FTAI Aviation CEO: "We’re Targeting 25% Market Share in Engine Maintenance" | Barclays Fireside Chat

00:38:39
https://www.youtube.com/watch?v=sFF6EA2m9oI

摘要

TLDRFTI Aviation, led by CEO Joe Adams, specializes in outsourced engine maintenance for CFM56 and V2500 engines, which are prevalent in commercial aviation. The company has developed a unique business model that combines engine ownership with maintenance services, allowing for significant cost savings and efficiency. FTI Aviation's strategic capital initiative aims to expand its leasing portfolio, targeting $4 billion in investments to own around 250 aircraft. The company is focused on achieving high margins, with expectations to reach close to 50%, and plans to grow its market share to 25%. Despite challenges from competition and market fluctuations, FTI Aviation is optimistic about its long-term growth prospects, particularly with the potential introduction of next-generation engines in the coming years.

心得

  • ✈️ FTI Aviation specializes in engine maintenance for CFM56 and V2500 engines.
  • 💰 The company aims for 25% market share in the engine maintenance sector.
  • 🔧 FTI Aviation combines engine ownership with maintenance services for efficiency.
  • 📈 The strategic capital initiative targets $4 billion in investments for aircraft ownership.
  • 📊 Expected margins could reach close to 50%, significantly higher than competitors.
  • 🔍 PMA parts are used to enhance cost-effectiveness and margins.
  • 💵 Anticipated cash flow for this year is $650 million, with growth expected.
  • 🌍 The long-term outlook includes investing in next-generation engines by 2028-29.
  • 🤝 FTI Aviation has over 100 customers with high repeat usage of their services.
  • 🚀 The company is positioned to capitalize on the growing demand for engine maintenance.

时间轴

  • 00:00:00 - 00:05:00

    The conference begins with Brandon Ollinsky introducing Joe Adams, CEO of FTI Aviation, who discusses their unique business model in engine maintenance and leasing, focusing on the CFM56 and V2500 engines. FTI Aviation aims to provide cost savings and flexibility to airlines by managing engine maintenance and rebuilding engines for resale or lease.

  • 00:05:00 - 00:10:00

    Joe explains the evolution of FTI Aviation from an engine leasing business to a comprehensive engine maintenance provider, highlighting the importance of PMA parts as a cost-effective alternative to OEM parts. The company has focused on the CFM56 engine market, which is the largest in the world, and aims to vertically integrate its operations.

  • 00:10:00 - 00:15:00

    The discussion shifts to FTI Aviation's Strategic Capital Initiative (SCI), which aims to grow their lease portfolio off-balance sheet. Joe outlines the potential for significant revenue generation through engine exchanges and partnerships, estimating a $4 billion investment to own approximately 250 aircraft, which will enhance their market share and operational efficiency.

  • 00:15:00 - 00:20:00

    Joe provides updates on the first partnership under the SCI, detailing the acquisition of aircraft and the expected revenue from engine exchanges. He emphasizes the importance of planning and visibility in engine maintenance to improve efficiency and margins, and addresses concerns regarding stock volatility related to these transactions.

  • 00:20:00 - 00:25:00

    The conversation touches on FTI Aviation's margin profile, which is significantly higher than competitors due to their unique business model that combines ownership of engines with maintenance services. Joe explains how their approach allows for better optimization and cost savings, leading to higher margins compared to traditional MRO providers.

  • 00:25:00 - 00:30:00

    Joe discusses the physical capacity of FTI Aviation's facilities and their plans for expansion, including investments in parts inventory and hiring mechanics to meet increasing demand. He reassures that their current capacity will be sufficient to achieve their financial targets for the upcoming years.

  • 00:30:00 - 00:38:39

    Finally, Joe addresses concerns about the long-term sustainability of the business, emphasizing the ongoing demand for maintenance services for aging aircraft and the potential for future investments in next-generation engines. He concludes by highlighting the company's commitment to providing engine availability and certainty to their customers.

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思维导图

视频问答

  • What is FTI Aviation's primary business focus?

    FTI Aviation focuses on outsourced engine maintenance for CFM56 and V2500 engines, which are widely used in commercial aircraft.

  • How does FTI Aviation's business model differ from traditional MRO providers?

    FTI Aviation combines ownership of engines with maintenance services, allowing for greater efficiency and cost savings.

  • What is the strategic capital initiative (SCI) mentioned by Joe Adams?

    The SCI aims to grow FTI Aviation's leasing portfolio off-balance sheet, targeting investments of $4 billion to own approximately 250 aircraft.

  • What are the expected margins for FTI Aviation's business?

    FTI Aviation aims to achieve margins close to 50%, significantly higher than traditional MRO competitors.

  • How does FTI Aviation handle engine maintenance?

    FTI Aviation performs maintenance on engines they own, allowing for optimized processes and reduced turnaround times.

  • What is the significance of PMA parts in FTI Aviation's operations?

    PMA parts are used as cost-effective alternatives to OEM parts, contributing to higher margins and efficiency.

  • What is the expected cash flow for FTI Aviation in the coming years?

    FTI Aviation anticipates generating $650 million in cash from operations this year, with expectations for growth in subsequent years.

  • How does FTI Aviation plan to expand its market share?

    FTI Aviation aims to grow its market share to approximately 25% by leveraging cost savings and strategic partnerships.

  • What challenges does FTI Aviation face in the aviation market?

    Challenges include competition from other MRO providers and potential fluctuations in engine prices due to market conditions.

  • What is the long-term outlook for FTI Aviation's business?

    FTI Aviation expects stable growth over the next decade, with plans to invest in next-generation engines starting around 2028-29.

