FTAI Aviation Ltd.

FTAI Aviation Ltd. operates as a leading independent engine maintenance platform primarily focused on CFM56-5B, CFM56-7B, and V2500 aircraft engines, which power 737NG and A320ceo aircraft. The company's core business model involves repairing and rebuilding these engines in its maintenance facilities and with joint venture partners, then selling or leasing them to airlines and asset owners globally. A significant portion of its revenue is generated through its proprietary Maintenance, Repair and Exchange (MRE) model, reported under the Aerospace Products segment. Additionally, FTAI Aviation owns and manages a portfolio of on- and off-lease aircraft and engines through its Aviation Leasing segment. The company has recently launched a Strategic Capital Initiative to manage third-party capital for investing in on-lease aircraft and engines, shifting its primary investment activities towards this asset-light model.

The company's core business model is centered on its MRE model within the Aerospace Products segment, which involves selling or leasing engines via exchange. This segment focuses on modular and parts repair and refurbishment of CFM56-7B and CFM56-5B engines. The Aviation Leasing segment generates revenue by owning and managing aviation assets, including aircraft and aircraft engines, which are leased and sold to lessees, directly and through equity method investments. The Strategic Capital Initiative, launched in late 2024, represents a shift towards an asset-light business model, where partnerships acquire on-lease narrowbody aircraft at scale, with FTAI Aviation providing aircraft management services for customary, market-based compensation and making minority capital commitments.

The Aerospace Products segment develops, manufactures, repairs/refurbishes, and sells aircraft engines and aftermarket components, primarily for CFM56-7B, CFM56-5B, and V2500 commercial aircraft engines. This segment's engine, module, and parts sales are supported by a dedicated commercial maintenance program. It also includes a 25% interest in the Advanced Engine Repair JV, focused on cost-saving engine repair programs, and a 50% equity interest in QuickTurn Europe, a CFM56 engine MRO facility. Total revenues for the Aerospace Products segment were $1,936,244 thousand ¹ for the year ended December 31, 2025, with net income attributable to shareholders of $548,346 thousand ².

The Aviation Leasing segment owns and manages 290 aviation assets ³, comprising 47 commercial aircraft ⁴ and 243 engines ⁵ as of December 31, 2025. Of these, 37 commercial aircraft ⁶ and 143 engines ⁷ were on lease to operators or third parties. The segment's aviation equipment utilization was approximately 77% ⁸ for the three months ended December 31, 2025. Aircraft had a weighted average remaining lease term of 44 months ⁹, and engines on-lease had an average remaining lease term of 38 months ¹⁰. Total revenues for the Aviation Leasing segment were $571,161 thousand ¹¹ for the year ended December 31, 2025, with net income attributable to shareholders of $271,352 thousand ¹².

For the fiscal year ended December 31, 2025, FTAI Aviation reported total revenues of $2,507,409 thousand ¹³. The company's total expenses amounted to $1,766,122 thousand ¹⁴. Net income for the period was $501,064 thousand ¹⁵. After accounting for dividends on preferred shares of $17,243 thousand ¹⁶ and loss on redemption of preferred shares of $6,327 thousand ¹⁷, net income attributable to shareholders was $477,494 thousand ¹⁸. Diluted EPS was $4.60 ¹⁹. As of December 31, 2025, total consolidated assets were $4.4 billion ²⁰, and total equity was $334.2 million ²¹. The company had $300,476 thousand ²² in cash and cash equivalents and $3,448,891 thousand ²³ in long-term debt, net.

Comparing the year ended December 31, 2025, to December 31, 2024, total revenues increased by $772.5 million ²⁴. This was primarily driven by a $520.6 million ²⁵ increase in Aerospace products revenue and a $335.8 million ²⁶ increase in MRE Contract revenue. Total expenses increased by $269.0 million ²⁷, largely due to a $523.8 million ²⁸ increase in cost of sales, partially offset by a $300.0 million ²⁹ decrease in internalization fee to affiliate. Net income increased by $492.4 million ³⁰. The Aviation Leasing segment saw a decrease in total revenues by $57.3 million ³¹, mainly due to an $85.2 million ³² decrease in asset sales revenue, partially offset by a $17.7 million ³³ increase in maintenance revenue and a $9.5 million ³⁴ increase in other revenue, including servicing fees from the 2025 Partnership.

