FTAI Aviation at Barclays Conference: Strategic Growth and Market Ambitions

On Tuesday, 06 May 2025, FTAI Aviation (NASDAQ:FTAI) presented at the Barclays Americas Select Franchise Conference 2025, outlining its strategic initiatives and future plans. CEO Joe Adams highlighted the company’s unique business model, combining engine ownership with maintenance capabilities, and addressed both opportunities and challenges in expanding market share and cash flow management.

Key Takeaways

• FTAI Aviation aims to increase its market share from under 5% to 25% in the aviation engine maintenance sector.
• The Strategic Capital Initiative (SCI) targets a $4 billion investment to own 250 aircraft off-balance sheet.
• The company forecasts $650 million in free cash flow for 2025, despite significant investments in 2024.
• Facilities in Montreal, Miami, and Rome support a growing capacity for engine maintenance.

Financial Results

• Revenue: Approximately $1 billion, representing less than 5% of the $22 billion annual maintenance spend for CFM 56 and V2500 engines.
• EBITDA: Current engine exchange operations generate $2.5 million in EBITDA, with the new partnership expected to contribute $250 million annually.
• Margin Targets: The company aims for margins close to 50%.
• Free Cash Flow: Anticipated to reach $650 million in 2025.
• Leasing EBITDA: Expected to be around $500 million, consistent with last year.
• Aerospace Products EBITDA: Projected between $600 million and $650 million for the year.

Operational Updates

• Engine Focus: Specializes in CFM 56 and V2500 engines, with plans to maintain a fleet of 450-500 CFM 56 engines and 50-200 V2500 engines.
• Customer Base: Over 100 customers, with high repeat usage.
• Physical Capacity: Facilities can handle 600 shop visits annually, with a ramp-up expected in Rome.
• Parts Inventory: Invested $200 million in parts to support increased production rates.
• V2500 Program: Agreement with Pratt & Whitney for 100 shop visits.

Future Outlook

• Market Share Growth: Targeting a 25% market share.
• Next-Generation Engines: Plans to invest in LEAP and GTF engines starting in 2028 or 2029.
• SCI Completion: Full investment expected by the end of the year.
• Long-Term Value: Committed to growth with CFM 56 and V2500 platforms for the next decade.

Q&A Highlights

• Margin Profile: The company’s model allows for higher margins compared to traditional MRO providers.
• Competition: FTAI Aviation leverages asset ownership and a focus on CFM 56 engines for a competitive edge.
• Cash Flow Concerns: Addressed strategic investments impacting cash flow in 2024, with a positive outlook for 2025.
• SCI Economics: Structured with 70% debt financing and 30% equity, with FTAI Aviation contributing 20% of the equity.

For more detailed insights, readers are encouraged to refer to the full transcript.

Full transcript - Barclays Americas Select Franchise Conference 2025:

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Good afternoon, everyone, and welcome to Barclays America’s Select Conference, day one. And I think this might be the last fireside chat session, and then we have drinks afterwards. But for those of you joining us on the webcast, I’m Brandon Oglenski, airline and transport analyst, and we’re very happy to host, f t a FTAI Aviation Next and with us from the company, Joe Adams, CEO. And you guys are running a very unique, MRE and aviation leasing business.

So figured I’d just give you maybe a couple minutes to maybe introduce the business to those that don’t know, and then we definitely have a lot of questions.

Joe Adams, CEO, FTAI Aviation: Yes. Thanks very much, Brandon. Thanks for having us. Very happy to be here today, and, we do have an increasing amount of interest in Europe from a number of investors. So, so good to be invited and included and look forward to doing this in the future.

Eftai Aviation is a, outsourced provider of engine maintenance in the aftermarket for, primarily two engines, the CFM 56 and the v 2,500, which happened to be the engines that fly, all seven three seven NGs and a three twenty c o aircraft, which is the largest part of the world’s, commercial aircraft fleet. So we focus on those two engines, and, what we do as a business is we acquire engines that are run out or have limits on on how, continued flying. We rebuild those engines through our own network and our own facilities, and then we go to market, to the airlines or lessors within with a product where we either sell, that engine, exchange it for a run out engine, or lease the engine to them. So effectively, allows the owner, the, the owner or the airline to not have to do their own engine maintenance on those engines. In in the aftermarket, that becomes an increasingly complex process, higher prices today, and, we can provide tremendous amount of flexibility and cost savings, directly to the to the customer.