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  • 00:00:00
    All right. Uh good afternoon everyone
  • 00:00:01
    and welcome to Barlay's America's Select
  • 00:00:03
    Conference uh day one and I think this
  • 00:00:05
    might be the last fireside uh chat
  • 00:00:07
    session and then we have drinks
  • 00:00:09
    afterwards. But for those of you joining
  • 00:00:11
    us on the webcast, I'm Brandon Ollinsky,
  • 00:00:13
    airline and transport analysts and we're
  • 00:00:15
    very happy to host uh FTA FTA aviation
  • 00:00:19
    next and with us from the company Joe
  • 00:00:21
    Adams uh CEO and you guys are running a
  • 00:00:24
    very unique uh MRE and aviation leasing
  • 00:00:27
    business. So figured I'd just give you
  • 00:00:29
    maybe a couple minutes to maybe
  • 00:00:30
    introduce the business to those that
  • 00:00:32
    don't know and then we definitely have a
  • 00:00:33
    lot of questions. Yes, thanks very much
  • 00:00:35
    Brandon. Thanks for having us. Very
  • 00:00:37
    happy to be here today and u we do have
  • 00:00:39
    an increasing amount of interest in
  • 00:00:41
    Europe from a number of investors. So um
  • 00:00:44
    so good to be invited included and look
  • 00:00:46
    forward to doing this in the future. Um,
  • 00:00:49
    FTI Aviation is a um, outsourced
  • 00:00:53
    provider of engine maintenance in the
  • 00:00:55
    aftermarket for uh, primarily two
  • 00:00:58
    engines, the CFM56 and the V2500, which
  • 00:01:01
    happen to be the engines that fly uh,
  • 00:01:04
    all 737 NGS and A320 CO aircraft, which
  • 00:01:07
    is the largest part of the world's um,
  • 00:01:10
    commercial aircraft fleet. So we focus
  • 00:01:12
    on those two engines and u what we do as
  • 00:01:15
    a business is we acquire engines that
  • 00:01:18
    are run out or have limits on on how uh
  • 00:01:22
    uh continued flying. We rebuild those
  • 00:01:25
    engines through our own network and our
  • 00:01:27
    own facilities and then we go to market
  • 00:01:29
    uh to the airlines or less or within
  • 00:01:32
    with a product where we either sell uh
  • 00:01:35
    that engine uh exchange it for runout
  • 00:01:38
    engine or lease the engine to them. So
  • 00:01:41
    effectively it allows the owner the um
  • 00:01:44
    uh the owner or the airline to not have
  • 00:01:48
    to do their own engine maintenance on
  • 00:01:49
    those engines. And in the aftermarket
  • 00:01:51
    that becomes an increasingly complex uh
  • 00:01:54
    process higher prices today and uh we
  • 00:01:58
    can provide tremendous amount of
  • 00:01:59
    flexibility and cost savings uh directly
  • 00:02:02
    the to the to the customer. So it's a
  • 00:02:05
    product that we introduced uh you know
  • 00:02:06
    really going back three four years and
  • 00:02:09
    has been widely accepted. We now have
  • 00:02:11
    over a hundred customers who've uh
  • 00:02:13
    endorsed it and a growing number. Uh
  • 00:02:16
    last year we estimated about um of a $22
  • 00:02:20
    billion annual spend on maintenance for
  • 00:02:23
    those two engines. Uh we generated about
  • 00:02:25
    a billion in revenue. So under 5% and
  • 00:02:28
    our goal over the next several years is
  • 00:02:30
    to grow that to approximately 25% market
  • 00:02:33
    share. And uh uh we think that that uh
  • 00:02:37
    is achievable given the uh direct cost
  • 00:02:40
    savings that customers and owners
  • 00:02:41
    received as well as the new strategic
  • 00:02:44
    capital initiative that we launched um
  • 00:02:47
    uh earlier this year uh whereby through
  • 00:02:50
    a partnership we'll end up owning being
  • 00:02:52
    the direct owner of those uh 737 NGS and
  • 00:02:55
    A320 cos that are on lease and as part
  • 00:02:59
    of that arrangement uh we'll that
  • 00:03:01
    partnership will contract to do all the
  • 00:03:04
    engine maintenance and exchanges
  • 00:03:05
    directly with uh FTI Aviation. So, an
  • 00:03:09
    immediate conversion of that business
  • 00:03:11
    over to our um FTI Aviation model as
  • 00:03:14
    well as a um a growth in commitment and
  • 00:03:17
    visibility for future engine shop visits
  • 00:03:19
    which will uh have a virtuous effect of
  • 00:03:22
    you know giving us increased visibility
  • 00:03:25
    and planning as well as allowing us to
  • 00:03:28
    um uh increase the efficiency in our
  • 00:03:30
    ability to produce those rebuilt
  • 00:03:32
    engines.
  • 00:03:33
    Joe, I appreciate that. And maybe just
  • 00:03:35
    as context, uh, for those again aren't
  • 00:03:38
    that new to the story or are new to the
  • 00:03:40
    story, uh, you know, when you IPOed this
  • 00:03:42
    business, it was really more focused on
  • 00:03:44
    the aviation side, leasing aircraft and
  • 00:03:46
    leasing engines. Can you talk about the
  • 00:03:48
    evolution of how you got into the
  • 00:03:50
    products business in the first place?
  • 00:03:52
    Yes, it it started years ago. We started
  • 00:03:55
    directly as an engine leasing business
  • 00:03:57
    and then realized the biggest
  • 00:03:59
    expenditure you make uh owning an engine
  • 00:04:01
    is on the maintenance that you need to
  • 00:04:03
    do to to restore hours and cycles
  • 00:04:05
    approximately every 5 years you have to
  • 00:04:08
    uh take apart that engine and rebuild it
  • 00:04:10
    and it's a very uh complicated and
  • 00:04:12
    expensive process in the aftermarket. Uh
  • 00:04:15
    so at that time uh we we discovered PMA
  • 00:04:18
    as an alternative uh to OEM parts. PMA
  • 00:04:21
    is a as I call it the generic drug
  • 00:04:23
    equivalent for aviation where you can go
  • 00:04:26
    to the FAA and uh and if you can prove
  • 00:04:30
    you can make a part equal to or better
  • 00:04:32
    than the uh OEM part, you get a license
  • 00:04:34
    to make it. And so that was a company
  • 00:04:36
    called Chromoy. We had a great
  • 00:04:38
    experience with PMA and the CF-680
  • 00:04:40
    engine. And then we realized the same
  • 00:04:43
    opportunity is was available for CFM56
  • 00:04:46
    engines. And that was you know about
  • 00:04:48
    2018 and we realized that's the largest
  • 00:04:51
    engine market in the world. Uh it is a
  • 00:04:54
    market that was maturing. It was most of
  • 00:04:56
    the engines were moving off of power by
  • 00:04:58
    the hour programs with OEMs into
  • 00:05:00
    aftermarket and uh we could take that um
  • 00:05:04
    competitive advantage proprietary
  • 00:05:06
    product and really create um a
  • 00:05:09
    tremendous business model for that
  • 00:05:11
    engine. So we decided to go allin on
  • 00:05:15
    CFM56 and as part of that we wanted to
  • 00:05:18
    vertically integrate uh and and be able
  • 00:05:20
    to do our own uh in addition to parts
  • 00:05:23
    manufacturing do our own engine shop
  • 00:05:25
    visits do our own tearown activity and
  • 00:05:28
    do our own piece part repair business.
  • 00:05:30
    And we've done all of that uh to ring
  • 00:05:32
