significantly between now and 2030 with continued growth in Europe and China, making offshore wind a significant global opportunity over the next decade and beyond.

We believe that we are well positioned to serve the market for support of offshore wind energy.

Components of Revenues and Expenses

We derive our revenues primarily from operating equipment, and our profits depend on our cost of capital, the acquisition costs of assets, our operating costs and our reputation. A majority of our revenues are generated through two types of contracts: helicopter services and fixed wing services. Revenues are recognized when control of the identified distinct goods or services has been transferred to the customer, the transaction price is determined and allocated to the satisfied performance obligations and we have determined that collection has occurred or is probable of occurring. Cost reimbursements from customers are recorded as reimbursable revenue with the related reimbursed cost recorded as reimbursable expense on our consolidated statements of operations.

Operating revenues recorded under our oil and gas line of service are primarily generated from offshore oil and gas exploration, development and production activities with fixed-term contracts generally ranging between one to five years, subject to provisions permitting early termination by customers. Customers are invoiced on a monthly basis with payment terms of 30 to 60 days. Revenues are typically earned through a combination of fixed monthly fees plus an incremental charge based on flight hours flown. Charter revenues are typically earned through either a combination of a daily fixed fee plus a charge based on hours flown or an hourly rate with a minimum number of hours to be charged daily.

Our customers for SAR services include both the oil and gas industry, where our revenues are primarily dependent on our customers’ operating expenditures, and governmental agencies, where our revenues are dependent on a country’s desire to privatize SAR and enter into long-term contracts. Operating revenues for these emergency response services are earned through a fixed monthly fee plus an incremental charge for flight hours flown, and charter revenues are typically earned through an hourly rate with a minimum number of hours to be charged daily.

We derive revenues from our fixed wing line of service by providing transportation services through passenger transport and charter services, with ticket sales recorded under deferred revenues on our consolidated balance sheet. Revenues are recognized over time at the earlier of the period in which the service is provided or the period in which the right to travel expires; this is determined by the terms and conditions of the ticket. For scheduled charter services, our contracts typically include variable rates based on the number of passengers, flights or flight hours. These agreements may also include a monthly standing charge; however, this is much less common as compared to helicopter contracts. Both chartered and scheduled airline services revenues are recognized net of passenger taxes and discounts.

Our policy of expensing all repair costs as incurred may result in operating expenses varying substantially when compared with a prior year or prior quarter if a disproportionate number of repairs, refurbishments or overhauls are undertaken. This variation can be exacerbated by the timing of entering or exiting third-party PBH programs and the timing of vendor credits.

For helicopters that we lease to third parties under arrangements whereby the customer assumes operational responsibility, we often provide technical parts support, but generally we incur no other material operating costs. In most instances, our leases require clients to procure adequate insurance, but we purchase contingent hull and liability coverage to mitigate the risk of a client’s coverage failing to respond. In some instances, we provide training and other services to support our lease customers.

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The aggregate cost of our operations depends primarily on the size and asset mix of the fleet. Our operating costs and expenses are grouped into the following categories:

•personnel (includes wages, benefits, payroll taxes and savings plans);

•repairs and maintenance (primarily routine activities and hourly charges for PBH maintenance contracts that cover helicopter refurbishments and engine and major component overhauls that are performed in accordance with planned maintenance programs);

•insurance (including the cost of hull and liability insurance premiums and loss deductibles);

•fuel;

•leased-in equipment (includes the cost of leasing helicopters and equipment); and

•other (primarily base expenses, property, sales and use taxes, communication costs, freight expenses, and other).

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Results of Operations

The following table presents our operating results and other statement of operations information for the twelve months ended March 31, 2020 and 2021, (in thousands, except percentages):

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Revenues by Service Line. The table below sets forth the operating revenues earned by service line for the applicable periods (in thousands):

Current Twelve Months compared to Prior Year Twelve Months

Operating Revenues. Operating revenues were $51.6 million lower in the twelve months ended March 31, 2021 (the “Current Year”) compared to the twelve months ended March 31, 2020 (the “Prior Year”).

Operating revenues from oil and gas operations were $39.0 million lower in the Current Year.