So it’s a product that we introduced, you know, really going back three, four years and has been, widely accepted. We now have over a hundred customers who’ve, endorsed it in a growing number. Last year, we estimated about, about $22,000,000,000 annual spend on maintenance for those two engines. We generated about a billion in revenue, so under 5%. And our goal over the next several years is to grow that to approximately 25 market share.

And we think that that is achievable given the direct cost savings that customers and owners received as well as the new strategic capital initiative that we launched earlier this year, whereby through a partnership, we’ll end up owning being the direct owner of those seven three seven NGs and a three twenty c o’s that are on lease. And as part of that arrangement, will that partnership will contract to do all the engine maintenance and exchanges directly with Eftai Aviation. So the immediate conversion of that business over to our, Eftai Aviation model as well as a, a growth and commitment and visibility for future engine shop visits, which will, have a virtuous effect of, you know, giving us increased visibility and planning as well as allowing us to, increase the efficiency in our ability to produce those rebuilt engines.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Joe, I appreciate that. And maybe just as context, for those, again, aren’t that new to the story or are new to the story. You know, when you IPO ed this business, it was really more focused on the aviation side, leasing aircraft and leasing engines. Can you talk about the evolution of how you got into the products business in the first place?

Joe Adams, CEO, FTAI Aviation: Yes. It it started, years ago. We started directly as an engine leasing business and then realized the biggest expenditure you make owning an engine is on the maintenance that you need to do to to restore hours and cycles approximately every five years. You have to, take apart that engine and rebuild it. And it’s a very, complicated and expensive process in the aftermarket.

So at that time, we we discovered PMA as an alternative, to OEM parts. PMA is a as I call it, the generic drug equivalent for aviation where you can go to the FAA and and if you can prove you can make a part equal to or better than the, OEM part, you get a license to make it. And so that was a company called Cromoy. We had a great experience with PMA and the CF six eighty engine, and then we realized the same opportunity is was available for CFM 56 engines, and that was, you know, about 2018. And we realized that’s the largest engine market in the world.

It is a market that it was maturing. It was most of the engines were moving off of power by the hour programs with OEMs into aftermarket, and, we could take that, competitive advantage proprietary product and really create, a tremendous business model for that engine. So we decided to go all in on CFM 56. And as part of that, we wanted to vertically integrate, and and be able to do our own, in addition to parts manufacturing, do our own engine shop visits, do our own teardown activity, and do our own piece part repair business. And we’ve done all of that, to ring out, as much cost as possible, which makes us the best perform you know, the best, most capable, most efficient provider of, aftermarket maintenance for that engine in

Brandon Oglenski, Airline and Transport Analyst, Barclays America: the world. I guess the evolution of that now has led to this SCI strategic capital initiative where you wanna grow lease portfolio off balance sheet. That is that right? Yes. So as part

Joe Adams, CEO, FTAI Aviation: of that, we we mentioned, you know, customers can be airlines and owners, owners being a lessor. And we started seeing that by delivering a rebuild engine, you can eliminate a lot of the negative experiences lessors have with either cost overruns, delays getting engines in, or managing the process themselves. And so as part of that, we realized that that benefit of that we can provide by doing these pre built engine exchanges, we might as well confer that on, a partnership that we could run and manage. And it was a part of the market that we hadn’t really focused on necessarily, before that because it’s very capital intensive. So about a year ago, we started thinking about that as the big opportunity to invest in owning these.

We can do it in a off balance sheet way with, strategic capital is our you know, the name of the entity strategic capital initiative. And our first, partnership was concluded at the beginning of this year. Our objective is to be able to invest $4,000,000,000 through that partnership, which effectively translates into owning about 250 aircraft. As part of the part of the arrangement, Eftai Aviation will do all engine maintenance required for those aircraft in that partnership through engine exchanges. So if you think about the math of of that, it’s four, 250 aircraft comprises about 500 engines.