    out um as much cost as possible which
  • 00:05:35
    makes us the best perform you know the
  • 00:05:38
    best most capable most efficient
  • 00:05:40
    provider of um aftermarket maintenance
  • 00:05:43
    for that engine in the world. I guess
  • 00:05:46
    the evolution of that now has led to
  • 00:05:47
    this SCI strategic capital initiative
  • 00:05:50
    where you want to grow lease portfolio
  • 00:05:52
    offbalance sheet that is that right?
  • 00:05:54
    Yes. So as part of that we we mentioned
  • 00:05:57
    you know customers can be airlines and
  • 00:06:00
    owners. Owners being a lesser and we
  • 00:06:03
    started seeing that by delivering a
  • 00:06:05
    rebuild engine you could eliminate a lot
  • 00:06:07
    of the negative experiences lessers have
  • 00:06:10
    with either cost overruns delays getting
  • 00:06:13
    engines in or managing the process
  • 00:06:15
    themselves. And so as part of that, we
  • 00:06:18
    realized that that benefit of that we
  • 00:06:20
    can provide by doing these pre-built
  • 00:06:22
    engine exchanges, we might as well
  • 00:06:25
    confer that on um a partnership that we
  • 00:06:28
    could run and manage. And it was a part
  • 00:06:30
    of the market that we hadn't really
  • 00:06:31
    focused on necessarily um u before that
  • 00:06:35
    because it's very capital intensive. So
  • 00:06:38
    about a year ago, we started thinking
  • 00:06:40
    about that as a big opportunity to
  • 00:06:42
    invest in owning these. We can do it in
  • 00:06:45
    a off balance sheet way with uh
  • 00:06:48
    strategic capital is our you know the
  • 00:06:50
    name of the energy strategic capital
  • 00:06:52
    initiative and our first um uh
  • 00:06:55
    partnership was concluded at the
  • 00:06:58
    beginning of this year. Our objective is
  • 00:07:00
    to be able to invest $4 billion through
  • 00:07:02
    that partnership which effectively
  • 00:07:05
    translates into owning about 250
  • 00:07:08
    aircraft.
  • 00:07:09
    As part of the part of the arrangement,
  • 00:07:12
    FTI Aviation will do all engine
  • 00:07:14
    maintenance required for those aircraft
  • 00:07:17
    in that partnership through engine
  • 00:07:20
    exchanges. So, if you think about the
  • 00:07:21
    math of of that, it's four uh 250
  • 00:07:25
    aircraft comprises about 500 engines.
  • 00:07:28
    Roughly 20% of those are due for a
  • 00:07:31
    performance restoration or shop visit
  • 00:07:33
    every year. So, that's a hundred if we
  • 00:07:35
    do an engine exchange. Um, and each one
  • 00:07:38
    of those generates roughly today for us
  • 00:07:40
    about two and a half million of ibida.
  • 00:07:42
    That's $250 million of ibida from the
  • 00:07:44
    new partnership that goes directly to
  • 00:07:47
    FTI aviation. In addition, we'll get
  • 00:07:50
    paid management fee for running the
  • 00:07:52
    partnership being the general partner
  • 00:07:54
    and we'll own 20% of it. So it allows us
  • 00:07:57
    to build a you know a customer that is
  • 00:08:00
    100% committed to engine exchanges and
  • 00:08:03
    to accelerate our um uh capture of
  • 00:08:06
    market share uh via that method and to
  • 00:08:09
    do um potentially do you know a new
  • 00:08:13
    partnership every year so that the
  • 00:08:15
    cumulative effect of that would be you
  • 00:08:17
    know very major and make us the largest
  • 00:08:19
    owner of narrow body aircraft in in the
  • 00:08:22
    uh in the world. But and Joe on on that
  • 00:08:26
    first partnership I think the first
  • 00:08:28
    capital closed in late March. Is that
  • 00:08:31
    correct? Yes. The well the first
  • 00:08:33
    aircraft was were closed in late March.
  • 00:08:35
    We actually had equity capital committed
  • 00:08:38
    at the end of December of last year. We
  • 00:08:42
    then arranged debt financing which was
  • 00:08:44
    committed in midFebruary and then the
  • 00:08:46
    debt financing uh was available to fund
  • 00:08:50
    at the uh last the end of last week of
  • 00:08:53
    March. So the first aircraft uh which
  • 00:08:55
    was four aircraft that were sold from
  • 00:08:57
    our um balance sheet FTI aviation in to
  • 00:09:01
    seed that portfolio closed in March and
  • 00:09:03
    then as also as part of that there were
  • 00:09:06
    a number of we've now got 98 aircraft in
  • 00:09:10
    the SCI lined up under letters of intent
  • 00:09:13
    of which today approximately 30 have
  • 00:09:16
    closed and a lot of those um were in the
  • 00:09:19
    works for the first few months of this
  • 00:09:20
    year uh would need immediate engines.
  • 00:09:24
    to replace engines that were run out and
  • 00:09:27
    we had a sale lease back of um um with
  • 00:09:30
    an airline that had a number of engines
  • 00:09:33
    that were um run out of time. So they
  • 00:09:35
    needed immediate engines as part of the
  • 00:09:37
    deal. So as part of that, we sold $und00
  • 00:09:41
    million of engines from uh the aerospace
  • 00:09:44
    products business to SCI in the first
  • 00:09:47
    quarter, which t which represented about
  • 00:09:50
    30% of the total activity in this in the
  • 00:09:53
    aerospace product segment for the
  • 00:09:55
    quarter. We've indicated that that was
  • 00:09:58
    um a little bit high compared to what we
  • 00:10:00
    expect the run rate to be. We expect for
  • 00:10:01
    the full year to be about 20%. So, but
  • 00:10:04
    as I mentioned, there was some stacking
  • 00:10:07
    of uh requirements from the lease
  • 00:10:09
    portfolio and a sale lease back from an
  • 00:10:11
    airline that made that number uh
  • 00:10:12
    slightly elevated. So all of that came
  • 00:10:15
    together and you know happened in the
  • 00:10:17
    first quarter which we view as a you
  • 00:10:19
    know a huge positive and a huge
  • 00:10:21
    accomplishment to put all that together
  • 00:10:22
    and get that done uh early this year.
  • 00:10:25
    And we see that as a you know a major
  • 00:10:28
    driver of uh both the um activity level
  • 00:10:32
    in the aerospace products as well as the
  • 00:10:34
    the visibility in terms of future
  • 00:10:36
    pipeline. The more you know about what
  • 00:10:38
    your engine requirements are going to
  • 00:10:40
    be, the more you could plan, the more
  • 00:10:42
    efficient you become, and the better
  • 00:10:44
    your margins are over time. I think
  • 00:10:47
    specific to that $und00 million, there
  • 00:10:49
    was a footnote in your earnings release
  • 00:10:51
    that maybe caused a little bit of
  • 00:10:52
    confusion last week. Definitely some
  • 00:10:54
    volatility in the stock, but effectively
  • 00:10:57
    this was associated with those other 26
  • 00:10:59
    aircraft being closed into the
  • 00:11:01
    portfolio. Is that right? Yes. Yes. And
  • 00:11:03
    it was um you know we view that as we
  • 00:11:07
    had lots of alternatives of what we
  • 00:11:09
    could do with those engines. The market
  • 00:11:10
    is extremely strong but we prioritized
  • 00:11:14
