FTAI Aviation Q1 2026 Earnings Call Summary

Key Financial Results
- Q1 Adjusted EBITDA: $325.6 million (+17% vs Q4 2025, +17% vs Q1 2025)
– Aerospace Products: $222.6 million (30% margin)
– Aviation Leasing: $153 million
– Corporate & Other: -$50 million (including Power start-up expenses)
- Adjusted Free Cash Flow: $158 million reported ($333 million excluding strategic growth investments)
- Leverage: 2.3x (below 2.5x-3x target range; down from 5x in 2022, 4x in 2023-2024)

2026 Guidance Reaffirmed
- Total Business Segment EBITDA: $1.625 billion
– Aerospace Products: $1.05 billion
– Aviation Leasing: $575 million
- Adjusted Free Cash Flow: ~$915 million
- Dividend Increase: $0.40 → $0.45 per share per quarter (3rd consecutive increase; 44th dividend as public company, 59th consecutive overall)

Aerospace Products – Strong Execution

Q1 Production & Revenue:
- 270 CFM56 modules refurbished (96% vs Q1 2025)
- Revenue: +104% YoY, +32% QoQ
- EBITDA: $222.6 million (70% YoY, +14% vs Q4 2025)
- 2026 Production Target: 1,050 modules

Market Share & Strategy:
- Market share climbed from 10% to 12%
- Top priority: Accelerate market share growth (5-year inflection point reached)
- Focusing on larger, programmatic partnerships with top-tier airlines
- “Virtually every airline in the world is an actual or potential customer”
- Even airlines with in-house MRO capabilities now adopting FTAI solutions

Value Proposition:
- Match or beat airline’s internal rebuild costs
- Eliminate spare engine needs, engineering departments, cost overrun risks
- Faster, lower-cost engine exchanges critical when airline liquidity is tight
- Increasingly “sticky” relationships expanding from exchanges → leasing → aircraft leasing

Capacity Expansion:
- Rome and Lisbon facilities still ramping up
- No major maintenance facilities east of Rome, Italy currently
- Expect different footprint by Q1 2027 call (expansion plans underway)
- M&A pipeline active for adding capacity east of Rome

Strategic Capital (SCI) – Deployment & Growth

2025 SPV Update:
- 165 aircraft closed as of Q1 end
- Deployment largely complete; transitioning from investment to harvest mode
- Quarterly distributions to LPs beginning Q2 2026
- Warehouse debt facility upsized by $1B to $3.5 billion across 10 lenders
- Closed-end fund structure (non-redeemable)

Active Management Focus:
- Maximizing cash flows through maintenance event management (airframe & engines)
- Lease extensions strong: Airlines want to fly current-gen aircraft longer without engine shop visit worries
- “All-in-one solution” of leasing + engine maintenance driving extensions

2026 SPV Launch:
- First close targeted end of Q2 2026
- Aircraft acquisitions start Q3 2026
- 12-15 month deployment period
- Size and strategy consistent with 2025 SPV
- Team expanded to 40+ dedicated individuals (Dublin, Dubai, Cardiff, New York)

Q1 Leasing EBITDA Breakdown:
- $45 million insurance recoveries
- $12 million gains on sale
- $25 million from 2025 SPV management fees + co-investment returns
- $71 million from balance sheet leasing assets

Insurance Recovery Total:
- Q1: $45M; remainder 2026: $5M (total $50M for 2026)
- Cumulative since 2022 war: $115 million recovered vs $88 million written off

Asset Sales:
- 9 of 14 planned aircraft sold to 2025 SPV in Q1
- $127.5M proceeds, 9% gain ($12.1M)
- Divested several noncore assets (airframes, RB211 engine)

Strategic Shift:
- Moving from balance sheet aircraft leasing to capital-light, fee-driven asset management model
- Mix increasingly shifting toward strategic capital-driven earnings

FTAI Power – Major Milestones

Commercial Launch: Q4 2026 (on track; prototype testing ahead of schedule)

Prototype Testing Progress:
- Completed all major mechanical testing milestones
- Redesigned Mod-1 fan stage tested at synchronous speed
- Results exceeding expectations
- Final testing expected to wrap Q3 2026
- Hosting customers on-site to observe prototype (important sales tool)

