FTAI Aviation Ltd. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• SCI Partnership: Successfully closed final round of equity commitments, upsized total equity capital to $2 billion with FTAI co-investing ~$380 million for a 19% minority interest. Target to deploy over $6 billion in capital with ~375 aircraft by mid-2026.
• Facilities and Acquisitions: Acquired ATOPS for ~$15 million to increase production capacity, with a facility in Medley, Florida (close to test cell) and Lisbon, Portugal (field service hub). Launched joint venture Prime Engine Accessories with Bauer, Inc. to enhance component repair capabilities.
• Production and Growth: Refurbished 207 CFM56 modules in Q3 2025. Montreal training academy has over 100 trainees. Rome operations developing with upgraded infrastructure. Target to produce 1,000 modules in 2026.

Segment Performance

• Aerospace Products: In Q3 2025, generated $180 million in adjusted EBITDA with a 35% margin, up approximately 77% year-over-year. Target to reach 40%+ margin in 2026. Production target for 2026 is 1,000 CFM56 modules (33% increase from 2025).
• Aviation Leasing: Posted ~$134 million of adjusted EBITDA in Q3 2025. Gains on sale from the 45-aircraft seed portfolio contributed $50.1 million to 2025 leasing EBITDA at a 10% margin. The 19% equity portion of SCI will be reflected in the equity income line.

Guidance

• 2025: Expected business segment EBITDA $1.25 billion to $1.3 billion, with Aerospace Products EBITDA $650 million to $700 million and Aviation Leasing EBITDA $600 million. Adjusted free cash flow $638 million YTD, targeting $750 million for 2025.
• 2026: Anticipate total business segment EBITDA $1.525 billion. Aerospace Products EBITDA $1 billion, Aviation Leasing EBITDA $525 million. Adjusted free cash flow $1 billion, a 33% increase from 2025.

Risks

• Market Volatility: Impact on engine purchase and sale prices; uncertainty in market conditions affecting margins and demand for rebuilt engines.
• Execution Risks: Challenges in integrating acquisitions and joint ventures, including training and skill development of personnel to meet production targets.
• Regulatory Risks: Changes in aviation regulations affecting engine maintenance, leasing, and investment activities.

Question and Answer

Q: Congratulations on upsizing of SCI. It looks like great traction from the investor base and sourcing these aircraft...

A: Alan Andreini mentioned the upsizing accelerates growth under SCI, with FTAI's SCI business potentially representing 20% to 25% of Aerospace products volume, and locked-in volume benefits for production planning.

Q: I just want to follow up on SCI. I mean you guys are significant buyers of aircraft engine assets now in a time where that there still seems to be a shortage of assets out there...

A: Joseph Adams explained the supply side from lessors selling older aircraft and airlines doing sale-leasebacks, and investors are receptive due to MRE solving problems, offering higher returns with lower risk.

Q: Could you unpack the guidance for 2026? What's the upside driven by new customers, repeat customers, new contacts from Finnair or the acquisition of ATOPS and the launch of JV, et cetera...

A: Joseph Adams stated 2026 guidance is driven by volume growth (33% increase in production) and margin improvement (40%+ margin) from parts acquisitions, repairs, and PMA approval.