    those engines for the strategic capital
  • 00:11:16
    initiative because we want to uh grow
  • 00:11:19
    that business. We want that business to
  • 00:11:21
    be very successful. So it was a um both
  • 00:11:25
    a commitment and a you know uh financial
  • 00:11:28
    goal to to grow that and make that uh
  • 00:11:30
    very successful. I guess it's almost a
  • 00:11:32
    validation of why you did the SCI. Is
  • 00:11:34
    that right? Yes. Well, and I guess along
  • 00:11:37
    those lines,
  • 00:11:39
    margins in the business been what north
  • 00:11:42
    of 35%, right? But recently you guys
  • 00:11:44
    have been talking about targets that
  • 00:11:45
    maybe could reach close to 50%. Yes.
  • 00:11:48
    What's there's been some discussion why
  • 00:11:51
    is your margin so much higher than maybe
  • 00:11:53
    a primary MRO competitor that's
  • 00:11:55
    generating 10 15% margins? Yeah. So I
  • 00:11:58
    mean we combine a number of activities
  • 00:12:01
    and as I mentioned our business model is
  • 00:12:03
    unique in that we both do the
  • 00:12:05
    maintenance and we own the engine and so
  • 00:12:08
    u we view the margin as a combination of
  • 00:12:11
    three different components. First of all
  • 00:12:13
    the the act of repairing and repairing
  • 00:12:15
    something for someone else tends to as a
  • 00:12:18
    third party MR would generate typically
  • 00:12:21
    uh 15% margin. The second part is we
  • 00:12:25
    have uh the ability by virtue of owning
  • 00:12:27
    inventory and by having our maintenance
  • 00:12:29
    capability the the ability to optimize
  • 00:12:32
    green time. And we showed an example in
  • 00:12:34
    our February slide deck where we took
  • 00:12:36
    three engines that we acquired in a real
  • 00:12:39
    life example uh perform maintenance
  • 00:12:42
    recombined them and created six million
  • 00:12:44
    of value on a $10 million total
  • 00:12:46
    investment. So that's a real
  • 00:12:49
    optimization
  • 00:12:51
    uh uh solution that we can bring to the
  • 00:12:54
    table because of the extent of our
  • 00:12:56
    ownership of assets and our and our
  • 00:12:58
    maintenance facilities and our and then
  • 00:13:01
    the third part of uh the margin will
  • 00:13:03
    come from today comes from parts where
  • 00:13:06
    we acquire and repair a lot of used
  • 00:13:08
    serviceable material which we recycle in
  • 00:13:10
    our own shop visits and we also generate
  • 00:13:13
    a lot of used serviceable material from
  • 00:13:14
    our own inventory that we tear
  • 00:13:17
    And then the growth opportunity will
  • 00:13:19
    come from u the addition of PMA which we
  • 00:13:23
    think will contribute a significant
  • 00:13:25
    amount of potentially 5 to 10 percentage
  • 00:13:27
    points of additional margin once the
  • 00:13:29
    full portfolio of PMA products is
  • 00:13:32
    available. Well, and can we talk about
  • 00:13:34
    the economies of scale you get by owning
  • 00:13:37
    the engine fleet as opposed to just a
  • 00:13:39
    traditional MRO shop visit where it's
  • 00:13:41
    one engine, one owner and billable
  • 00:13:43
    hours? Yeah, that's a great question. I
  • 00:13:45
    mean, we we run our shops very
  • 00:13:48
    differently in that we only do our uh uh
  • 00:13:52
    maintenance and res restorations on
  • 00:13:54
    engines we own. So, we have no third
  • 00:13:56
    party engines uh owned by others in the
  • 00:13:59
    shop. And what that allows you to do is
  • 00:14:02
    two things. One is you can specialize.
  • 00:14:04
    So, you can have each one of those
  • 00:14:05
    engines can be managed by a fan, a core,
  • 00:14:09
    and a low pressure turbine and
  • 00:14:11
    recombined at the end of the process.
  • 00:14:13
    and you don't have to track whether
  • 00:14:15
    those are part of someone else's fleet
  • 00:14:17
    or not. The second thing you can do is
  • 00:14:19
    you don't have to track someone else's
  • 00:14:21
    parts. So you can have parts inventory
  • 00:14:23
    available. So you can operate it like a
  • 00:14:25
    m an assembly line. So as an engine
  • 00:14:27
    comes down the line, you take whatever
  • 00:14:29
    parts are available, you put it together
  • 00:14:31
    at the end of the end of the shop visit,
  • 00:14:33
    you've got um a fully built engine. So
  • 00:14:37
    those efficiencies, the specialization
  • 00:14:39
    and the efficiency of not having to
  • 00:14:41
    track other people's parts, you know,
  • 00:14:43
    creates a very very um a faster
  • 00:14:45
    turnaround times and lower cost uh for
  • 00:14:49
    uh for refurbishing engines. And this is
  • 00:14:52
    effectively what a large airline like
  • 00:14:54
    Delta will do with their own tech ops
  • 00:14:55
    facility. Is that right? Exactly. Okay.
  • 00:14:57
    So when we think about our business
  • 00:14:59
    model is more similar to what the major
  • 00:15:02
    airlines who own their own maintenance
  • 00:15:04
    facilities do internally. So if you
  • 00:15:07
    think about if you own you know 400
  • 00:15:09
    aircraft and you have your own
  • 00:15:11
    maintenance facility your operation is
  • 00:15:14
    very similar to the way we operate and
  • 00:15:16
    and or you could argue we copied that
  • 00:15:18
    model. And of the 600 owners of CFM56
  • 00:15:22
    engines in the world there's only five
  • 00:15:24
    that effectively have that ability. So
  • 00:15:27
    the 595 other airlines that operate, we
  • 00:15:31
    can provide that functionality to them
  • 00:15:33
    on an outsourced basis, save them money
  • 00:15:36
    and make great margins for ourselves at
  • 00:15:37
    the same time. Whereas that that product
  • 00:15:40
    was never really available um uh because
  • 00:15:43
    the major airlines who do it for their
  • 00:15:45
    own fleet don't don't they don't provide
  • 00:15:47
    that to other that that function to
  • 00:15:49
    other airlines. And what's been the
  • 00:15:51
    response from your customer base? It's
  • 00:15:54
    been great. I mean we now we announced
  • 00:15:56
    we have over a hundred customers. So uh
  • 00:15:59
    we've had um a very very high level of
  • 00:16:02
    repeat usage. Our our pitch is almost
  • 00:16:06
    always like if you know just try it and
  • 00:16:09
    use it once and if you don't like it
  • 00:16:10
    then don't do it again. And we've always
  • 00:16:12
    found that people were like wow this is
  • 00:16:14
    amazing. I save so much time and money
  • 00:16:17
    and I eliminate the use the the um the
  • 00:16:20
    potential cost overrun of having an
  • 00:16:22
    engine be inducted into a thirdparty MRO
  • 00:16:25
    shop. So we haven't had anybody that
  • 00:16:27
    hasn't wanted to use it again or said
  • 00:16:29
    anything about like they love it. They
  • 00:16:31
    love the product. So we see the adoption
  • 00:16:33
    you know growing and increasing um uh
  • 00:16:36
    throughout the entire industry really. I
  • 00:16:37
    don't see I've never had anybody say
