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.

Recurring Fair Value Measurements

The following table summarizes the financial instruments we had as of September 30, 2019, 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 September 30, 2019		Balance Sheet Classification
Derivative financial instruments	$	—	$	3,443	$	—	$	3,443	Prepaid expenses and other current assets
Rabbi Trust investments	2,645		—		—		2,645		Other assets
Total assets	$	2,645	$	3,443	$	—	$	6,088

The following table summarizes the financial instruments we had as of March 31, 2019, 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, 2019		Balance Sheet Classification
Derivative financial instruments	$	—	$	1,845	$	—	$	1,845	Prepaid expenses and other current assets
Rabbi Trust investments	2,544		—		—		2,544		Other assets
Total assets	$	2,544	$	1,845	$	—	$	4,389

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. The derivative financial instruments consist 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 7 for a discussion of our derivative financial instruments.

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 at its fair value.

The following table summarizes the assets as of September 30, 2019, 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 September 30, 2019		Total Loss for the Three Months Ended September 30, 2019			Total Loss for the Six Months Ended September 30, 2019
Aircraft and equipment	$	—	$	60,426	$	—	$	60,426	$	(42,022	)	$	(42,022	)
Investment in unconsolidated affiliates	—		—		—		—		(2,575		)	(2,575		)
Goodwill	—		—		—		—		(17,504		)	(17,504		)
Total assets	$	—	$	60,426	$	—	$	60,426	$	(62,101	)	$	(62,101	)

The following table summarizes the assets as of September 30, 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 September 30, 2018		Total Loss for the Three Months Ended September 30, 2018			Total Loss for the Six Months Ended September 30, 2018
Inventories	$	—	$	—	$	7,697	$	7,697	$	(9,276	)	$	(9,276	)
Aircraft and equipment	—		—		136,338		136,338		(104,939		)	(104,939		)
Other intangible assets	—		—		—		—		(3,005		)	(3,005		)
Total assets	$	—	$	—	$	144,035	$	144,035	$	(117,220	)	$	(117,220	)

The fair value of goodwill, using Level 3 inputs, is determined using a combination of an income and market approach. The estimate of fair value was derived from unobservable inputs that require significant estimates, judgments and assumptions as described in Note 1 under the heading “— Goodwill”.

The fair value of investment in unconsolidated affiliates is estimated using the income approach. The estimate of fair value includes unobservable inputs, representative of Level 3 fair value measurement, including assumptions related to future performance, such as projected demand for services. For further details on our investment in unconsolidated affiliates, see Note 1.

The fair value of inventories using Level 3 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 time frame 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.

The fair value of aircraft and equipment, using Level 3 inputs, is determined using a market approach. The market approach consisted of a thorough review of recent market activity, available transaction data involving the subject aircraft, current demand and availability on the market. We took into account the age, specifications, accrued hours and cycles, and the maintenance status of each subject aircraft.

The fair value of aircraft and equipment, using Level 2 inputs, is determined using inputs that are derived principally from or corroborated by observable market data or inputs other than quoted prices that are observable for the asset including potential sale prices contemplated in arms-length transactions with third-parties.

The fair value of other intangible assets, using Level 3 inputs, is estimated using the income approach. The estimate of fair value includes unobservable inputs, including assumptions related to future performance, such as projected demand for services, rates, and levels of expenditures.

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 debt, excluding unamortized debt issuance costs, are as follows (in thousands):



	September 30, 2019				March 31, 2019
	Carrying Value		Fair Value		Carrying Value		Fair Value
8.75% Senior Secured Notes due 2023⁽¹⁾	$	273,449	$	269,678	$	347,400	$	252,000
4½% Convertible Senior Notes due 2023^{(2) (3)}	143,750		14,375		112,944		28,923
6¼% Senior Notes due 2022⁽³⁾	401,535		28,107		401,535		75,288
DIP Credit Agreement	150,000		150,000		—		—
Term Loan	75,000		75,000		—		—
Lombard Debt	167,519		167,519		183,450		183,450
Macquarie Debt	164,028		164,028		171,028		171,028
PK Air Debt	202,634		202,634		212,041		212,041
Airnorth Debt	9,416		9,416		11,058		11,058
Eastern Airways Debt	351		351		—		—
Other Debt⁽³⁾	9,370		9,370		9,168		9,168
	$	1,597,052	$	1,090,478	$	1,448,624	$	942,956

_____________


⁽¹⁾	The carrying value is net of unamortized discount of $1.7 million and $2.6 million as of September 30, 2019 and March 31, 2019, respectively.


⁽²⁾	The carrying value is net of unamortized discount of zero and $30.8 million as of September 30, 2019 and March 31, 2019, respectively.


⁽³⁾	Reclassified to liabilities subject to compromise on our condensed consolidated balance sheet as of September 30, 2019. See Note 2 and Note 5 for further details.

Other

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