Roughly 20% of those are due for, performance restoration or or shop visit every year. So that’s a hundred. If we do an engine exchange, and each one of those generates roughly today for us about 2 and a half million of EBITDA, That’s $250,000,000 of EBITDA from the new partnership that goes directly to Eftai Aviation. In addition, we’ll get paid, management fee for running the partnership being the general partner, and we’ll own 20% of it. So it allows us to build a, you know, a customer that is a % committed to engine exchanges and to accelerate our, capture of market share, via that method and to do, potentially do, you know, a new partnership every year so that the cumulative effect of that would be, you know, very major and make us the largest owner of narrow body aircraft in in the, in the world.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: But and Joe, on on that first partnership, I think the first capital closed in late March. Is that correct?

Joe Adams, CEO, FTAI Aviation: Yes. The well, the first aircraft were were closed in late March. We actually had equity capital committed at the December. We then arranged debt financing, was committed in mid February, and then the debt financing, was available to fund at the, last the end of last week of March. So the first aircraft, which is four aircraft that were sold from our, balance sheet, Eftahi Aviation, into seed that portfolio closed in March.

And then as also as part of that, there were a number of we’ve now got 98 aircraft in the SCI lined up under letters of intent of which today approximately 30 have closed. And a lot of those were in the works for the first few months of this year, would need immediate engines to replace engines that were run out. And we had a sale leaseback of, with an airline that had a number of engines that were, run out of time, so they needed immediate engines as part of the deal. So as part of that, we sold a hundred million dollars of engines from, the aerospace products business to SCI in the first quarter, which which represented about 30% of the total activity in this in the aerospace product segment for the quarter. We’ve indicated that that was a little bit high compared to what we expected run rate to be.

We expect for the full year to be about 20%. So but as I mentioned, there was some stacking of, requirements from the lease portfolio and a sale leaseback from an airline that made that number, slightly elevated. So all of that came together and, you know, happened in the first quarter, which we view as a, you know, a huge positive and huge accomplishment to put all that together and get that done, early this year. And we see that as a, you know, a major driver of both the activity level in the aerospace products as well as the the visibility in terms of future pipeline. The more you know about what your engine requirements are gonna be, the more you can plan, the more efficient you become, and the better your margins are over time.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: I think specific to that hundred million dollars, there was a footnote in your earnings release that maybe caused a little bit of confusion last week, definitely some volatility in the stock. But effectively, this was associated with those other 26 aircraft being closed into the portfolio. Is that right?

Joe Adams, CEO, FTAI Aviation: Yes. Yes. And it was, you know, we view that as we had lots of alternatives to what we could do with those engines. The market is extremely strong, but we prioritized those engines for the strategic capital initiative because we want to, grow that business. We want that business to be very successful.

So it was a, both a commitment and a, you know, financial goal to to grow that and make that, very successful.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: I guess it’s almost a validation of why you did the SCI. Is that right? Yes. Well, and I guess along those lines, margins in the business been, what, north of 35%. Right?

But recently, you guys have been talking about targets that maybe could reach close to 50%. Yes. What’s there’s been some discussion why is your margin so much higher than maybe a primary MRO competitor that’s generating 15% margins.

Joe Adams, CEO, FTAI Aviation: Yeah. So, I mean, we combine a number of activities. And as I mentioned, our business model is unique in that we both do the maintenance and we own the engine. And so, we view the margin as a combination of three different components. First of all, the the act of repairing and repairing something for someone else tends to as a third party MRR would generate typically 15% margin.

The second part is we have, the ability by virtue of owning inventory and by having our maintenance capability, the ability to optimize green time. And we showed an example in our February slide deck where we took three engines that we acquired in a real life example, performed maintenance, recombine them, and created 6,000,000 value on a $10,000,000 total investment. So that’s a real optimization, solution that we can bring to the table because of the extent of our ownership of assets in our in our maintenance facilities and our. And then the third part of, the margin will come from today comes from parts where we acquire and repair a lot of used serviceable material, which we recycle in our own shop visits, and we also generate a lot of used serviceable material from our own inventory that we tear down. And then the growth opportunity will come from, the addition of PMA, which we think will contribute a significant amount of potentially five to 10 percentage points of additional margin once the full portfolio of PMA products is available.

