FTAI Aviation: Module Swaps vs CFM’s Locked Ecosystem

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It sounds logical, and it's striking that it's novel, and they seem to be making more money than others doing it. Maybe it's an open-ended question, but could you explain what, if anything, FTAI is doing that's innovative in this business? Why do they seem to be having so much success, or maybe you don't think they're successful, and you can tell me about that too? Help me get my bearings here because you don't often see someone saying something so logical and simple, and frankly, obvious, that they can suddenly build a big business in a way that no one else has thought of that often. So, help me with my bearings.

Personally, the Fortress company you mentioned is chasing about 2% of the business. They're not very big, in my opinion, relative to the number of CFM engines out there. They're also trying to do this with V2500 engines, which is the Rolls/Pratt & Whitney combination. In general, they're targeting numbers of 300 to 400 engines. There are 28,000 CFMI engines in the world, and they're trying to accommodate a small percentage of that by working with airlines to utilize their services. The CFM business model is completely different, and they've developed what they call an ecosystem to keep companies like FTAI out of the business. What they've done now is create an ecosystem with service shops worldwide, licensed by CFMI, to work on engines and replace with CFM parts. This competitive structure of service shops is essentially eliminating many who were trying to enter the market with PMA parts, which are substitute parts requiring FAA approval. Entering the market via PMA parts is challenging because you need to generate these parts. This is why the module swap becomes attractive to them. However, there are only a limited number of engines not already under service contracts with CFMI. CFMI has been successful in keeping other companies out by establishing shops and agreements with facilities globally, like Lufthansa, Delta, StandardAero, and places in Asia. They've licensed these shops to perform repair work on CFM engines, encouraging airlines to sign service contracts and use this architecture for competitive engine repairs. Airlines that don't have service contracts with CFMI often turn to companies like Fortress, but there aren't many of them.

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