FTAI Aviation Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Dividend: Announced the 41st dividend as a public company, with a $0.30 per share dividend paid on August 19, based on a shareholder record date of August 12.
• Aerospace Products: Delivered $165 million adjusted EBITDA at a 34% margin, with 9% market share (doubled from last year), expanding backlog, an MRE agreement with SCI, and acquisition of Pacific Aerodynamic for margin expansion.
• Production: Refurbished 184 CFM56 modules, expanded Montreal operations with a training academy, closed a 50% joint venture in Rome (QuickTurn Europe), and acquired Pacific Aerodynamic for cost savings and margin expansion.
• Free Cash Flow: Generated $370 million in free cash flow in the first half of 2025, with a target of $750 million for the full year 2025, up from the prior $650 million target.
• EBITDA Guidance: Upgraded Aviation Leasing EBITDA to $600 million, Aerospace Products EBITDA to $650 million to $700 million, and total 2025 business segment EBITDA to $1.25 billion to $1.3 billion.
• SCI: Closed additional equity partners, with a target of $4 billion investment, 145 aircraft closed or in LOI commitment, and an MRE agreement with FTAI generating $70 million in Q2 2025 revenue.

Segment Performance

• Leasing: In Q2 2025, leasing posted approximately $199 million of EBITDA. The pure leasing component was $169 million for Q2, including a $24 million settlement related to assets in Russia. For 2025, Leasing EBITDA is expected to be $600 million, including $54 million in insurance settlements as the company pivots to an asset-light model.
• Aerospace Products: Generated $164.9 million in EBITDA in Q2 2025 with a 34% margin. For 2025, Aerospace Products EBITDA is estimated to be in the range of $650 million to $700 million, up from prior ranges. In Q2, Aerospace Products had an adjusted EBITDA of $165 million at a 34% margin, with 9% market share (double last year's level).
• Corporate & Other: Had negative $16.4 million in Q2 2025, including intersegment eliminations.

Guidance

• Increased 2025 adjusted free cash flow target from $650 million to $750 million.
• Raised Aviation Leasing EBITDA for 2025 to $600 million, including $54 million in insurance settlements.
• Increased Aerospace Products 2025 EBITDA estimate to $650 million to $700 million from prior ranges.
• Total 2025 business segment EBITDA updated to $1.25 billion to $1.3 billion from $1.15 billion.
• Plan to provide an update on 2026 EBITDA later in the year, seeing upside to the previous $1.4 billion estimate.
• SCI target $4 billion investment, with 145 aircraft closed or in LOI commitment, expecting final closings by October 2025.

Risks

• Industry issues such as multiyear delays in new aircraft deliveries and durability concerns with new engine technology.
• Uncertainty around the timing and impact of PMA part approvals on margins.
• Market share growth depends on continued adoption of MRE solutions and the ability to execute on acquisitions and partnerships effectively.

Question and Answer

Q: Sheila Kahyaoglu of Jefferies asks about margin improvements in Aerospace Products and the Pacific Aerodynamic deal.

A: Joe Adams states margin improvements are multifaceted, with Pacific Aerodynamic acquisition expected to save $15 million annually (1-year payback) and looking at more inorganic opportunities for vertical integration.

Q: Kristine Liwag of Morgan Stanley asks about Aerospace Products production growth, capacity, and M&A strategy.

A: David Moreno and Joe Adams discuss production targets, hiring/training initiatives (e.g., Montreal training academy), and M&A focus on piece part repairs to fill vertical integration gaps.

Q: Giuliano Bologna of Compass Point asks about Aerospace Products growth acceleration and SCI model.

A: Joe Adams and David Moreno talk about market adoption of MRE solutions, SCI as an accelerant with 50 customers and 145 aircraft in the pipeline, and the repeatable nature of the SCI model.