  • 00:16:39
    there's something wrong with it. If you
  • 00:16:41
    can provide the same engine to someone
  • 00:16:44
    for a lower cost with no other
  • 00:16:47
    associated expenses, why wouldn't people
  • 00:16:49
    do
  • 00:16:50
    it? Okay. Can you talk about physical
  • 00:16:53
    capacity in your network to reach your
  • 00:16:55
    Ebbitas? I think this year is 1.1
  • 00:16:57
    billion or 1.1 to 1.5.4 by next year.
  • 00:17:02
    Yeah. Yeah. So we have uh today we have
  • 00:17:04
    the capacity physical capacity to do
  • 00:17:07
    about 300 shop visits in
  • 00:17:10
    Montreal 150 in Miami and then uh
  • 00:17:13
    closing this quarter is a investment in
  • 00:17:16
    a facility in Rome which will add
  • 00:17:18
    another 150 engines. So that engine u
  • 00:17:22
    that adds up to about 600 chavis of
  • 00:17:24
    physical capacity
  • 00:17:26
    perom and uh we are increasing our um uh
  • 00:17:32
    our production rates in Montreal the
  • 00:17:34
    most this year. So that's ramping up and
  • 00:17:37
    we will bring on Rome uh this summer and
  • 00:17:41
    we've made an substantial investment in
  • 00:17:43
    in advance in parts. Uh you saw in the
  • 00:17:46
    cash flow statement we called out, you
  • 00:17:48
    know, a $200 million investment in the
  • 00:17:50
    first half of this year in arts
  • 00:17:52
    inventory, which is in anticipation of
  • 00:17:54
    that. And so um the only remaining piece
  • 00:17:57
    of that is mechanics. You have to have
  • 00:17:59
    people to do that. We are adding um
  • 00:18:02
    mechanics in Montreal as we speak this
  • 00:18:05
    quarter. We've invested a substantial
  • 00:18:07
    amount in that in the first quarter and
  • 00:18:09
    then we will uh ramp up uh Rome the
  • 00:18:12
    lighter the latter part of this year,
  • 00:18:14
    the second half. So we believe that what
  • 00:18:16
    we have today in place will be more than
  • 00:18:19
    enough capacity to to hit those targets.
  • 00:18:22
    Okay. I think some fair concerns around
  • 00:18:26
    your margin profile has been like the
  • 00:18:28
    aftermarket's been really hot in
  • 00:18:29
    aerospace especially with the GTF
  • 00:18:31
    groundings especially with max delivery
  • 00:18:33
    delays and just overall aggregate OEM
  • 00:18:37
    challenges. Once we finally get that
  • 00:18:39
    worked out, maybe in the next two or
  • 00:18:41
    three years, if asset values decline,
  • 00:18:43
    especially on the CFM56 platform, won't
  • 00:18:46
    your margins be impacted by that? Yes.
  • 00:18:49
    So, we we view our business as more of a
  • 00:18:51
    spread business and that we buy, as I
  • 00:18:54
    said at the very beginning, we buy
  • 00:18:55
    runout engines, we rebuild them, and
  • 00:18:57
    then we go to market. And the cost of
  • 00:19:00
    shop visits is not a cyclical because
  • 00:19:02
    it's driven mostly by parts prices,
  • 00:19:05
    which only go one way. They always go
  • 00:19:07
    up. So when you think about, you know,
  • 00:19:09
    an engine, its replacement cost is
  • 00:19:11
    driven off of what it would cost you to
  • 00:19:13
    rebuild it. As long as you continue
  • 00:19:15
    flying and you have to do shop visits,
  • 00:19:17
    you're going to have to do that. That's
  • 00:19:19
    going to be your benchmark for for
  • 00:19:21
    comparisons. The only thing that you
  • 00:19:23
    know cyclical what can drive um engine
  • 00:19:26
    prices in the secondary market is if you
  • 00:19:29
    have a downturn or you have a lot of
  • 00:19:30
    excess equipment available. But the
  • 00:19:32
    engine market is the best
  • 00:19:34
    self-correcting market for supply demand
  • 00:19:37
    of any market. And that if you have to
  • 00:19:39
    do 20% of your engines are due for a
  • 00:19:42
    shop visit in any one year, if you have
  • 00:19:44
    a cyclical downturn like we had in COVID
  • 00:19:46
    or other times, people stop or reduce
  • 00:19:49
    the amount of shop visits are going to
  • 00:19:51
    do, which means that if you stopped all
  • 00:19:53
    shop visits, you 10% of the, you know,
  • 00:19:56
    the the fleet, you know, you you'd
  • 00:19:58
    retire that in a half a year. So it
  • 00:20:01
    tends to be um uh self-correcting and
  • 00:20:04
    self-regulating in terms of the price
  • 00:20:06
    and then the price is really set off of
  • 00:20:08
    the the OEM parts prices. So you can see
  • 00:20:11
    temporary disruptions, but we view
  • 00:20:13
    ourselves as that would also give us an
  • 00:20:15
    opportunity to buy, you know, cheaper
  • 00:20:17
    and rebuild and still still earn the
  • 00:20:19
    same margin.
  • 00:20:21
    Um and by the way, if there's Q&A in
  • 00:20:23
    here, I think we have a mic if if you
  • 00:20:24
    guys want. But um Joe, I guess along
  • 00:20:27
    those lines, uh as we think about
  • 00:20:30
    competition, why is another MRO provider
  • 00:20:33
    not doing this? And won't your margins
  • 00:20:35
    entice more competition or maybe a
  • 00:20:37
    reaction from the OEMs as well?
  • 00:20:40
    Yes, and we think about that all the
  • 00:20:42
    time and I think you know you're right
  • 00:20:43
    the MRO um industry third party MRO's
  • 00:20:47
    have the capability to do what we do but
  • 00:20:49
    the key as I mentioned in the beginning
  • 00:20:51
    is our business model is to combine
  • 00:20:53
    ownership of assets with maintenance. So
  • 00:20:56
    if you're a third party MRO today uh I'm
  • 00:20:59
    not aware of any third party MRO that
  • 00:21:01
    owns a significant amount of their own
  • 00:21:03
    engines. they mostly are going out and
  • 00:21:05
    pitching airlines and other customers to
  • 00:21:08
    give them third party to do thirdparty
  • 00:21:10
    work on those engines. So step one would
  • 00:21:13
    be, you know, acquire a bunch of
  • 00:21:15
    engines, get a bunch of capital from
  • 00:21:18
    somewhere, buy the engines, and then
  • 00:21:20
    most third party MRO's have more than
  • 00:21:23
    one engine they do. So you'd have to
  • 00:21:24
    select one. We seven or eight years ago,
  • 00:21:28
    we said we're just going to do
  • 00:21:30
    CFM56. We sort of did the opposite of
  • 00:21:32
    what most people do is we were anti-
  • 00:21:35
    diversification. We went all in to
  • 00:21:37
    concentrate on one engine. So some
  • 00:21:39
    somehow the MRO's would have to say okay
  • 00:21:41
    I want just to do this engine and then
  • 00:21:44
    you have to take some of your capacity
  • 00:21:46
    which right now is very full with leap
  • 00:21:49
    and GTF work that's been promised to
  • 00:21:51
    third parties and promise third party uh
  • 00:21:54
    you know turnaround times and you'd have
  • 00:21:56
    to allocate that somehow to your own
  • 00:21:58
    engines. So there's a lot of
  • 00:21:59
    reorganizing that people would have to
  • 00:22:01
    do. I'm not saying it's impossible. Uh
  • 00:22:04
    the other impediment people have is that
  • 00:22:06