During the reported period, FTAI Aviation launched FTAI Power on December 30, 2025, a platform focused on converting CFM56 engines to power turbines. The company also entered into an agreement within its MRE business to supply replacement aircraft engines and modules for the life of the 2025 Partnership. Acquisitions in 2025 included Pacific Aerodynamic Inc. (Pac Aero), a specialist in CFM56 compressor blade and vane repairs, and the MRE business of AerotechOPS (ATOPS), expanding its MRE operations in Miami. Additionally, on June 5, 2025, the company invested $10.5 million ³⁵ for a 50% ³⁶ interest in Quick Turn Engine Center Europe S.r.l. (QuickTurn Europe), a CFM56 engine MRO facility in Rome. The 2025 Partnership completed its fundraise in October 2025 with $2.0 billion ³⁷ of equity commitments.

FTAI Aviation expects its primary investment activities to be channeled through its Strategic Capital Initiative going forward, which involves an asset management business that manages third-party capital to invest in on-lease aircraft and engines. The company anticipates a savings in operation costs as a result of the Internalization of its management function, which became effective on May 28, 2024.

A major growth area for FTAI Aviation is its Strategic Capital Initiative, launched on December 30, 2024, in collaboration with third-party institutional investors. The first partnership under this initiative, the 2025 Partnership, focuses on acquiring 737NG and A320ceo aircraft. This initiative allows the company to maintain an asset-light business model while the partnerships actively acquire on-lease narrowbody aircraft at scale. The 2025 Partnership completed its fundraise in October 2025 with $2.0 billion ³⁸ of equity commitments and is designated as the primary buyer of all future on-lease 737NG and A320ceo aircraft. FTAI Aviation, as the Servicer, provides aircraft management services to the 2025 Partnership and receives customary, market-based compensation for these services. The company has also made a minority capital commitment and will make additional commitments to the 2025 Partnership in the same proportion relative to additional third-party institutional investors.

Another growth vector is the expansion of the Aerospace Products segment through strategic acquisitions and joint ventures. In 2023, the company acquired the remaining interest in Quick Turn Engine Center LLC (QuickTurn), a dedicated hospital maintenance and testing facility specializing in CFM56-7B and CFM56-5B engines. In 2024, it acquired Lockheed Martin Commercial Engine Solutions (LMCES) to establish permanent engine and module manufacturing capabilities. In 2025, FTAI Aviation acquired Pacific Aerodynamic Inc. (Pac Aero), a specialist in CFM56 compressor blade and vane repairs, and the MRE business of AerotechOPS (ATOPS), further expanding its MRE business in Miami. Additionally, on June 5, 2025, the company invested $10.5 million ³⁹ for a 50% ⁴⁰ interest in Quick Turn Engine Center Europe S.r.l. (QuickTurn Europe), a CFM56 engine MRO facility in Rome, aiming to expand global engine maintenance capabilities and meet increasing demand for MRE services. The company also announced the launch of FTAI Power on December 30, 2025, a platform focused on converting CFM56 engines to power turbines.

The company anticipates a savings in operation costs as a result of the Internalization of its management function, which became effective on May 28, 2024. Following this, the company no longer pays management fees or incentive distributions to the Former Manager and Master GP, and has assumed general and administrative, and compensation and benefit expenses directly.

FTAI Aviation's planned capital allocation includes continued investments in unconsolidated entities, which amounted to $328,546 thousand ⁴¹ for the year ended December 31, 2025. The company also plans to fund acquisitions of leasing equipment, which totaled $658,799 thousand ⁴² in 2025. Dividends to ordinary and preferred shareholders remain a use of liquidity, with $128,205 thousand ⁴³ declared for ordinary shares and $17,243 thousand ⁴⁴ for preferred shares in 2025. The company also engages in debt service obligations, with outstanding principal and interest payment obligations of $3.5 billion ⁴⁵ and $1.2 billion ⁴⁶ respectively, as of December 31, 2025, with $228.8 million ⁴⁷ in interest payments due in the next twelve months.

The company is currently evaluating several potential transactions and related financings, including additional debt and equity financings, which could occur within the next 12 months. However, these potential transactions are not definitive or included within its planned liquidity needs.