Operating revenues from oil and gas operations in Africa were $64.6 million lower primarily due to lower utilization.

Operating revenues from oil and gas operations in the Europe Caspian region were $51.6 million lower in the Current Year. Revenues in the U.K. decreased $32.5 million primarily due to lower utilization, partially offset by the strengthening of the GBP relative to the U.S. dollar. Revenues in Norway decreased $14.3 million primarily due to lower utilization and the weakening of the NOK relative to the U.S. dollar. Revenues in Turkmenistan decreased $4.7 million due to the end of customer contracts.

Operating revenues from oil and gas operations in the Asia Pacific region were $15.7 million lower in the Current Year. Revenues in Australia decreased $10.0 million primarily due to lower utilization. In addition, the Prior Year included revenues of $5.6 million related Aviashelf, which was sold during the Prior Year.

Operating revenues from oil and gas operations in the Americas were $93.0 million higher in the Current Year primarily due to the Merger. These increases were partially offset by lower utilization in the U.S. Gulf of Mexico and Trinidad. Revenues in Canada were $6.8 million lower due to to the change in revenue recognition method for leases to Cougar to cash basis recognition, which was effective at the beginning of the fourth quarter of the Current Year.

Operating revenues from U.K. SAR services were $6.3 million higher in the Current Year primarily due to the strengthening of the GBP relative to the U.S. dollar.

Operating revenues from fixed wing services decreased by $32.6 million in the Current Year. Revenues from fixed wing services in the U.K. were $12.8 million lower primarily due to the sale of Eastern Airways International Limited (“Eastern Airways”) during the Prior Year. Revenues from fixed wing services in Africa and Australia were $10.8 million and $9.0 million lower, respectively, primarily due to lower utilization.

Operating revenues from other services were $13.6 million higher due to the Merger and higher part sales.

Operating Expenses. Operating expenses were $89.3 million lower in the Current Year. Lease costs were $30.1 million lower in the Current Year primarily due to aircraft lease rejections in the Chapter 11 Cases prior to the Current Year, the absence of $10.8 million in net lease return costs incurred in the Prior Year and the return of leased helicopters during the

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Current Year. Fuel expense was $23.5 million lower primarily due to a decrease in flight hours. Personnel costs were $7.4 million lower primarily due to the full-year benefit of pre-Merger headcount reduction. Maintenance costs were $8.9 million lower primarily due to lower power-by-the-hour (“PBH”) expense related to fewer flight hours, partially offset by an increase in PBH amortization costs related to the recognition of a PBH asset as a result of fresh-start accounting and the Merger. Other operating expenses decreased $24.8 million primarily due to the decrease in activity, including lower training, travel and freight costs. These decreases were partially offset by an increase in insurance costs of $5.4 million primarily due to increased premiums and deductibles related to hurricane damages.

Pre-Petition Restructuring Charges. In the Prior Year, the Company incurred $13.5 million in professional fees prior to the petition date related to the Chapter 11 Cases.

General and Administrative. General and administrative expenses were $0.1 million lower in the Current Year.

Merger-related costs. Merger-related costs of $42.8 million primarily consist of professional services fees and severance costs related to the Merger.

Restructuring costs. Restructuring costs of $25.8 million during the Current Year were primarily related to separation programs in our Africa region, which were not directly related to the Merger.

Depreciation and Amortization. Depreciation and amortization expense decreased by $29.0 million in the Current Year primarily due to the revaluation of assets in connection with the adoption of fresh-start accounting and fewer helicopters. Old Bristow recorded all property and equipment at fair value upon emergence from Chapter 11 and made certain changes to the useful lives and salvage value of assets.

Loss on Impairment. During the Current Year, the Company recognized a loss on impairment of $51.9 million related to its investment in Cougar, a loss on the impairment of its investment in Líder of $18.7 million, a loss on impairment of $12.9 million related to the write down of inventory and a loss on impairment of $7.8 million related to helicopters that were transferred to held for sale assets. During the Prior Year, the Company recognized a loss on the impairment of H225 aircraft of $42.0 million, $17.5 million for Airnorth goodwill and $2.6 million for Bristow’s investment in Sky Future Partners, all of which occurred in the Predecessor Period. During the Prior Year Successor Period, the Company also recognized a loss on the impairment for its investment in Líder of $9.6 million.