Well, and can we talk about the economies of scale you get by owning the engine fleet as opposed to just a traditional MRO shop visit where it’s one engine, one owner and billable hours. Yeah. That’s a great question. I mean, we we run our shops very differently in that. We only do our maintenance and rest restorations on engines we own.

So we have no third party engines owned by others in the shop. And what that allows you to do is two things. One is you can specialize, you can have each one of those engines can be managed by a fan, a core, and a low pressure turbine and recombined at the end of the process, and you don’t have to track whether those are part of someone else’s fleet or not. The second thing you can do is you don’t have to track someone else’s parts. So you can have parts inventory available, so you can operate it like a mish an assembly line.

So as an engine comes down the line, you take whatever parts are available, you put it together at the end of the end of the shop visit, you’ve got, a fully built engine. So those efficiencies, the specialization, and the efficiency of not having to track other people’s parts, you know, creates a very, very, faster turnaround times and lower cost, for, for refurbishing engines. And this is effectively what a large airline like Delta will do with their own tech ops facilities. Is that right? Exactly.

So when we think about our business model is more similar to what the major airlines who own their own maintenance facilities do internally. So if you think about if you own, you know, 400 aircraft and you have your own maintenance facility, your operation is very similar to the way we operate and and or you could argue we copied that model. And of the 600 owners of cfm fifty six engines in the world, there’s only five that effectively have that ability. So the 595 other airlines that operate, we can provide that functionality to them on an outsourced basis, save them money, and make great margins for ourselves at the same time. Whereas that that product was never really available, because the major airlines who do it for their own fleet don’t don’t they don’t provide that to other that that function to other airlines.

And what’s been the response from your customer base? It’s been great. I mean, we now we announced we have over a hundred customers, so, we’ve had, a very, very high level of repeat usage. Our our pitch is almost always like if, you know, just try it and use it once. And if you don’t like it, then don’t do it again.

And we’ve always found that people were like, wow. This is amazing. I save so much time and money, and I eliminate the use the the, the potential cost overrun of having an engine being inducted into a third party MRO shop. So we haven’t had anybody that hasn’t wanted to use it again or said anything about, like, they love it. They love the product.

So we see the adoption, you know, growing and increasing, throughout the entire industry, really. I don’t see I’ve never had anybody say there’s something wrong with it. If you can provide the same engine to someone for a lower cost with no other associated expenses, why wouldn’t people do it?

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. Can you talk about physical capacity in your network to reach your EBITDA? Taurus, I think this year is 1,100,000,000, or 1.1 to 1.5, one point four by next year.

Joe Adams, CEO, FTAI Aviation: Yep. Yeah. So we have, today, we have the capacity physical capacity to do about 300 shop visits in Montreal, a 50 in Miami, and then, closing this quarter is a investment in a facility in Rome, which will add another 50 engines. So that engine, that adds up to about 600 Chavez’s of physical capacity per annum, and, we are increasing our our production rates in Montreal the most this year, so that’s ramping up. And we will bring on Rome, this summer, and we’ve made a substantial investment in in advance in parts.

You saw in the cash flow statement, we called out, you know, $200,000,000 investment in the first half of this year in arts inventory, which is in anticipation of that. And so, the only remaining piece of that is mechanics. You have to have people to do that. We are adding, mechanics in Montreal as we speak this quarter. We’ve invested a substantial amount in that in the first quarter, and then we will, ramp up, Rome the lighter the latter part of this, year, the second half.