FTAI Aviation faces several material risks, including macroeconomic conditions that may reduce demand for assets, lead to non-performance of contracts, or limit access to capital. Instability in geographies where assets are located or revenue is derived, such as Eastern Europe and Russia, poses a risk, with eight aircraft and seventeen engines ⁴⁸ still located in Russia as of December 31, 2025, and an insured value of $210.7 million ⁴⁹ for these assets. The aviation industry's cyclical nature and potential for oversupply could depress lease rates and asset values. High concentration in CFM-56-5B, CFM56-7B, and V2500 engines and related parts makes the business vulnerable to changes in market demand or asset-specific problems. Competition from traditional and non-traditional players, including those with greater capital access, could impact acquisition opportunities and product/service pricing. Operational disruptions at maintenance facilities due to labor issues, geopolitical events, or natural disasters could lead to significant delays and losses. The company's substantial indebtedness of $3.4 billion ⁵⁰ as of December 31, 2025, and its ability to generate sufficient cash flow to service this debt, is a key financial risk. Joint ventures and partnerships, including the Strategic Capital Initiative, introduce risks such as co-investor bankruptcy, conflicting business interests, market and liquidity risks, valuation subjectivity, key personnel risk, litigation risk, and potential conflicts of interest in investment allocation. Obsolescence of assets due to technological advancements or increased regulation could reduce asset value and leaseability. Supply chain disruptions for component parts could harm the business. ESG and sustainability-related matters, including the ability to achieve and accurately report on initiatives, pose reputational, regulatory, and financial risks. Unforeseen maintenance costs for assets, especially due to lessee failure to properly maintain them, could decrease asset value and increase expenses. Changes in governmental regulations, including international trade laws, could adversely affect the ability to lease or sell assets. Difficulties in enforcing contracts and recovering assets in jurisdictions with less developed legal systems, particularly as business shifts outside the United States and Europe, are also noted. International operations expose the company to political uncertainties, foreign currency fluctuations, and potential nationalization or expropriation of property. Acquisitions in new aviation sectors could introduce unforeseen obstacles and regulatory compliance costs. The agreements governing the company's indebtedness contain covenants that restrict operational flexibility, and a breach could trigger events of default. Terrorist attacks or other hostilities could negatively impact operations and profitability. Projects in the aerospace products and services sector are exposed to unplanned interruptions. The reliance on U.S. dollar payments from lessees operating in other currencies exposes the company to foreign currency devaluation risks. Inability to obtain sufficient capital would constrain growth. Environmental regulations and climate change initiatives could increase costs and limit asset economic life. Cybersecurity threats could disrupt IT systems and lead to loss of business information. The Internalization of management may not yield all targeted benefits. The company's status as a Cayman Islands exempted company may limit shareholders' ability to protect their interests through U.S. federal courts. Tax risks include potential PFIC or CFC status for U.S. federal income tax purposes, and increased or unanticipated tax liabilities from international tax reforms like BEPS 2.0 and Bermuda's 15% corporate income tax regime effective January 1, 2025.

Management's message to shareholders emphasizes the company's position as a leading independent engine maintenance platform focused on CFM56-5B, CFM56-7B, and V2500 aircraft engines, and its strategy to generate predictable cash flows through its maintenance platform and leasing activities. A key strategic priority is the Strategic Capital Initiative, launched in late 2024, which aims to maintain an asset-light business model by managing third-party capital to invest in on-lease aircraft and engines, with the 2025 Partnership having completed its fundraise in October 2025 with $2.0 billion ⁵¹ of equity commitments. Another strategic priority is the expansion and enhancement of the Aerospace Products segment through acquisitions like Lockheed Martin Commercial Engine Solutions (LMCES) in 2024, Pacific Aerodynamic Inc. (Pac Aero), and AerotechOPS (ATOPS) in 2025, and the investment in QuickTurn Europe in 2025, all aimed at strengthening engine and module manufacturing and repair capabilities. The launch of FTAI Power on December 30, 2025, focused on converting CFM56 engines to power turbines, highlights a forward-looking strategic initiative. Management also underscored the Internalization of its management function, effective May 28, 2024, as a move expected to result in operational cost savings. The Board of Directors declared a cash dividend on ordinary shares of $0.40 per share ⁵² for the quarter ended December 31, 2025, payable on March 23, 2026 ⁵³, and cash dividends on Series C and Series D Preferred Shares of $0.52 ⁵⁴ and $0.59 per share ⁵⁵, respectively, for the same quarter, payable on March 16, 2026 ⁵⁶.