    we um we don't have OEM ties restricting
  • 00:22:10
    us from using PMA. Many other people do
  • 00:22:13
    and many other you know customers
  • 00:22:15
    wouldn't necessarily embrace PMA. So you
  • 00:22:18
    reduce some of the you know cost savings
  • 00:22:20
    opportunity available. So so I think
  • 00:22:22
    there's a lot of things that people have
  • 00:22:23
    to overcome and at the same time those
  • 00:22:25
    businesses are doing quite well given
  • 00:22:28
    the amount of GTF and LEAP business they
  • 00:22:30
    have. So I'm not sure they have
  • 00:22:32
    necessarily the incentive to do all
  • 00:22:33
    that. Okay. Can we talk about cash flow
  • 00:22:37
    because I think that's another concern
  • 00:22:38
    especially last year just didn't see a
  • 00:22:40
    lot of cash from operations but there
  • 00:22:42
    were a lot of things moving underneath
  • 00:22:44
    the surface there especially the buildup
  • 00:22:46
    in inventories because you do have two
  • 00:22:48
    different accounting treatments for your
  • 00:22:49
    lease portfolio for your aviation
  • 00:22:51
    products portfolio. So maybe you can
  • 00:22:53
    speak to that. Sure. So last in 2024 we
  • 00:22:56
    had you know three great strategic
  • 00:22:58
    initiatives to you know grow the
  • 00:23:00
    business which we capitalized on. One
  • 00:23:01
    was um acquiring the Montreal facility
  • 00:23:06
    uh for $150 million. Uh the second was
  • 00:23:10
    the the V2500 deal we did with Pratt and
  • 00:23:13
    Whitney involved um over a 100 shop
  • 00:23:16
    visits. So we increased the size of our
  • 00:23:18
    fleet um owned fleet of
  • 00:23:20
    V2500s up to 150 engines and then the
  • 00:23:24
    third was buying out the management
  • 00:23:26
    contract from a fortress. So none of
  • 00:23:29
    those are you know repeating cash flows.
  • 00:23:32
    So we go into 2025 and we showed you
  • 00:23:34
    know 650 million of cash from operations
  • 00:23:38
    uh this year. Um the first half of the
  • 00:23:41
    year has the strategic capital
  • 00:23:43
    initiative transactions in there which
  • 00:23:45
    we broke out in detail where we're
  • 00:23:47
    selling 46 aircraft from the balance
  • 00:23:50
    sheet of FI aviation to seed the SCI
  • 00:23:53
    portfolio and we're investing 300
  • 00:23:55
    million in in replacement capex which is
  • 00:23:58
    to replace some of the engines that
  • 00:24:00
    moved with those aircraft in from the
  • 00:24:02
    balance sheet of FTI into the to acquire
  • 00:24:04
    in the secondary market which we've
  • 00:24:06
    largely done this year. And then the
  • 00:24:08
    third part was, you know, really on um
  • 00:24:11
    building up the parts inventory and
  • 00:24:13
    anticipation of a ramp. But all all told
  • 00:24:16
    we're, you know, we're saying 650
  • 00:24:18
    million of free cash flow this year and
  • 00:24:20
    as I ramps up, you know, that should
  • 00:24:23
    that should only increase. Okay. And on
  • 00:24:27
    the SEI, can you talk about the
  • 00:24:28
    economics? I think you guys are
  • 00:24:29
    committed to 20% of the equity. Is that
  • 00:24:31
    right? That's correct. So we um we're
  • 00:24:34
    estimating if a $4 billion is invested
  • 00:24:37
    this year roughly 70% of that will be
  • 00:24:39
    debt financing which has been committed
  • 00:24:42
    and is being provided by Apollo and
  • 00:24:44
    Deutsche Bank. The balance would be
  • 00:24:47
    equity of 1.2 billion then our 20% would
  • 00:24:50
    be 240 million of that of which the
  • 00:24:53
    first half of this year will be roughly
  • 00:24:54
    100 the second half 140. Uh so that's
  • 00:24:58
    our you know that's the structure. We're
  • 00:25:00
    a limited partner investor for 20%. Then
  • 00:25:03
    we're also the general partner where we
  • 00:25:06
    receive um a fee for managing the
  • 00:25:08
    partnership uh on total assets and also
  • 00:25:12
    all of that FTI aviation engine exchange
  • 00:25:15
    business from the partnership is
  • 00:25:17
    committed to go to FTI aviation which is
  • 00:25:20
    that's the 250 or that's the uh 100
  • 00:25:24
    engines a year we estimate that will be
  • 00:25:27
    done through engine exchanges once the
  • 00:25:29
    partnership is fully ramped up. So
  • 00:25:31
    there's there's a tremendous amount of
  • 00:25:32
    benefits for all parties. It's both FTI
  • 00:25:35
    aviation benefits for those three
  • 00:25:37
    reasons. The you know the fees, the
  • 00:25:40
    equity investment plus the engine
  • 00:25:42
    exchanges and the partnership benefits
  • 00:25:45
    because the economics of those engine
  • 00:25:47
    exchanges are fixed and optimized so
  • 00:25:50
    that the the objective for the
  • 00:25:52
    partnership is to generate higher
  • 00:25:54
    returns with lower risk. So, we think
  • 00:25:56
    it's a, you know, it's a win-win on
  • 00:25:58
    every side and it's something that, you
  • 00:25:59
    know, we we intend to continue to to uh
  • 00:26:03
    uh to advocate for growing that over the
  • 00:26:05
    next coming years. A traditional Wesor
  • 00:26:07
    would be pushing out the maintenance
  • 00:26:09
    onto the airline. Is that right? Yeah.
  • 00:26:11
    The the typical structure of a if you
  • 00:26:13
    have a 5-year lease with an airline and
  • 00:26:16
    an engine is due for a shop visit, um
  • 00:26:18
    the lease would require maintenance
  • 00:26:20
    reserves to be paid to the lesser. Then
  • 00:26:23
    the airline does the engine shop visit
  • 00:26:26
    however they might decide whether it's a
  • 00:26:29
    third-party MRO and then they would
  • 00:26:30
    withdraw those maintenance reserves to
  • 00:26:32
    pay for that shop visit. So what we do
  • 00:26:35
    is we've ended up doing exchanges so
  • 00:26:37
    that the the outflow from that engine
  • 00:26:41
    exchange is less than it would be if you
  • 00:26:43
    were doing it the traditional way. And
  • 00:26:45
    secondarily, the residual value would be
  • 00:26:47
    less because that engine is targeted to
  • 00:26:50
    uh to have the number of hours and
  • 00:26:52
    cycles needed to complete the lease. So
  • 00:26:55
    you reduce the investment, you increase
  • 00:26:56
    the cash flow, which reduces the risk
  • 00:26:58
    and increases the
  • 00:27:00
    returns. Okay. On the the 45 or 46
  • 00:27:04
    aircraft that you've committed to the
  • 00:27:06
    SCI, know you've delivered a few
  • 00:27:08
    already. Uh, but I think you're guiding
  • 00:27:10
    to about 500 million of leasing IBITA
  • 00:27:12
    this year, which is similar to what you
  • 00:27:14
    did last year. Is that going to be made
  • 00:27:16
    up by those 300 million of incremental
  • 00:27:19
    purchases? Yeah, it's uh it's several
  • 00:27:21
    parts of it. We think it'll exceed the
  • 00:27:24
    original IBIDA from gain on sale of
  • 00:27:27
    those 46 aircraft. the 20% ownership of
  • 00:27:31
    IBIDA that we pick up um from the
  • 00:27:35
    partnership from the partnership the SEI