Loss on Disposal of Assets. During the Current Year, the Company sold eleven H225 heavy, 14 S-76C++ medium, two B412 medium, 19 B407 single engine helicopters, one H225 simulator, three fixed wing aircraft and other equipment for cash proceeds of $67.9 million and disposed of five S-76C++ helicopters via sales-type lease agreements, resulting in losses of $8.2 million. During the Prior Year, the Company sold four H225 heavy, three B412 medium helicopters, a fixed wing aircraft and other equipment, resulting in losses of $4.2 million.

Earnings from Unconsolidated Affiliates, net of Losses. During the Current Year, the Company recognized earnings of $0.4 million from equity investments compared to $13.9 million in the Prior Year. The Current Year includes $4.8 million of losses from Líder and $5.0 million lower earnings from Cougar.

Operating Loss. Operating loss as a percentage of revenues was (8.7)% in the Current Year compared to (7.0)% in the Prior Year. Operating loss in the Current Year was primarily due to losses on impairment, restructuring and merger-related costs. Operating loss in the Prior Year was primarily due to pre-petition restructuring costs, the recognition of lease return costs and the losses on impairments.

Interest Expense. Interest expense was $100.4 million lower in the Current Year. During the Prior Year, the Company incurred a $56.9 million expense related to the Chapter 11 Cases. Interest expense was also lower in the Current Year due to lower debt balances and the absence of the amortization of deferred financing fees as these fees were written-off as a result of Chapter 11. These decreases were partially offset by increased debt discount amortization related to the fair valuing of debt as a result of fresh-start and purchase price accounting.

Loss on extinguishment of debt. During the Current Year, in connection with the refinancing, the Company repaid existing term loans and redeemed its 7.750% senior unsecured notes due December 15, 2022 (the “7.750% Senior Notes”) and

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recognized a loss on extinguishment of debt of $29.4 million related to the write-off of associated discount balances and early repayment fees.

Reorganization Items, net. During the Current Year, the Company recognized a gain of $1.6 million related to the release of the rabbi trust which held investments related to the Company’s non-qualified deferred compensation plan for the Company’s former senior executives, partially offset by bankruptcy trustee fees. Reorganization items incurred in the Prior Year related to the Chapter 11 Cases and consisted of fresh-start accounting adjustments of $686.1 million, reorganization professional and other fees of $86.2 million, debt related expenses of $48.3 million, settlement charges related to the rejection of H175 helicopters of $31.8 million, lease termination costs of $30.2 million, write-off of corporate lease and leasehold improvements of $2.8 million, gain on settlement of liabilities subject to compromise of $265.6 million, and benefit from adjustment of allowed claim associated with return of four H225 helicopters of $1.9 million. During the Prior Year, the Company also incurred $6.5 million related to professional services fees for fresh start accounting and $0.7 million related to bankruptcy trustee fees.

Loss on sale of Subsidiaries. During the Prior Year, Old Bristow sold two subsidiaries, Eastern Airways and Aviashelf, resulting in losses of $46.9 million and $9.0 million, respectively.

Change in Fair Value of Preferred Stock Derivative. During the Current Year, the Company recognized a benefit of $15.4 million related to a decrease in the fair value of preferred stock derivative. During the Prior Year, Old Bristow recognized a benefit of $184.1 million related to a decrease in the fair value of preferred stock derivative.

Gain on Bargain Purchase. During the Current Year, the Company recognized a bargain purchase gain of $81.1 million related to the Merger. The net tangible and intangible assets acquired, and liabilities assumed in connection with the Merger, were recorded at their acquisition date fair values.  The excess of the fair value of Era’s identified assets acquired and liabilities assumed was recognized as a gain.

Other Income, net. Other income, net was $27.5 million in the Current Year compared to other expense, net of $13.5 million in the Prior Year. Other income in the Current Year was primarily due to other income related to Airnorth (government grants) of $11.5 million, net foreign exchange gains of $7.5 million as shown in the table below, a favorable interest adjustment to the Company’s pension liability of $3.8 million and insurance proceeds of $2.6 million. Other expense, net in the Prior Year was primarily due to net foreign exchange losses of $12.9 million as shown in the table below and an unfavorable interest adjustment to the Company’s pension liability of $0.6 million.