So we believe that what we have today in place will be more than enough capacity to to hit those targets.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. I think some fair concerns around your margin profile has been like, the aftermarket’s been really hot in aerospace, especially with

Joe Adams, CEO, FTAI Aviation: the GTF groundings, especially with max delivery delays and just overall aggregate OEM challenges. Once we finally get that worked out maybe in the next two or three years, if asset values decline, especially on the CFM 56 platform, won’t your margins be impacted by that? Yes. So we we view our business as more of a spread business and that we buy as I said at the very beginning, we buy run out engines, we rebuild them, and then we go to market. And the cost of shop visits is not a cyclical because it’s driven mostly by parts prices, which only go one way.

They always go up. So when you think about, you know, an engine, its replacement cost is driven off of what it would cost you to rebuild it. As long as you continue flying and you have to do shop visits, you’re gonna have to do that. That’s gonna be your benchmark for for comparisons. The only thing that, you know, cyclical, what can drive, engine prices in the secondary market is if you have a downturn or you have a lot of excess equipment available.

But the engine market is the best self correcting market for supply demand of any market. And that if you have to do 20% of your engines are due for a shop visit in any one year, if you have a cyclical downturn like we had in COVID or other times, people stop or reduce the amount of shop visits they’re gonna do, which means that if you stopped all shop visits, 10% of the, you know, the the fleet, you know, you you’d retire that in half a year. So it tends to be, self correcting and self regulating in terms of the price, and then the price is really set off of the the OEM’s parts prices. So you can see temporary disruptions, but we view ourselves as that would also give us an opportunity to buy, you know, cheaper and rebuild and still still earn the same margin. And by the

Brandon Oglenski, Airline and Transport Analyst, Barclays America: way, there’s q and a in here, I think we have a mic if you guys want. But, Joe, I guess along those lines, as we think about competition, why is another MRO provider not doing this? And won’t your margins entice more competition or maybe a reaction from the OEMs as well?

Joe Adams, CEO, FTAI Aviation: Yes. And we think about that all the time. And I think, you know, you’re right. The MRO, industry third party MROs have the capability to do what we do. But the key, as I mentioned in the beginning, is our business model is to combine ownership of assets with maintenance.

So if you’re a third party MRO today, I’m not aware of any third party MRO that owns a significant amount of their own engines. They mostly are going out and pitching airlines and other customers to give them third party to do third party work on those engines. So step one would be, you know, acquire a bunch of engines, get a bunch of capital from somewhere, buy the engines, and then most third party MROs have more than one engine they do. So you have to select one. We seven or eight years ago, we said we’re just gonna do CFM 56.

We sort of did the opposite of what most people do is we were anti diversification. We went all in to concentrate on one engine. So some somehow the MROs would have to say, okay. I want just to do this engine. And then you have to take some of your capacity, which right now is very full with leap and GTF work that’s been promised to third parties and promised third party, you know, turnaround times, and you’d have to allocate that somehow to your own engines.

So there’s a lot of reorganizing that people would have to do. I’m not saying it’s impossible. The other impediment people have is that we, we don’t have OEM ties restricting us from using PMA. Many other people do, and many other, you know, customers wouldn’t necessarily embrace PMA. So you reduce some of the, you know, cost savings opportunities available.

So so I think there’s a lot of things that people have to overcome, and at the same time, those businesses are doing quite well given the amount of GTF and LEAP business they have. So I’m not sure they have necessarily the incentive to do all that.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Okay. Can we talk about cash flow? Because I think that’s another concern, especially last year. Just didn’t see a lot of cash from operations, but there were a lot of things moving underneath the surface there, especially the buildup in inventories because you do have two different accounting treatments for your lease portfolio versus your aviation products portfolio. So maybe you can speak to that.

Joe Adams, CEO, FTAI Aviation: Sure. So last in 2024, we had, you know, three great strategic initiatives to, you know, grow the business, which we capitalize on. One was acquiring the Montreal facility, for a hundred and $50,000,000. The second was the the v 2500 deal we did with, Pratt and Whitney involved, over a hundred shop visits, so we increased the size of our fleet, owned fleet of v 25 hundreds up to a 50 engines. And then the third was buying out the management contract from, Fortress.

