FTAI Aviation Ltd. Q4 FY2024 earnings call

• Announced the 39th dividend as a public company, with $0.30 per share paid on March 24. - Highlighted the market opportunity with small and medium-sized airlines using CFM56 and V2500 engines, a $22 billion annual maintenance spend. - Outlined the value proposition of lower fixed prices, minimal downtime via green time optimization, unique maintenance capabilities, and PMA exclusivity. - Discussed scalability and durability through investments in facilities (Montreal, Miami, Rome) and the SCI initiative with $2.5 billion debt financing and plans for equity financing. - Noted 2024 financials: Adjusted EBITDA $862.1 million, up 44% from 2023; Q4 2024 adjusted EBITDA $252 million, up from Q3 and Q4 2023.

In 2024, adjusted EBITDA was $862.1 million, up 44% versus $597.3 million in 2023. For Q4 2024, adjusted EBITDA was $252 million, with $133.9 million from the Leasing segment, $117.3 million from the Aerospace Products segment, and $0.8 million from Corporate and Other (including $18.7 million related to the gain on sale of offshore vessels). Aviation Leasing delivered strong results in 2024, generating $500 million of adjusted EBITDA, aligning with original estimates. The Aerospace Products segment had $117.3 million of adjusted EBITDA in Q4 2024 with a 34% margin, and is expected to generate $600 million to $650 million of EBITDA in 2025, up from $381 million in 2024 and $160 million in 2023.

• 2025: Expected annual aviation EBITDA between $1.1 billion and $1.15 billion (excluding corporate and other). Adjusted free cash flow approximately $650 million. Aerospace Products EBITDA expected $600 million to $650 million. - 2026: Expected annual aviation EBITDA to rise from previously projected $1.25 billion to approximately $1.4 billion.

• Uncertainty of forward-looking statements. - Risk factors in quarterly report filed with SEC. - Potential impact of tariffs on aerospace industry and new deliveries. - Dependence on successful execution of SCI and capital raise.

Q: By the way, this investor presentation that you put out is very interesting. But just taking a step back, when you look at the competitive landscape, one of the key investor questions had been like why isn’t anybody else doing this?

A: Sure. There’s a lot of different moats. We’ve maybe put in place over the years. It’s taken us seven, eight years to get to this point. So it’s not a simple process. It was a sequential number of steps we took. But basically, to compete, to do what we do is similarly what United, American and Delta do, which is you have to own a large fleet of the same type of engine and then have your own maintenance capability and facilities. And so there’s nothing to stop other people from doing that. But what we did is we’ve sort of copied the majors and then offer that to the 600 operators around the world that don’t have a maintenance facility. So it’s effectively, it’s an outsourcing function for a single engine type. So when you look around the world, like, well, who could do that, clearly, people that own maintenance facilities could do that, but oftentimes they have multiple engines and they don’t own the engine. They’re servicing other people’s engines. So they have to reorganize their business, set up an asset management team, pick an engine, find a facility that doesn’t have third-party work that they have to displace and then try to assemble all the other parts. The other impediment, if you go back where we started, is we invested in PMAs six, seven years ago. And that will be the only PMA product for this engine. So we have an exclusive on that. And many of the companies that I just mentioned, that own maintenance facilities, have very strong ties with OEMs, which will commercially likely prohibit them from using PMA to any significant degree. So that advantage is something that nobody can copy. The other advantage is that we built up, people could, but it takes a lot of time and a focus. And when we did it, the outcome wasn’t all that clear. I mean it seems today, clear, but when we went down that path and decided not to diversify and to own our own maintenance facilities, nobody else is doing it, so we were like – people looking at us like what are you doing? So I don’t know that’s – we think about it all the time. We’re always paranoid, and we keep putting up other barriers. And I actually think that SCI is yet another barrier because now we’ve added institutional quality asset management to the mix, which – that’s a big hurdle for people to – you can’t just go raise the first fund easily. I know because we’ve done it a couple of times. It takes a lot of work. And so if you put that on top of it, it’s – we’re going to try to add something every year to make it harder, frankly.

Q: Can we just dig into the new QuickTurn center Europe? Why was this the right joint venture in Rome? How should we think of the ramp? Maybe what percentage of your customers are already in Europe and what having a local facility might do for turnaround times or politics or even new capabilities for FTAI?

A: Sure. This is David. I’ll take that question. So we’re very excited to add Rome to our MRE network. And we’re very excited because as you pointed out, the first focus is geography. So about 40% of our customers today are in Europe, as well as Rome has great connectivity to the Middle East, and this specific facility actually has the Chinese certification, which then gives us access into China. As the second reason is its capabilities. So this facility has a lot of the similar capabilities to our Miami facility, where it is focused on CFM56. It has MRE maintenance capability as well as it has access to a test cell. So our plan is to reactivate that test cell in the next two years and bring that test cell online. Where it differs from the Miami facility is it also has access to piece power repair. Like all our maintenance facilities, they all have a deep history. This one in particular has a history with an airline, Alitalia. It has had investments with Lufthansa, which, at one point, had a partnership. So they developed a lot of capabilities and that facility has been underutilized. So we’re very excited to bring our volume to that facility and grow that. We believe we can start the MRE process immediately after acquisition, and then we can ramp up for the test cell and piece-part capability over time.