Income Tax Benefit (Expense). Income tax benefit was $0.4 million in the Current Year compared to $50.7 million in the Prior Year Year primarily due to nondeductible expenses related to impairment of foreign investments, variability of earnings in different jurisdictions and the impact of valuation allowances.

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Liquidity and Capital Resources

General

Our ongoing liquidity requirements arise primarily from working capital needs, meeting our capital commitments (including the purchase of helicopters and other equipment) and the repayment of debt obligations. In addition, we may use our liquidity to fund acquisitions, repay debt, repurchase shares or debt securities or make other investments. Our primary sources of liquidity are cash balances and cash flows from operations and, from time to time, we may obtain additional liquidity through the issuance of equity or debt or other financing options or through asset sales.

Summary of Cash Flows

Operating Activities

Cash flows provided by operating activities were $96.8 million during the Current Year compared to cash flows used in operating activities of $108.4 million during the Prior Year. The Prior Year was impacted by significant reorganization costs related to Chapter 11, with a net cash flow impact of approximately $89 million. The Current Year benefited from higher other income, primarily related to COVID-19 government relief grants and principal receipts on the Company’s sales-type leases. Operating income before depreciation and amortization, impairment charges, losses on asset dispositions, net and earnings from unconsolidated affiliates, net, was $2.9 million lower in the Current Year compared to the Prior Year. In the Current Year, lower operating expenses primarily due to lower lease costs and activity were partially offset by lower revenues, Merger-related costs and restructuring costs.

Cash paid for interest expense and income taxes was $32.3 million and $15.1 million, respectively, in the Current Year compared to $62.3 million and $17.1 million, respectively, in the Prior Year.

Investing Activities

During the Current Year, net cash provided by investing activities was $173.3 million primarily consisting of:

•Increase in cash from the Merger of $120.2 million,

•Proceeds of $67.9 million from the sale or disposal of fifty-four aircraft and certain other equipment, and

•Capital expenditures of $14.8 million primarily consisting of spare helicopter parts, facility improvements and information technology upgrades.

During the Prior Year, net cash used in investing activities was $76.5 million primarily consisting of:

•Capital expenditures of $77.7 million,

•Net payments of $22.5 million for the disposal of Eastern Airways, BHLL and Aviashelf,

•Proceeds of $19.5 million from the sale or disposal of three aircraft and certain other equipment, and

•Proceeds of $4.5 million from deposits on assets held for sale.

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Financing Activities

During the Current Year, net cash used in financing activities was $245.6 million primarily consisting of:

•Proceeds of $400.0 million from the issuance of 6.875% Senior Notes,

•Net repayments of debt and redemption premiums of $623.9 million,

•Share repurchases of $15.3 million, and

•Debt issuance costs of $6.4 million related to the 6.875% Senior Notes.

During the Prior Year, net cash provided by financing activities was $202.5 million primarily consisting of:

•Borrowings under the Term Loan Agreement were $225.6 million,

•Proceeds from issuance of common and preferred stock were $385.0 million, partially offset by

•Debt issuance costs of $14.9 million,

•Net repayments of debt and other securities of $391.9 million, and

•Partial prepayment of put/call obligation of $1.3 million.

Short and Long-Term Liquidity Requirements

We anticipate that we will generate positive cash flows from operating activities and that these cash flows will be adequate to meet our working capital requirements. To support our capital expenditure program and/or other liquidity requirements, we may use any combination of operating cash flow, cash balances, issue debt or equity, ABL or other financing options.

Our availability of long-term liquidity is dependent upon our ability to generate operating profits sufficient to meet our requirements for working capital, debt service, capital expenditures and a reasonable return on investment. While the COVID-19 pandemic, in general, and the related decrease in oil and natural gas prices, more specifically, have not had a material impact on our liquidity, a sustained environment of depressed oil and natural gas prices could affect capital spending for offshore oil and gas exploration, drilling and production, which in turn could affect our business and liquidity. As of March 31, 2021, we had $228.0 million of unrestricted cash and $56.1 million of remaining availability under our amended asset-backed revolving credit facility (the “ABL Facility”) for total liquidity of $284.1 million.

