FAIR VALUE DISCLOSURES

Assets and liabilities subject to fair value measurement are categorized into one of three different levels depending on the observability of the inputs employed in the measurement, as follows:


•	Level 1 – observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.


•	Level 2 – inputs that reflect quoted prices for identical assets or liabilities in markets which are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.


•	Level 3 – unobservable inputs reflecting the Company’s own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Non-recurring Fair Value Measurements

The majority of our non-financial assets, which include inventories, property and equipment, assets held for sale, goodwill and other intangible assets, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial asset is required to be evaluated for impairment and deemed to be impaired, the impaired non-financial asset is recorded as its fair value.

The following table summarizes the assets as of March 31, 2018, valued at fair value on a non-recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2018		Total Loss for Fiscal Year 2018
Inventories	$	—	$	515	$	—	$	515	$	(5,717	)
Assets held for sale	—		30,348		—		30,348		(15,853		)
Investment in unconsolidated affiliates	—		—		62,267		62,267		(85,683		)
Total assets	$	—	$	30,863	$	62,267	$	93,130	$	(107,253	)

The following table summarizes the assets as of March 31, 2017, valued at fair value on a non-recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2017		Total Loss for Fiscal Year 2017
Inventories	$	—	$	46,568	$	—	$	46,568	$	(7,572	)
Assets held for sale	—		38,246		—		38,246		(12,450		)
Goodwill	—		—		19,798		19,798		(8,706		)
Total assets	$	—	$	84,814	$	19,798	$	104,612	$	(28,728	)

The fair value of inventories using Level 2 inputs is determined by evaluating the current economic conditions for sale and disposal of spare parts, which includes estimates as to the recoverability of the carrying value of the parts based on historical experience with sales and disposal of similar spare parts, the expected timeframe of sales or disposals, the location of the spare parts to be sold and the condition of the spare parts to be sold or otherwise disposed of. See Note 1 for further discussion of the impairment of inventories.

The fair value of assets held for sale using Level 2 inputs is determined through evaluation of expected sales proceeds for aircraft. This analysis includes estimates based on historical experience with sales, recent transactions involving similar assets, quoted market prices for similar assets and condition and location of aircraft to be sold or otherwise disposed of. See Note 3 for details on assets held for sale.

The fair value of investment in affiliates is estimated using a variety of valuation methods, including the income and market approaches. These estimates of fair value include unobservable inputs, representative of Level 3 fair value measurement, including assumptions related to future performance, such as projected demand for services and rates. For further details on our investment in unconsolidated affiliates, see Notes 1 and 2.

The fair value of other intangible assets and goodwill is estimated using a variety of valuation methods, including the income and market approaches. These estimates of fair value include unobservable inputs, representative of Level 3 fair value measurement, including assumptions related to future performance, such as projected demand for our services and rates. For further details on other intangible assets and goodwill, see Note 1.

Recurring Fair Value Measurements

The following table summarizes the financial instruments we had as of March 31, 2018, valued at fair value on a recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of March 31, 2018		Balance Sheet Classification
Derivative financial instrument	$	—	$	718	$	—	$	718	Prepaid expenses and other current assets
Rabbi Trust investments	2,296		—		—		2,296		Other assets
Total assets	$	2,296	$	718	$	—	$	3,014

The following table summarizes the financial instruments we had as of March 31, 2017, valued at fair value on a recurring basis (in thousands):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at March 31, 2017		Balance Sheet Classification
Rabbi Trust investments	$	3,075	$	—	$	—	$	3,075	Other assets
Total assets	$	3,075	$	—	$	—	$	3,075

The rabbi trust investments consist of cash and mutual funds whose fair value are based on quoted prices in active markets for identical assets, and are designated as Level 1 within the valuation hierarchy. The rabbi trust holds investments related to our non-qualified deferred compensation plan for our senior executives as discussed in Note 9. The derivative financial instrument consists of foreign currency put option contracts whose fair value is determined by quoted market prices of the same or similar instruments, adjusted for counterparty risk. See Note 6 for a discussion of our derivative financial instruments.

Fair Value of Debt

The fair value of our debt has been estimated in accordance with the accounting standard regarding fair value. The fair value of our fixed rate long-term debt is estimated based on quoted market prices and has not been updated for any possible acceleration provisions in our debt instruments. The carrying and fair value of our long-term debt, including the current portion and excluding unamortized debt issuance costs, are as follows (in thousands):



	March 31,
	2018				2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
8.75% Senior Secured Notes ⁽¹⁾	$	346,610	$	353,500	$	—	$	—
4½% Convertible Senior Notes ⁽²⁾	107,397		158,772		—		—
6¼% Senior Notes	401,535		325,243		401,535		323,236
Term Loan	—		—		261,907		261,907
Term Loan Credit Facility	—		—		45,900		45,900
Revolving Credit Facility	—		—		139,100		139,100
Lombard Debt	211,087		211,087		196,832		196,832
Macquarie Debt	185,028		185,028		200,000		200,000
PK Air Debt	230,000		230,000		—		—
Airnorth Debt	13,832		13,832		16,471		16,471
Eastern Airways Debt	14,519		14,519		15,326		15,326
Other Debt	3,991		3,991		16,293		16,293
	$	1,513,999	$	1,495,972	$	1,293,364	$	1,215,065

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⁽¹⁾ The carrying value is net of unamortized discount of $3.4 million as of March 31, 2018.

⁽²⁾ The carrying value is net of unamortized discount of $36.4 million as of March 31, 2018.

Other

The fair values of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to the short-term nature of these items.