Partner Interview
Published October 28, 2025
FTAI Aviation: Vertical Integration Gains & PMA
inpractise.com/articles/ftai-aviation-vertical-integration-gains-oem-contract-locks-and-pma-trade-offs-limit-upside
Executive Bio
Former Director at Korry Electronics
Summary
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Interview Transcript
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.
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The last question on this topic ties into everything you just mentioned. Our research indicates that a significant part of the market is off-limits to them for several reasons. Some of it relates to the OEMs and the MRO relationship, while other reasons involve certain parties, like lessors, not wanting to trust module swaps or PMA due to concerns about residual value. Do you see that changing? I want to highlight that this year, FTAI has signed contracts with Finnair and some other airlines, suggesting the market is moving more in their direction. I'm curious about your thoughts.
Regarding market trends, there are a few key aspects to understand about the market structure. Firstly, on the OEM side, you have companies like CFM or Safran, particularly with the CFM56 and LEAP engines. At the start of an engine's life, many, especially LEAP engines, have service contracts for the first 10 years. This creates a significant lock on the market, with about 70% of engines sold under these contracts. After the 10-year period, these engines enter the open market. GE and Safran attempt to maintain some control over the market, but their primary revenue comes from spare parts, not MRO services. They don't discourage MRO shops from expanding, as long as they can sell spare parts to them. FTAI holds a unique position by managing supply chains and USM. However, they face significant competition from CFM Material, which controls 50% to 60% of the USM market. CFM Material is both a competitor and a supplier to Fortress, as they provide supplies but have less control, especially when PMAs are involved. PMAs are a specific aspect of the market, but before delving into PMAs, it's important to discuss the customer side. On the customer side, there are different approaches to shop visits. Lessors often partner with MRO shops to control costs, avoiding direct CFM shop visits once engines surpass 10 years. They seek cheaper alternatives. However, SES, owned by GE and Safran, holds a significant market share on the lessor side, conducting shop visits at CFM. Airlines have varying strategies. Some, like Air France, KLM, Delta, and Southwest, manage their own shops internally. Mainstream airlines' strategies depend on individual preferences. Some stick with standard CFM options without aggressively optimizing costs, while others pursue lower costs, sometimes using PMA DAR parts. Using PMA parts in an engine leads to three consequences: one, CFM MROs refuse to conduct shop visits; two, the engine's resale value diminishes, making it difficult to sell, especially at the end of its life when non-PMA parts are contaminated; and three, warranties are lost. Thus, choosing PMA parts often means committing to keeping the engine until its end of life. This strategy isn't for everyone and is niche, as USM parts are usually not significantly more expensive than PMA parts.
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