As of March 31, 2021, approximately 78% of our total cash balance was held outside the U.S. and is generally used to meet the liquidity needs of our non-U.S. operations. Most of our cash held outside the U.S. could be repatriated to the U.S., and any such repatriation could be subject to additional taxes. If cash held by non-U.S. operations is required for funding operations in the U.S., we may make a provision for additional taxes in connection with repatriating this cash, which is not expected to have a significant impact on our results of operations.

The significant factors that affect our overall liquidity include cash from or used to fund operations, capital expenditure commitments, debt service, pension funding, adequacy of bank lines of credit and the Company’s ability to attract capital on satisfactory terms.

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The following table summarizes our contractual obligations and capital commitments and their aggregate maturities as of March 31, 2021 (in thousands):

_______________________

(1)Maturities of our borrowings, interest payments pursuant to such borrowings and a capital commitment fee on our ABL are based on contractual terms. Interest amounts represent the expected cash payments for interest on our long-term debt based on the interest rates in place and amounts outstanding as of March 31, 2021.

(2)Other purchase obligations primarily include purchase orders for helicopter inventory and non-cancelable PBH maintenance commitments. These commitments are for goods and services to be acquired in the ordinary course of business and are fulfilled by our vendors within a short period of time.

(3)Operating leases primarily include leases of facilities that have a remaining term in excess of one year.

(4)Capital purchase obligations as of March 31, 2021 represent commitments for the purchase of new helicopters. Of the total unfunded capital commitments, all may be terminated without further liability other than liquidated damages of $2.1 million in the aggregate. These commitments are not recorded as liabilities on our consolidated balance sheet as we had not yet received the goods or taken title to the property. See discussion of these purchase obligations below.

(5)See discussion of pension obligations below.

We believe our cash flows from operations and other sources of liquidity will be sufficient to meet our working capital needs and fulfill our debt obligations. While the COVID-19 pandemic has not had a material impact on our liquidity, management will continue to closely monitor our liquidity position, the credit markets and oil and gas prices in general.

Debt Obligations

Total principal debt balance as of March 31, 2021 (Successor) was $573.6 million primarily comprised of the 6.875% Senior Notes due in March 2028 and two tranches of the Lombard Debt due December 29, 2023 and January 30, 2024, respectively.

Currently, we do not believe the conditions caused by COVID-19 will affect our ability to meet the maintenance and other covenants in our debt instruments.

Contractual Obligations and Commercial Commitments

We have various contractual obligations that are recorded as liabilities on our consolidated balance sheet. Other items, such as certain purchase commitments and other executory contracts are not recognized as liabilities on our consolidated balance sheet such as certain minimum lease payments for the use of property and equipment under operating lease agreements we are contractually committed to make.

As of March 31, 2021, we had unfunded commitments of $85.3 million, primarily stemming from agreements to purchase eight new helicopters, consisting of three AW189 heavy helicopters and five AW169 light twin helicopters. We also

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had $1.3 million of deposits paid on options that have not yet been exercised. The AW189 helicopters are scheduled to be delivered in fiscal year 2022. Delivery dates for the AW169 helicopters have not been determined. In addition, we had outstanding options to purchase up to an additional ten AW189 helicopters. If these options were exercised, the helicopters would be delivered in fiscal year 2022 and 2023. All of all of our capital commitments (inclusive of deposits paid on options not yet exercised) may be terminated without further liability other than aggregate liquidated damages of approximately $2.1 million.

We had $21.2 million of other purchase obligations representing non-cancelable PBH maintenance commitments and unfilled purchase orders for aircraft parts.

Lease Obligations

We have non-cancelable operating leases in connection with the lease of certain equipment, including leases for aircraft, and land and facilities used in our operations. The related lease agreements, which range from non-cancelable and month-to-month terms, generally provide for fixed monthly rentals and can also include renewal options. As of March 31, 2021 (Successor), aggregate future payments under all non-cancelable operating leases that have initial or remaining terms in excess of one year, including leases for 44 aircraft, were as follows (in thousands):

During the fiscal years ended March 31, 2021 and 2020, we recognized $120.3 million and $151.6 million of operating lease expense, respectively.