  • 00:27:37
    partnership that flows into the leasing
  • 00:27:39
    business and then the uh IBITA from the
  • 00:27:42
    $300 million replacement capex those
  • 00:27:44
    three and and the management fee the
  • 00:27:47
    combination of those items would exceed
  • 00:27:49
    the EBIT from from the prior year. Okay.
  • 00:27:54
    Okay. And then on the aerospace products
  • 00:27:57
    side, 600 to 650 million is the guidance
  • 00:28:00
    this year for Ibata. Is that right?
  • 00:28:01
    Correct. And again, what's the targeted
  • 00:28:04
    mix coming from the SCI deal? So 20%
  • 00:28:08
    roughly for the year.
  • 00:28:12
    Okay. Pretty interesting outside. Yeah.
  • 00:28:15
    Background noise. Um on the 1.4 4 uh
  • 00:28:19
    billion of IBIDA target for next year.
  • 00:28:22
    Have you guys provided any indication of
  • 00:28:23
    where you'd like to see leasing versus
  • 00:28:25
    the aerospace products business? Yes,
  • 00:28:28
    it's
  • 00:28:29
    550 of uh leasing IBIT and the balance
  • 00:28:33
    was aerospace products. Okay. I guess
  • 00:28:37
    longer term another concern investors
  • 00:28:39
    have though is like this is a great
  • 00:28:41
    business. It's clearly working. They can
  • 00:28:43
    understand that this is economies of
  • 00:28:44
    scale for a small airline. it's why
  • 00:28:46
    you're getting the demand you are. But
  • 00:28:48
    ultimately, this is a platform that's
  • 00:28:50
    out of production. So, how do you put,
  • 00:28:53
    you know, a long-term value on the
  • 00:28:55
    business? Uh, two things is first of
  • 00:28:57
    all, I think that the the platform for
  • 00:29:00
    the 7 CFM56 and the B2500 is basically
  • 00:29:04
    from what way we looked at is we're
  • 00:29:06
    going to have locked in growth for 10
  • 00:29:08
    years. So, that's where you that's a
  • 00:29:10
    starting point. And then uh secondly our
  • 00:29:13
    expectation is starting in
  • 00:29:15
    2028-29 we will begin investing in the
  • 00:29:18
    next generation um engines which would
  • 00:29:20
    be the leap and the GTF. So at that
  • 00:29:23
    point you'll have um enough engines
  • 00:29:26
    coming off OEM power by the hour
  • 00:29:28
    programs. You'll have a stable platform
  • 00:29:32
    and most likely there'll be some
  • 00:29:34
    announcement of another engine coming
  • 00:29:36
    which has a tendency to depress you know
  • 00:29:38
    secondary market prices. So you can buy,
  • 00:29:41
    you know, at better prices. So our
  • 00:29:43
    expectation is that starting towards the
  • 00:29:45
    end of this decade, we will begin moving
  • 00:29:47
    into the next engines. Okay. On the PMA
  • 00:29:51
    side, I know you've had this JV with
  • 00:29:53
    Chrome Oy now, I think since 2018. Yep.
  • 00:29:56
    I think you have two parts approved and
  • 00:29:58
    for sale on the market. Is that right?
  • 00:30:00
    Yes. I guess I've been covering you guys
  • 00:30:02
    a long time. We've always been waiting
  • 00:30:04
    on the third and fourth and fifth part.
  • 00:30:06
    Any update on timelines there? Yeah,
  • 00:30:09
    what I've said is excellent progress
  • 00:30:10
    being made. Um, you know, we're nearing
  • 00:30:13
    the home stretch and it is, um, you
  • 00:30:16
    know, uh, very close for the next part
  • 00:30:18
    to be approved, which which is the most
  • 00:30:20
    significant, um, part. The 80% of the
  • 00:30:25
    savings will come from the first three
  • 00:30:26
    parts in the in the program.
  • 00:30:29
    Okay. And maybe on the used serviceable
  • 00:30:31
    material side, how does that work?
  • 00:30:32
    Because you have a partnership with AR,
  • 00:30:34
    is that correct? Yes. So we decided
  • 00:30:37
    years ago that the as part of our you
  • 00:30:40
    know acquiring engines and harvesting
  • 00:30:42
    when we split them into modules a fan
  • 00:30:44
    accord sometimes it's better a strategy
  • 00:30:48
    to part out one of the modules we did
  • 00:30:50
    not want to build our own parts
  • 00:30:52
    distribution business so what we did is
  • 00:30:54
    we went to AR and said when we have a
  • 00:30:56
    tear engine tearown or module tearown uh
  • 00:31:00
    for the parts that we don't recall for
  • 00:31:02
    our own engine build we will sell them
  • 00:31:04
    through your network for a fee and AR
  • 00:31:08
    manages the repair uh process on those
  • 00:31:11
    parts and then gets paid a distribution
  • 00:31:13
    fee when they sell those parts. So these
  • 00:31:15
    are parts that we're not looking to be
  • 00:31:17
    using in our own engines and uh allows
  • 00:31:20
    us to be able to optimize again the the
  • 00:31:24
    the waste nothing aspect of our business
  • 00:31:27
    which is to harvest you know the value
  • 00:31:28
    from each part of those every part of
  • 00:31:30
    that engine in the most efficient way.
  • 00:31:33
    Okay. And I want to come back to a
  • 00:31:35
    concern just around the idea that once
  • 00:31:37
    well for Athon can ever figure out the
  • 00:31:39
    GTF fix and get those airplanes in the
  • 00:31:41
    air uh and Boeing is obviously ramping
  • 00:31:44
    up production at some point we'll get uh
  • 00:31:46
    better utilization of the newer narrow
  • 00:31:48
    body technology. Doesn't that just
  • 00:31:50
    depress MRO activity and engine
  • 00:31:52
    overhauls in aggregate in the sector
  • 00:31:55
    that you're in? Well, the the most
  • 00:31:57
    recent uh estimates uh from SRM were
  • 00:32:00
    that the total $22 billion a year spend
  • 00:32:03
    for maintenance on the V and the CFM was
  • 00:32:06
    just extended out to 2030 to be at
  • 00:32:10
    roughly a 22 billion a year. So no
  • 00:32:13
    decline in that number for the next five
  • 00:32:16
    years and then it starts will start to
  • 00:32:19
    uh taper off. So very stable, you know,
  • 00:32:22
    spend. You've had a huge uh shortfall in
  • 00:32:25
    both deliveries and availability of of
  • 00:32:28
    everything in the narrow body market for
  • 00:32:30
    the last three to four years. So there's
  • 00:32:31
    a big hole that has to be filled before
  • 00:32:34
    you're going to have anything excess of
  • 00:32:35
    what the world of what airlines need. So
  • 00:32:39
    so the combination of those two is is
  • 00:32:41
    creating a very very strong environment
  • 00:32:43
    over the next five years. And then the
  • 00:32:45
    question always is, well, what is the
  • 00:32:47
    rate of decline on a CFM56 and V2500
  • 00:32:51
    after that? And my experience with other
  • 00:32:53
    engines in previous generation equipment
  • 00:32:56
    has been it's it lasts a lot longer than
  • 00:32:59
    people realize. There's there's 757s
  • 00:33:01
    that are almost 40 years old that are
  • 00:33:03
    still being utilized and
  • 00:33:05
    767s and you know even
  • 00:33:08
    CFM563C1s are still flying. So there's a
  • 00:33:11
    long life to these assets because
  • 00:33:13
    second, third tier operators, cargo