So none of those are, you know, repeating cash flows. So we go into the 2025, and we showed, you know, June of cash from operations, this year. The first half of the year has the strategic capital initiative transactions in there, which we broke out in detail where we’re selling 46 aircraft from the balance sheet of FTAI Aviation to seed the SCI portfolio, and we’re investing 300,000,000 in in replacement CapEx, which is to replace some of the engines that moved with those aircraft in from the balance sheet of FTAI into the to acquire in the secondary market, which we’ve largely done this year. And then the third part was, you know, really on, building up the parts inventory in anticipation of a ramp. But all all told, we’re, you know, we’re saying 650,000,000 of free cash flow this year.

And as EBITDA ramps up, you know, that should that should only increase.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. And on the SCI, can you talk about the economics? I think you guys are committed to 20% of the equity. Is that right?

Joe Adams, CEO, FTAI Aviation: That’s correct. So we, we’re estimating if a $4,000,000,000 invested this year, roughly 70% of that will be debt financing, which has been committed and is being provided by Apollo and Deutsche Bank. The balance would be equity of 1,200,000,000.0, and our 20% would be 240,000,000 of that, of which the first half of this year will be roughly a hundred, the second half one one hundred and forty. So that’s our you know, that’s the structure. We’re a limited partner investor for 20%.

Then we’re also the general partner where we receive a fee for managing the partnership, on total assets. And, also, all of that Eftai Aviation engine exchange business from the partnership is committed to go to Eftai Aviation, which is that’s the 250 or that’s the, hundred engines a year we estimate that will be done through engine exchanges once the partnership is fully ramped up. So there’s there’s a tremendous amount of benefits for all parties. It’s both EFTA Aviation benefits for those three reasons, the, you know, the fees, the equity investment, plus the engine exchanges, and the partnership benefits because the economics of those engine exchanges are fixed and optimized so that the the objective for the partnership is to generate higher returns with lower risk. So we think it’s a, you know, it’s a win win on every side, and it’s something that, you know, we we intend to continue to to, to advocate for growing that over the next coming years.

And traditional lessor would be pushing out the maintenance onto the airline. Is that right? Yeah. The the typical structure of a if you have a five year lease with an airline and an engine is due for a shop visit, the lease would require maintenance reserves to be paid to the lessor, then the airline does the engine shop visit, however they might decide whether it’s a third party MRO, and then they would withdraw those maintenance reserves to pay for that shop visit. So what we do is we’ve ended up doing exchanges so that the the outflow from that engine exchange is less than it would be if you were doing it the traditional way.

And secondarily, the residual value would be less because that engine is targeted to to have the number of hours and cycles needed to complete the lease. So you reduce the investment, you increase the cash flow, which reduces the risk and increases the returns.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. On the the 45 or 46 aircraft that you’ve committed to the SCI, I know you’ve delivered a few already, but I think you’re guiding to about 500,000,000 of leasing EBITDA this year, which is similar to

Joe Adams, CEO, FTAI Aviation: what you did last year. Is that gonna be made up by those 300,000,000 of incremental purchases? Yeah. It’s, it’s several parts of it. We think it’ll exceed the original EBITDA from, gain on sale of those 46 aircraft.

The 20% ownership of EBITDA that we pick up from the partnership, from the partnership, the SCI partnership that flows into the leasing business, and then the, EBITDA from the $300,000,000 replacement capex. Those three and and the management fee, the combination of those items would exceed the, EBITDA from from the prior year. Okay. Then on the aerospace products side 600 to 650,000,000 is the guidance this year for EBITDA. Is that right?

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Correct. And again, what’s the targeted mix coming from the SCI deal?

Joe Adams, CEO, FTAI Aviation: So 20% roughly for the year.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. Pretty interesting outside.

Joe Adams, CEO, FTAI Aviation: Yeah. Background noise.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: On the 1.4, billion of EBITDA target for next year, have you guys provided any indication of where you’d like to see leasing versus the aerospace, products business?

Joe Adams, CEO, FTAI Aviation: Yes. It’s five fifty of, leasing EBITDA, and the balance was aerospace products.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Okay. I guess longer term, another concern investors have, though, is, this is a great business. It’s clearly working. They can understand that this is economies of scale for a small airline. That’s why you’re getting, the demand you are.