Cash paid for amounts included in the measurement of lease liabilities during the fiscal year ended March 31, 2021 (Successor), was $112.6 million.

Pension Obligations

As of March 31, 2021 (Successor), we had recorded on our balance sheet a net $44.2 million pension liability related to the Bristow Helicopters Limited and Bristow International Aviation (Guernsey) Limited (“BIAGL”) pension plans. The liability represents the excess of the present value of the defined benefit pension plan liabilities over the fair value of plan assets that existed at that date. The minimum funding rules of the U.K. require the employer to agree to a funding plan with the plans’ trustee for securing that the pension plan has sufficient and appropriate assets to meet its technical provisions liabilities. In addition, where there is a shortfall in assets against this measure, we are required to make scheduled contributions in amounts sufficient to bring the plan up to fully-funded status as quickly as can be reasonably afforded. The timing of the funding is dependent on actuarial valuations and resulting negotiations with the plan trustees. The funding for defined benefit pension plans for the fiscal year ending March 31, 2022 is expected to be $18.0 million. The employer contributions for the pension plan for the Current Year, the Prior Year and the Predecessor Fiscal Year 2019 were £12.7 million ($16.2 million), £12.7 million ($16.6 million), and £12.8 million ($17.0 million), respectively.

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Selected Financial Information on Guarantors of Securities

On February 25, 2021, Bristow Group Inc. (“the Parent”) issued its 6.875% Senior Notes due 2028 (the “Registered Notes”). The Registered Notes, issued under an indenture, are fully and unconditionally guaranteed as to payment by a number of subsidiaries of the Parent (collectively, the “Guarantors”). The Parent is a holding company with no significant assets other than the stock of its subsidiaries. In order to meet its financial needs and obligations, the Parent relies exclusively on income from dividends and other cash flow from such subsidiaries. The subsidiary guarantees provide that, in the event of a default on the Registered Notes, the holders of the Registered Notes may institute legal proceedings directly against the Guarantors to enforce the guarantees without first proceeding against the Parent.

None of the non-Guarantor subsidiaries of the Parent are under any direct obligation to pay or otherwise fund amounts due on the Registered Notes or the guarantees, whether in the form of dividends, distributions, loans or other payments. If such subsidiaries are unable to transfer funds to the Parent or Guarantors and sufficient cash or liquidity is not otherwise available, the Parent or Guarantors may not be able to make principal and interest payments on their outstanding debt, including the Registered Notes or the guarantees. We believe the following selected financial information of the Guarantors presents a sufficient financial position of Bristow Group Inc. to continue to fulfill its obligations under the requirements of the Registered Notes. This selected financial information should be read in conjunction with the accompanying consolidated financial statements and notes (amounts shown in thousands).

Contingencies

General Litigation and Disputes

In the normal course of our business, we become involved in various litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. In addition, from time to time, we are involved in tax and other disputes with various government agencies. Management has used estimates in determining our potential exposure to these matters and has recorded reserves in our financial statements related thereto as appropriate. It is possible that a change in our estimates related to these exposures could occur, but we do not expect such changes in estimated costs would have a material effect on our business, consolidated financial position or results of operations.

Critical Accounting Estimates

Critical accounting estimates are defined as those that are affected by significant judgments and uncertainties which could potentially result in materially different accounting under different assumptions and conditions. The Company has prepared the financial statements in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates under different assumptions or conditions. The following critical accounting estimates could potentially result in a material impact to our financial condition or operating results. The Company believes that of its significant accounting policies, as discussed in Note 1 to the Consolidated Financial Statements included in this Annual Report on Form 10-K, the following involve a higher degree of judgment and complexity.