  • 00:33:16
    carriers, they care a lot about capital
  • 00:33:18
    cost and to buy a new um 737 Max or A320
  • 00:33:24
    Neo in 2030 could be 60 to 70 million.
  • 00:33:30
    So if you look at that and you say,
  • 00:33:31
    "Well, I could buy a 737 NG for 12
  • 00:33:34
    million or 14 million." There's going to
  • 00:33:37
    be a lot of people that are going to do
  • 00:33:38
    that. Um, I'm not saying that this is
  • 00:33:40
    going to be anything, you know, that's
  • 00:33:43
    outside the norm. I'm just saying I
  • 00:33:45
    think there's more upside for these
  • 00:33:48
    assets flying longer than people
  • 00:33:50
    realize. Well, in discussing discussing
  • 00:33:53
    your margin profile and why you can
  • 00:33:55
    generate better margins than your
  • 00:33:56
    competitors, you did talk about, you
  • 00:33:58
    know, owning the MRO capacity, but
  • 00:34:00
    that's not necessarily the case on the
  • 00:34:01
    V2500 program that you guys have. So,
  • 00:34:04
    can you talk to the size of that fleet
  • 00:34:06
    and the arrangement that you have with
  • 00:34:07
    Pratt? Yes. So, we expect uh we signed
  • 00:34:11
    up for 100 shop visits with Pratt. We
  • 00:34:14
    still can do our own engines outside of
  • 00:34:17
    that Pratt agreement. So, uh to the
  • 00:34:20
    extent we want to do builds with using
  • 00:34:22
    other used serviceable material or uh
  • 00:34:24
    advanced repairs, we can still do that.
  • 00:34:27
    We're focused on between 25 and 30
  • 00:34:29
    engines this year for the V. Um and it's
  • 00:34:34
    a very good relationship. It's not, you
  • 00:34:36
    know, when that agreement ends in terms
  • 00:34:38
    of the rebuild, we'll then have to have
  • 00:34:40
    another conversation like, do we do it?
  • 00:34:42
    Which way do we go? Which is the
  • 00:34:44
    conversation we've had always, you know,
  • 00:34:46
    we have a choice. We can either, you
  • 00:34:47
    know, we can go one way or another. And
  • 00:34:49
    then it's up to, you know, sort of the,
  • 00:34:52
    you know, the math for both parties to
  • 00:34:53
    figure out what's the optimal what's the
  • 00:34:56
    optimal answer to that. But the key is
  • 00:34:58
    always to have
  • 00:34:59
    options. Okay. I think we're coming
  • 00:35:01
    towards the close here, but can you give
  • 00:35:03
    us just your expectations on how fast
  • 00:35:06
    the SEI closes on that 4 billion target?
  • 00:35:09
    We think we'll be fully invested by the
  • 00:35:12
    end of the year on the 4 billion. And is
  • 00:35:16
    there any concern that you know in the
  • 00:35:18
    marketplace everyone knows that now
  • 00:35:20
    you're looking for 737 NGS or A320s
  • 00:35:23
    CEOs? Does that impact the pricing or
  • 00:35:26
    the availability of those assets? No. I
  • 00:35:29
    think that um we've seen a very uh it's
  • 00:35:32
    a big big market. So if you think about
  • 00:35:35
    there's roughly 14,000
  • 00:35:37
    um aircraft in
  • 00:35:39
    operation 20 50% of those are owned by
  • 00:35:42
    less. If you just take the turnover,
  • 00:35:45
    typical a 20% turnover from just less
  • 00:35:48
    source selling, you're talking about a
  • 00:35:50
    25 to 30 billion dollar year um
  • 00:35:53
    investment opportunity. And then on top
  • 00:35:55
    of that, you have airlines who are
  • 00:35:58
    looking at keep they they decided, you
  • 00:36:00
    know, recently in the last few years
  • 00:36:02
    that they're going to keep those 737 NGS
  • 00:36:05
    and CO flying longer and they didn't
  • 00:36:08
    necessarily, you know, do the engine
  • 00:36:10
    maintenance to allow that to happen. So
  • 00:36:11
    there's a lot of aircraft that are
  • 00:36:13
    coming up where engine maintenance
  • 00:36:14
    events are needed. And so as part of the
  • 00:36:17
    sale eastback that we deliver, we can
  • 00:36:19
    deliver replacement engines and it
  • 00:36:22
    solves a huge problem for an airline.
  • 00:36:24
    And no one else can can provide that um
  • 00:36:28
    function in the market. So
  • 00:36:31
    someone FTA,
  • 00:36:34
    it's looking good, Joe. I don't know
  • 00:36:35
    what's going on out
  • 00:36:36
    there, but that is an advantage when
  • 00:36:39
    you're in the sale lease back market.
  • 00:36:41
    competing with other LSRs, right?
  • 00:36:43
    Correct. Because if you're a typical SOR
  • 00:36:46
    does not own a maintenance facility. So
  • 00:36:49
    if there's a portfolio of aircraft that
  • 00:36:52
    are presented and you have say for
  • 00:36:54
    example 10 engine shop visits you need
  • 00:36:56
    to do in the next two years, that is a
  • 00:36:59
    very scary proposition if you don't
  • 00:37:00
    control a maintenance facility because
  • 00:37:03
    you have to find somebody to do that.
  • 00:37:05
    It's a very tight market. Turnaround
  • 00:37:07
    times are increasing. Arts prices are
  • 00:37:09
    increasing. there's a lot of risk for
  • 00:37:12
    that if you're purely a financial
  • 00:37:14
    provider and so you know we have much
  • 00:37:17
    much less competition for those types of
  • 00:37:19
    deals where you're basically providing
  • 00:37:22
    engine availability as part of the
  • 00:37:24
    solution. Maybe uh last question because
  • 00:37:26
    I think we're about out of time but Joe
  • 00:37:28
    can you just talk about the capital
  • 00:37:31
    required to sustain this business
  • 00:37:32
    looking forward especially when you get
  • 00:37:34
    beyond seating the SCI. Yeah. So, um, if
  • 00:37:37
    you go back originally what we said to
  • 00:37:39
    run our business the way we want to run
  • 00:37:42
    it, we felt like we needed to own in the
  • 00:37:44
    system about 450 to 500 CFM56 engines
  • 00:37:49
    and then 150 to 200 V2500 engines. We
  • 00:37:54
    are basically at those levels now. So,
  • 00:37:57
    we feel we can deliver the engine
  • 00:38:00
    certainty that customers need to be sure
  • 00:38:02
    that we can always provide that engine
  • 00:38:04
    to them. And that's part of you know
  • 00:38:06
    what the commitment is. We commit to do
  • 00:38:08
    the engine exchanges and always have an
  • 00:38:09
    engine availability and the airliner the
  • 00:38:12
    lessor commits to doing engine exchanges
  • 00:38:14
    with us. So we feel that that we've
  • 00:38:17
    achieved that level. So when you look at
  • 00:38:18
    the cash flows going forward we will run
  • 00:38:21
    our business with 450 to 500 CFMs and
  • 00:38:24
    and 150 to 200 V2500s and everything
  • 00:38:27
    else should be free cash flow.
  • 00:38:31
    Well Joe, thank you very much. I know
  • 00:38:32
    it's been volatile for your stock, but
  • 00:38:34
    it's been a good run the last few years
  • 00:38:35
    and I think a lot more to come. Thanks
  • 00:38:37
    for the support. Thank you.
标签
  • FTI Aviation
  • engine maintenance
  • CFM56
  • V2500
  • leasing
  • strategic capital initiative
  • PMA parts
  • aviation market
  • MRO
  • business model