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FTAI, Chromalloy & the CFM56 HPT Blade PMA

When CFM came to know about these kinds of things, they banned Fortress from a lot of things. They don't even let us participate in any of the forums because they think we might influence their operators if we join the forums, which they don't want. So they don't invite us to any of the forums, even though we are an eligible lessor. CFM is very nervous about this because they know their HPT blades are overpriced, but they don't want to accept it. - Former Director, FTAI Aviation

You know you’ve struck a nerve when you’re banned from General Electric’s industry conferences. FTAI Aviation, the lessor-turned-MRO-provider, is one of the world’s largest owners of CFM56 engines yet it cannot attend conferences of its engine manufacturer. This is because FTAI is creating a PMA for CFMs cash cow: the high-pressure turbine (HPT) blade. Over the last 4 years, this PMA has been a core attraction for FTAI bulls. 

HPT blades are critical components in the core hot section of the engine. The blades convert energy of the hot gasses into mechanical energy to drive the compressor and produce thrust. 

CFM56-5B HPT Blade, CFM International
CFM56-5B HPT Blade, CFM International

HPT blades are GEs cash cow: at 80%+ gross margin, 80 blades per engine and a catalog part price of ~$25,000 per unit, airlines spend ~$2m per heavy shop visit to replace all blades. This amounts to ~30% of a total $7m engine overhaul cost. 

This research piece collates our recent work on FTAI and Chromalloy’s engine PMA and its potential addressable market. More interestingly, we explore how the FTAI long thesis has evolved over the years as the long-awaited PMA has yet to be approved.

Next week we will discuss FTAIs module swap offering, where it’s differentiated, and the potential total addressable market. While we believe FTAI has some unique advantages, just like the HPT PMA blade, there may also be potential misconceptions about its module addressable market. 

Ferrari: Pre-Owned Market & Hybrid Model Demand

In this interview, a Sales Manager at a Ferrari dealership sheds light on the different factors affecting prices and demand in the pre-owned market and luxury EV market.

All these vehicles were launched around Covid. People had savings, and these vehicles were selling above MSRP. For example, the SF90 in 2021. We were selling the SF90 Stradale about $200,000 above sticker. The client could use the car for one year, bring it back, and we would pay sticker and then sell it back easily for $200,000 over it. When the public found out about this, they started placing orders. Some people had the money to buy the car but not to keep it. There was a lot of speculation. Once the market changed and these cars started having many electrical issues, people started putting them up for sale. The market was flooded with SF90 Stradales. Then it followed with the SF90 Spider. Now the market is flooded with these vehicles from people who took delivery but were trying to make money on the car.- Sales Manager at Ferrari Dealership

Howden Joinery: France Market Growth Challenge

In this interview, a former Managing Director at Howden Joinery Group sheds light on the differences between the UK and French markets and growth challenges across France.

People, and people in general, in the store. It was a difficulty. Why? Because the business model is very, very different from the French model. All the French models in general, in retail, are based on incentives. Your fixed salary is a little bit low in the market, but you have the opportunity to earn a lot of money if you achieve your sales or margin targets. So this was completely different. - a former Managing Director at Howden Joinery Group

Computer Modelling Group: Customer Retention & Pricing Strategy

In this interview, the former CEO of Computer Modelling Group explains how the company's pricing and product differs from Schlumberger and the impact on customer retention.

"The Schlumberger manager would have phrased it as having a high nineties retention rate, around 96%, 97%, or 98%. One of the things that started just as I transitioned into note, and I actually learned it from the Constellation guys, was tracking every renewal in detail. We tracked what was incremental, what was a change of product, if there were concessions, price gains, product additions, and so on. - Former CEO of Computer Modelling Group

Builders FirstSource & US Building Materials Market: Supply Chain, Market Consolidation and Specialty Products

In this interview, a former Executive VP of Strategic Accounts at Builders FirstSource explains how the company consolidated the US building materials market and the transformational changes the group is undergoing in terms of offering value-added products and services.

The difference is that there were really two transformational changes that occurred. The first was the move to value-added products and services. I was reading through one of the old investor decks from several years ago, and I looked at a pie chart from around 2005, when we had just gone public. Back then, the company was about 52% lumber and lumber sheet goods and 48% value-added and specialty products. Now, in 2024, it's 25% lumber and lumber sheet goods and 75% value-added and specialty products.Why is that important? Because you're taking the commodity risk and dropping it from 50% down to 25% of the company's revenue, completely changing the landscape. Now, you not only have significantly higher margins, but those margins are more predictable and sticky. The real change came with the move to components. - Former Executive VP of Strategic Accounts at Builders FirstSource

Smartsheet, Atlassian, Microsoft Project & Comparing Work Management Tools: A Client's Perspective

In this interview, an SVP of Strategic Initiatives at Marsh McLennan shares his views on the different work management tools used within his organization, highlighting the advantages and challenges each one presents.

"I think part of it is due to negotiation and pricing. When you buy in bulk and add more products, the licensing costs can be more favorable. Another element is the trend to get everything more natively integrated. While everything can be integrated with everything, having tools like Power BI, ADO, a Microsoft-based CRM, and Office tools all from Microsoft offers more natural integration. So, I suspect the decision was driven by both cost and integration benefits. - SVP of Strategic Initiatives at Marsh McLennan

Palo Alto, Zscaler & SASE Market: Pricing Dynamics and Competition

In this interview, a former Regional Sales Manager at Palo Alto Networks sheds light on the pricing dynamics and competitive landscape in the SASE market.

The same way Tesla has always been an electric car, we've always been a cloud vendor. The difficult thing for companies like Palo Alto Networks is that they have hardware-based security technology and are trying to move that into the cloud. It's like having a combustion engine and trying to make it electric slowly. It's really difficult to do; you'd rather be cloud-native. Their solution is ultimately VPN technology, which is enforced on a firewall, and that might be on-premise or in GCP, where they host their infrastructure. When I'm in engagements with customers and we're against Palo Alto Networks, we always highlight that this is traditional VPN architecture, not SASE, and that's a big way they fall short. The business impact of that is you never really improve user experience from what it has been historically because it's the same old way. - Former Regional Sales Manager at Palo Alto Network

Macfarlane Group: Key Supplier Risk, Customer Segmentation, & Sales Strategy

In this interview, a former Regional Manager at Macfarlane Group sheds light on some of the asymmetrical relationships with the company's key suppliers. 

"The way they feel things are going is that the relationship is breaking down for two reasons. It appears there's a lot of taking, but not much giving back. If an opportunity arises to use another supplier in that field, whether that be Pregis, for example, or some of the more environmental alternatives coming up, Macfarlane will jump at the opportunity to save a few pence off a product. The relationship that has been built between the two is then forgotten. However, if Sealed Air is approached by another distributor, they tend to stay loyal to Macfarlane, saying, "Sorry, we already work with Macfarlane, we can't work with you on this opportunity." They feel that this is very one-way traffic. This sentiment is echoed by many, whether they are consumable manufacturers or corrugate manufacturers. The relationship seems very one-sided from a contractual point of view. - Former Regional Manager at Macfarlane Group