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Taxes. Our annual tax provision is based on expected taxable income, statutory rates and tax planning opportunities available to us in the various jurisdictions in which we operate. The determination and evaluation of our annual tax provision and tax positions involves the interpretation of the tax laws in the various jurisdictions in which we operate and requires significant judgment and the use of estimates and assumptions regarding significant future events such as the amount, timing and character of income, deductions and tax credits. Changes in tax laws, regulations, agreements, tax treaties and foreign currency exchange restrictions or our level of operations or profitability in each jurisdiction would impact our tax liability in any given year. We also operate in many jurisdictions where the tax laws relating to the offshore oil service industry are open to interpretation which could potentially result in tax authorities asserting additional tax liabilities. While our annual tax provision is based on the best information available at the time, a number of years may elapse before the ultimate tax liabilities in the various jurisdictions are determined.

We recognize foreign tax credits available to us to offset the U.S. income taxes due on income earned from foreign sources. These credits are limited by the total income tax on the U.S. income tax return as well as by the ratio of foreign source income in each statutory category to total income. In estimating the amount of foreign tax credits that are realizable, we estimate future taxable income in each statutory category. These estimates are subject to change based on changes in the market conditions in each statutory category and the timing of certain deductions available to us in each statutory category. We periodically reassess these estimates and record changes to the amount of realizable foreign tax credits based on these revised estimates. Changes to the amount of realizable foreign tax credits can be significant given any material change to our estimates on which the realizability of foreign tax credits is based.

We maintain reserves for estimated income tax exposures in jurisdictions of operation. The expenses reported for these taxes, including our annual tax provision, include the effect of reserve provisions and changes to reserves that we consider appropriate, as well as related interest. Tax exposure items primarily include potential challenges to intercompany pricing, disposition transactions and the applicability or rate of various withholding taxes. These exposures are resolved primarily through the settlement of audits within these tax jurisdictions or by judicial means, but can also be affected by changes in applicable tax law or other factors, which could cause us to conclude that a revision of past estimates is appropriate. We believe that an appropriate liability has been established for estimated exposures. However, actual results may differ materially from these estimates. We review these liabilities quarterly.

We do not believe it is reasonably possible to estimate the potential effect of changes to the assumptions and estimates identified because the resulting change to our tax liability, if any, is dependent on numerous factors which cannot be reasonably estimated. These include, among others, the amount and nature of additional taxes potentially asserted by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the impartiality of the local courts; and the potential for changes in the tax paid to one country to either produce, or fail to produce, an offsetting tax change in other countries. Our experience has been that the estimates and assumptions we have used to provide for future tax assessments have proven to be appropriate. However, past experience is only a guide and the potential exists that the tax resulting from the resolution of current and potential future tax controversies may differ materially from the amounts accrued.

Judgment is required in determining whether deferred tax assets will be realized in full or in part. When it is estimated to be more-likely-than-not that all or some portion of specific deferred tax assets, such as foreign tax credit carryovers or net operating loss carry forwards, will not be realized, a valuation allowance must be established for the amount of the deferred tax assets that are estimated to not be realizable. As of March 31, 2021 (Successor), we have established deferred tax assets for certain attributes we expect to be realizable. Our ability to realize the benefit of our deferred tax assets requires us to achieve certain future earnings levels. In the event that our earnings performance projections or future financial conditions do not indicate that we will be able to benefit from our deferred tax assets, valuation allowances would be established following the “more-likely-than-not” criteria. We periodically evaluate our ability to utilize our deferred tax assets and, in accordance with accounting guidance related to accounting for income taxes, will record any resulting adjustments that may be required to deferred income tax expense in the period for which an existing estimate changes. If our facts or financial results were to change, thereby impacting the likelihood of establishing and then realizing the deferred tax assets, judgment would have to be applied to determine changes to the amount of the valuation allowance in any given period. Such changes could result in either a decrease or an increase in our provision for income taxes, depending on whether the change in judgment resulted in an increase or a decrease to the valuation allowance. We continually evaluate strategies that could allow for the future utilization of our deferred tax assets.

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We consider the earnings of certain foreign subsidiaries to be indefinitely invested outside the U.S. on the basis of estimates that future cash generation will be sufficient to meet future U.S. cash needs and specific plans for foreign reinvestment of those earnings. As such, as of March 31, 2021 (Successor), we have not provided for deferred taxes on the unremitted earnings of certain foreign subsidiaries that are indefinitely invested abroad. If our expectations were to change, withholding and other applicable taxes incurred upon repatriation, if any, would not be expected to have a significant impact on our results of operations.