Jereh Group Joint Venture (signed this week):
- Foundational partnership for packaging and customer conversions
- Jereh handles everything except turbine: trailer, generator, gearbox, controls
- Manufacturing footprint: US, Canada, UAE, China (provides scale and global reach)
- Jereh experience: Packages turbines for GE Vernova, Baker Hughes, Siemens
- Unit economics unchanged; less working capital investment required from FTAI
- Some revenue through JV equity earnings vs direct revenue

Customer Traction:
- “Expect to be mostly sold out of 2027 target production in the near term”
- Meaningful portion of 2028 production already spoken for
- Deep, active negotiations with leaders across energy and digital infrastructure
- Customer types: (1) Hyperscalers, (2) Data center operators, (3) Gas distributors, (4) Financial sponsors

Commercial Structures:
- Every deal anchored by Long-Term Service Agreement (LTSA) on turbine
- Flexible models: Outright purchase, lease, or power purchase agreement
- Strong interest in lease structures (fits naturally with strategic capital)
- Conversations framed around multiyear, multi-block deployment plans (visibility beyond 2027)
- Typically 10+ year contracts

Value Proposition (resonating strongly):
1. Speed to power: Mobile, installed in <2 weeks (vs 18 months for EPC/construction)
2. Scale: Unmatched capacity between FTAI turbines + Jereh packaging
3. Reliability: CFM56 = most durable engine ever produced
4. Maintenance model: Turbine swap in 2 days vs 6 months offline
– Lower levelized cost of energy (LCOE) for customers
– Industry-first capability for power sector
– Based on usage, turbines replaced every 3-6 years via exchange program
– Recurring revenue stream similar to aerospace business

Economics & Margins:
- Margins expected in line with historical aerospace margins (~30%)
- LTSA creates recurring revenue (huge competitive advantage)
- No impact from aerospace market share growth strategy on Power margins

2027 Production Target: 100 units
- Q1 working capital build: $19M inventory investment to support target

Liquidity & Capital Structure

Revolver Upsize (April):
- $400 million → $2.025 billion
- Maturity extended through 2031
- Improved pricing terms
- 15 lenders (several overlap with 2025 SPV debt facility)
- Significantly oversubscribed

Q1 Strategic Growth Investments (excluded from adjusted FCF):
- $75M prepayments on multiyear CFM56 parts agreement with OEM
- $81M induction prepayments for V2500 engines (strong FPR demand)
- $19M FTAI Power inventory for 2027 production
- Total: $175M

Capital Allocation Priorities:
1. Balance sheet strength and flexibility
2. ROIC-accretive investments in airline
3. Return cash to investors
4. M&A, minority investments in 2026 SPV, FTAI Power development

Middle East Crisis & Geopolitical Impact

Limited Direct Exposure:
- <3% of global current-gen narrow-body fleet based in Middle East
- Very little customer exposure in region
- No meaningful change in shop visit demand to date

Aerospace Products Impact:
- Elevated fuel prices negatively impact airline financials
- FTAI value proposition becomes MORE critical when airline liquidity is tight
- Faster, lower-cost engine exchange more attractive vs multimillion-dollar shop visit
- Airlines cannot meaningfully change fleets short-term (new aircraft orders locked 4-5 years)
- Current-gen aircraft remain vital for many years
- Market share gains >> overall market growth for FTAI

Strategic Capital Opportunities:
- Volatility creates investment opportunities
- Sale-leasebacks help airlines raise funds and avoid future shop visits
- Only lessor covering all engine maintenance for aircraft portfolio = unique positioning

FTAI Power Insulation:
- Business largely insulated from geopolitical dynamics
- Runs predominantly on natural gas
- Additional aviation retirements provide more feedstock for conversions

M&A & Vertical Integration

Active Pipeline (Two Categories):

1. Capacity Addition: Overhaul facilities east of Rome, Italy
2. Vertical Integration: Piece part repair and manufacturing
– 2025 additions: Pacific Aerodynamics, Prime (through Bauer partnership)
– Multiple deals in progress
– Goal: Reduce cost of overhauling/building engines

PMA Parts Progress:
- 5 total parts with Chromalloy: 3 approved (representing ~80% of cost savings)
- Final 2 parts in FAA approval process

Management Promotions:
- Nicholas McAleese: CFO (from prior role)
- Mike Hazan: CAO (Chief Accounting Officer)

Management expressed confidence in navigating geopolitical volatility, emphasized durable competitive advantages across all platforms, and highlighted strong demand fundamentals supporting continued growth through 2027 and beyond.