But ultimately, this is a platform that’s out of production. So how do you put, you know, long term value on the business?

Joe Adams, CEO, FTAI Aviation: Two things is first of all, I think that the the platform for the seven CFM 56 and the v 2,500 is basically from what way we looked at is we’re gonna have locked in growth for ten years. So that’s where you that’s a starting point. And then, secondly, our expectation is starting in 2028, ’20 ’9, we will begin investing in the next generation, engines, which would be the leap in the GTF. So at that point, you’ll have, enough engines coming off OEM power by the hour programs. You’ll have a stable platform, and most likely, there’ll be some announcement of another engine coming, which has a tendency to depress, you know, secondary market prices so you can buy, you know, at better prices.

So our expectation is that starting towards the end of this decade, we will begin moving into the next engines.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: K. On the PMA side, I know you’ve had this JV with Chrome Moy now, I think since 2018. Yep. I think you have two parts approved in for sale on the market. Is that right?

Yes. I guess I’ve been covering you guys

Joe Adams, CEO, FTAI Aviation: a long time. We’ve always been waiting on the third and fourth and fifth part. Any update on timelines there? Yeah. What I’ve said is excellent progress being made.

You know, we’re nearing the home stretch, and it is, you know, very close for the next part to be approved, which which is the most significant, part. The 80% of the savings will come from the first three parts in the in the program.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Okay. And maybe on the used serviceable material side, how does that work? Because you have a partnership with AAR. Is that correct?

Joe Adams, CEO, FTAI Aviation: Yes. So we decided years ago that the as part of our, you know, acquiring engines and harvesting when we split them into modules a fan, a core, and LPT, sometimes it’s better a strategy to part out one of the modules. We did not wanna build our own parts distribution business. So what we did is we went to AAR and said, when we have a tear engine tear down or module tear down for the parts that we don’t recall for our own engine build, we will sell them through your network for a fee. And AR manages the repair, process on those parts and then gets paid a distribution fee when they sell those parts.

So these are parts that we’re not looking to be using in our own engines, and, it allows us to be able to optimize again the the the waste nothing aspect of our business, which is the harvest, you know, the value from each part of those, every part of that engine in the most efficient way.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Okay. And I wanna come back to a concern just around the idea that once well, Raytheon can ever figure out the GTF fix and get those airplanes in the air. And Boeing is obviously ramping up production. At some point, we’ll get, better utilization of the newer narrow body technology. Doesn’t that just depress MRO activity and engine overhauls in aggregate in the sector that you’re in?

Joe Adams, CEO, FTAI Aviation: Well, the the most recent, estimates, from Cerium were that the total $22,000,000,000 a year spend for maintenance on the v and the CFM was just extended out to 2030 to be at roughly 22,000,000,000 a year. So no decline in that number for the next five years, and then it starts will start to, taper off. So very stable, you know, spend. You’ve had a huge shortfall in both deliveries and availability of of everything in the narrow body market for the last three to four years. So there’s a big hole that has to be filled before you’re gonna have anything excess of what the world of what airlines need.

So so the combination of those two is is creating a very, very strong environment over the next five years. And then the question always is, well, what is the rate of decline on a CFM 56 and v 2,500 after that? And my experience with other engines in previous generation equipment has been it’s it lasts a lot longer than people realize. There’s there’s seven five sevens that are almost 40 years old that are still being utilized and seven six sevens. And, you know, even CFM fifty six three c ones are still flying.

So there’s a long life to these assets because second, third tier operators, cargo carriers, they care a lot about capital cost. And to buy a new, seven three seven max or a three twenty neo in 2030 could be 60 to $70,000,000. So if you look at that and you say, well, I could buy a seven three seven n g for 12,000,000 or 14,000,000. There’s gonna be a lot of people that are gonna do that. I’m not saying that this is gonna be anything, you know, that’s outside the norm.