Should our expectations change regarding the expected future tax consequences, we may be required to record additional U.S. federal deferred income taxes that could have a material adverse effect on our consolidated financial position, result of operations and cash flows.

Property and Equipment. Our net property and equipment represents 50% of our total assets as of March 31, 2021. We determine the carrying value of these assets based on our property and equipment accounting policies, as discussed in Note 1 to our Consolidated Financial Statements included in this Annual Report on Form 10-K, which incorporate our estimates, assumptions, and judgments relative to capitalized costs, useful lives and salvage values of our assets.

We review our property and equipment for impairment when events or changes in circumstances indicate that the carrying value of assets or asset groups may be impaired or when reclassifications are made between property and equipment and assets held for sale.

Asset impairment evaluations for held for use asset groups are based on estimated undiscounted cash flows for the asset group being evaluated. If the sum of the expected future cash flows is less than the carrying amount of the asset group, we would be required to recognize an impairment loss. When determining fair value, we utilize various assumptions, including projections of future cash flows. An impairment loss is recorded in the period in which it is determined that the aggregate carrying amount of assets within an asset group is not recoverable. This requires us to make judgments regarding long-term forecasts of future revenue and cost related to the assets subject to review. In turn, these forecasts are uncertain in that they require assumptions about demand for our services, future market conditions and technological developments. A change in these underlying assumptions will cause a change in the results of the tests and, as such, could cause fair value to be less than the carrying amounts. In such event, we would be required to record a corresponding charge, which would reduce our earnings. Given the nature of these evaluations and their application to specific asset groups and specific times, it is not possible to reasonably quantify the impact of changes in these assumptions.

Pension Benefits. Pension obligations are actuarially determined and are affected by assumptions including discount rates, compensation increases and employee turnover rates. The recognition of these obligations through the statement of operations is also affected by assumptions about expected returns on plan assets. We evaluate our assumptions periodically and adjust these assumptions and subsequently record liabilities as necessary.

Three of the most critical assumptions are the expected long-term rate of return on plan assets, the assumed discount rate and the mortality rate. We evaluate our assumptions regarding the estimated long-term rate of return on plan assets based on historical experience and future expectations on investment returns, which are calculated by our third-party investment advisor utilizing the asset allocation classes held by the plans’ portfolios. We utilize a British pound sterling denominated AA corporate bond index as a basis for determining the discount rate for our U.K. plans. We base mortality rates utilized on actuarial research on these rates, which are adjusted to allow for expected mortality within our industry segment and, where available, individual plan experience data. Changes in these and other assumptions used in the actuarial computations could impact our projected benefit obligations, pension liabilities, pension expense and other comprehensive income. We base our determination of pension expense on a fair value valuation of assets and an amortization approach for assessed gains and losses that reduces year-to-year volatility. This approach recognizes investment and other actuarial gains or losses over the average remaining lifetime of the plan members. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets.

Business Combinations - Purchase-Price Allocation. Accounting for business combinations requires the allocation of a company’s purchase price to the various assets and liabilities of the acquired business at their respective fair values. We use all available information to make these fair value determinations. Determining the fair values of assets acquired and liabilities assumed generally involves assumptions regarding the amounts and timing of future revenues and expenditures, as well as discount rates.

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During the fiscal year 2021, in connection with the purchase price allocation for the Merger, we derived the fair value of the Era fleet of aircraft from the estimated enterprise value of Era, using the discounted cash flow method of the income approach. The estimated enterprise value of Era was made using principal assumptions such as forecasted revenues and discount rate. All non-aircraft acquired assets and assumed liabilities were valued at fair value, which based upon their nature were more readily determinable. After allocating fair values to all the non-aircraft acquired assets and assumed liabilities, the remaining value was attributed to the aircraft. For additional discussion of purchase price allocations, refer to Note 2 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Recent Accounting Pronouncements

For a description of recent accounting pronouncements that will, or could possibly, have an effect on our financial condition and results of operations, see Note 1 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.