FTAI Aviation

This is a new podcast we're launching which is a more relaxed format discussing what we've learned from our internal primary research over the last week.

Please add our feed to your podcast player to keep up to date with future podcasts.

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Engine repair is my favorite topic. It seems to be your favorite topic of late. We're going to be talking about FTAI today. How did you come across this business?

Well, I came across it about 18 months too late, which is kind of typical for me lately. The stock has increased about 5X times over the last 18 months. I've been following GE and Safran for years, specifically the CFM56 engine, which I believe accounts for nearly 40% of all commercial engines globally. It's the largest engine program by about two to three times, I think. Understanding the engines and how the OEMs behave is crucial, especially for companies like HEICO, which make PMA parts or replicate and compete with some of the engine parts.

I've always been aware of and followed GE and Safran, as well as various engine MRO shops like MTU. I had briefly heard of Fortress Infrastructure, the previous name of the company, because it was working with Chromalloy to develop an HPT blade, PMA, a critical part in the hot section of the CFM56. I came across it after they changed the name and really started to ramp up the MRO business.

FTAI previously owned a bunch of infrastructure assets that they spun out. Historically, it has been an aircraft lease and engine leasing business. The current shape of the business was formed during Covid when no one was flying, and the aftermarket RPMs declined massively. With the capital they had via Fortress, FTAI, the old Fortress Infrastructure entity backed by Fortress, spun out of Fortress. They had capital not only from Fortress but also from the assets they sold. They ended up buying a lot of CFM56s fairly cheaply, especially when aircraft were retiring or being grounded, and airlines and fleet owners needed cash.

FTAI entered the engine MRO market for the largest engine program, the CFM56. They bought a Lockheed facility with capabilities to do core engine repair and test engines. They have become the largest owner of CFM56s and one of the largest MRO shops for CFM56s. I initially came across the business from the PMA angle and then became more interested in their engine MRO activities.