I’m just saying I think there’s more upside for these assets flying longer than people realize.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Well, in discussing discussing your margin profile and why you can generate better margins than your competitors, you did talk about, you know, owning the MRO capacity, but that’s not necessarily the case on the v 2,500 program that you guys have. So can you talk to the size of that fleet and the arrangement that

Joe Adams, CEO, FTAI Aviation: you have with Pratt? Yes. So we expect, we signed up for a hundred shop visits with Pratt. We still can do our own engines outside of that Pratt agreement. So to the extent we want to do builds with using other used serviceable material or advanced repairs, we can still do that.

We’re focused on between twenty five and thirty engines this year for the v, and it’s a very good relationship. It’s not you know, when that agreement ends in terms of the rebuild, we’ll then have to have another conversation like, we do it? Which way do we go? Which is the conversation we’ve had always, you know, we have a choice. Can either you know, we can go one way or another and then it’s up to you know, sort of the you know, the math for both parties to figure out what’s the optimal what’s the optimal answer that but the key is always to have options.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Okay. I think we’re coming towards the close here, but can you give us just your expectations on how fast the SCI closes on that 4,000,000,000 target?

Joe Adams, CEO, FTAI Aviation: We think we’ll be fully invested by the end of the year on the 4,000,000,000.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: And is there any concern that, you know, in the marketplace, everyone knows that now you’re looking for seven thirty seven NGs or a three twenties CEOs. Does that impact the pricing or the availability of those assets?

Joe Adams, CEO, FTAI Aviation: No. I think that, we’ve seen a very, it’s a big big market. So if you think about there’s roughly 14,000, aircraft in operation, 20 50% of those are owned by lessors. If you just take the turnover, a typical 20% turnover from just lessors selling, you’re talking about a 25 to $30,000,000,000 a year, investment opportunity. And then on top of that, you have airlines who are looking at keep they they decided, you know, recently in the last few years that they’re gonna keep those seven three seven NGs and COs flying longer, and they didn’t necessarily, you know, do the engine maintenance to allow that to happen.

So there’s a lot of aircraft that are coming up where engine maintenance events are needed. And so as part of the sale leaseback that we deliver, we can deliver replacement engines, and it solves a huge problem for an airline. And no one else can can provide that, function in the market. So

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Someone likes FTAI outside. It’s looking good, Joe.

Joe Adams, CEO, FTAI Aviation: I don’t know what’s going on out there.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: But that is an advantage when you’re in the sale leaseback market competing with other lessors,

Joe Adams, CEO, FTAI Aviation: Correct because if you were a typical lessor does not own a maintenance facility. So if there’s a portfolio of aircraft that are presented and you have say, for example, 10 engine shop visits you need to do in the next two years, that is a very scary proposition if you don’t control a maintenance facility because you have to find somebody to do that. It’s a very tight market. Turnaround times are increasing. Parts prices are increasing.

There’s a lot of risk for that if you’re purely a financial provider. And so, you know, we have much, much less competition for those types of deals where you’re basically providing engine availability as part of the solution.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Maybe, last question because I think we’re about out of time. But Joe, can you just talk about the capital required to sustain this business looking forward especially when you get beyond seeding the SCI?

Joe Adams, CEO, FTAI Aviation: Yeah. So, if you go back originally what we said to run our business the way we want to run it, we felt like we needed to own in the system about 450 to 500 CFM 56 engines and then a 50 to 200 v 2,500 engines. We are basically at those levels now, so we feel we can deliver the engine certainty that customers need to be sure that we can always provide that engine to them. And that’s part of, you know, what the commitment is. We commit to do the engine exchanges and always have an engine availability, and the airliner or the lessor commits to doing engine exchanges with us.

So we feel that that we’ve achieved that level. So when you look at the cash flows going forward, we will run our business with 450 to 500 CFMs and and a 50 to 200 v 25 hundreds, and everything else should be free cash flow.

Brandon Oglenski, Airline and Transport Analyst, Barclays America: Well, Joe, thank you very much. I know it’s been volatile for your stop, but it’s been a good run the last few years, and I think a lot more to come.

Joe Adams, CEO, FTAI Aviation: Thanks for the support. Thank you. Yep.

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