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 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 also launched a Strategic Capital Initiative to manage third-party capital for investing in on-lease aircraft and engines, aiming for an asset-light business model for future investment activities in this area.

The company's core business model is centered on its MRE model within the Aerospace Products segment, where it sells or leases engines via exchange. Revenue generation also includes equipment leasing and asset sales. Primary customer segments consist of global operators of transportation networks and global industrial companies, including airlines. The company maintains ongoing relationships with these customers and lessees, which it believes helps source additional opportunities and gain insight into attractive opportunities in the aviation sector.

The Aerospace Products segment focuses on developing, manufacturing, repairing, refurbishing, and selling 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 facilitated through a dedicated commercial maintenance program. The company also holds a 25% interest in the Advanced Engine Repair JV, which develops cost-saving programs for engine repairs, and a 50% equity interest in QuickTurn Europe, a CFM56 engine MRO facility. For the year ended December 31, 2025, Aerospace Products revenue was $1,600,456 thousand ⁴, and MRE Contract revenue was $335,788 thousand ⁵. Total revenues for this segment reached $1,936,244 thousand ⁶, with a net income attributable to shareholders of $548,346 thousand ⁷.

The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to lessees, directly and through its equity method investment. As of December 31, 2025, this segment owned and managed 290 aviation assets, comprising 47 commercial aircraft and 243 engines ⁸. Of these, 37 commercial aircraft and 143 engines were leased to operators or third parties ⁹. The aviation equipment utilization rate for the three months ended December 31, 2025, was approximately 77% ¹⁰. Aircraft had a weighted average remaining lease term of 44 months ¹¹, and engines on-lease had an average remaining lease term of 38 months ¹². For the year ended December 31, 2025, Lease income was $235,210 thousand ¹³, Maintenance revenue was $218,499 thousand ¹⁴, and Asset sales revenue was $106,945 thousand ¹⁵. Total revenues for this segment were $571,161 thousand ¹⁶, with a net income attributable to shareholders of $271,352 thousand ¹⁷.

For the fiscal year ended December 31, 2025, FTAI Aviation reported total revenues of $2,507,409 thousand ¹⁸. Cost of sales amounted to $1,349,719 thousand ¹⁹, resulting in a gross profit. Operating expenses were $152,541 thousand ²⁰, and general and administrative expenses were $9,478 thousand ²¹. Depreciation and amortization totaled $225,797 thousand ²². The company reported net income of $501,064 thousand ²³ and net income attributable to shareholders of $477,494 thousand ²⁴. Basic EPS was $4.66 ²⁵, and diluted EPS was $4.60 ²⁶. Cash and cash equivalents stood at $300,476 thousand ²⁷ as of December 31, 2025. Total debt, net, was $3,448,891 thousand ²⁸. Adjusted EBITDA (non-GAAP) for the year was $1,190,922 thousand ²⁹.

Comparing the year ended December 31, 2025, to December 31, 2024, total revenues increased by $772.5 million ³⁰. This was primarily driven by a $520.6 million ³¹ increase in Aerospace products revenue, largely due to a $499.7 million ³² increase in CFM56-5B, CFM56-7B, and V2500 engine and module sales, and a $4.8 million ³³ increase in other maintenance service revenues. MRE Contract revenue also increased significantly by $335.8 million ³⁴ due to engine and module sales to the 2025 Partnership. Asset sales revenue, however, decreased by $85.2 million ³⁵. Total expenses increased by $269.0 million ³⁶, with cost of sales rising by $523.8 million ³⁷ in direct correlation with increased Aerospace products revenue. The internalization fee to affiliate decreased by $300.0 million ³⁸ as the internalization was effective May 28, 2024. Net income increased by $492.4 million ³⁹, and Adjusted EBITDA increased by $328.9 million ⁴⁰.

Significant operational developments during the period include the launch of the Strategic Capital Initiative on December 30, 2024, in collaboration with third-party institutional investors. The first partnership under this initiative, the 2025 Partnership, completed its fundraise in October 2025 with $2.0 billion ⁴¹ of equity commitments and is the primary buyer of all future on-lease 737NG and A320ceo aircraft. The company also announced the launch of FTAI Power on December 30, 2025, a platform focused on converting CFM56 engines to power turbines. In 2025, the company acquired Pacific Aerodynamic Inc. (Pac Aero), specializing in CFM56 compressor blade and vane repairs, and the MRE business of AerotechOPS (ATOPS) in Miami, expanding its MRE operations. On May 28, 2024, the company internalized its management function, terminating the Management Agreement with the Former Manager and Master GP, and paid $150.0 million ⁴² in cash consideration and issued 1,866,949 ⁴³ ordinary shares.

The company expects its primary investment activities to be through its Strategic Capital Initiative going forward, which consists of an asset management business that manages third-party capital to invest in on-lease aircraft and engines. The first partnership under this initiative, the 2025 Partnership, completed its fundraise in October 2025 with $2.0 billion ⁴¹ of equity commitments and is designated as the primary buyer of all future on-lease 737NG and A320ceo aircraft. The company provides aircraft management services to the 2025 Partnership and receives customary, market-based compensation for these services. It 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.

A key growth area is the expansion of the Aerospace Products segment, which develops and manufactures, repairs/refurbishes, and sells aircraft engines and aftermarket components, primarily for CFM56-7B, CFM56-5B, and V2500 commercial aircraft engines. The company has recently expanded its capabilities through acquisitions, including Lockheed Martin Commercial Engine Solutions (LMCES) in 2024 to establish permanent engine and module manufacturing capabilities, and in 2025, Pacific Aerodynamic Inc. (Pac Aero) for CFM56 compressor blade and vane repairs, and the MRE business of AerotechOPS (ATOPS) to expand MRE operations in Miami. The company also maintains a 25% equity interest in the Advanced Engine Repair joint venture and a 50% equity interest in QuickTurn Europe, a CFM56 engine MRO facility.

Another significant growth vector is the newly launched FTAI Power platform, announced on December 30, 2025, which is focused on converting CFM56 engines to power turbines. This initiative represents a strategic diversification leveraging existing engine assets and expertise into a new market.

Operationally, the company anticipates a savings in operating costs as a result of the Internalization of management, 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.

Regarding capital allocation, the company's principal uses of liquidity continue to be acquisitions of aircraft and engines, dividends to ordinary and preferred shareholders, operating expenses, and debt service obligations. Cash used for investments was $1,130.3 million ⁴⁴ in 2025. Distributions to shareholders, including cash dividends, were $145.4 million ⁴⁵ in 2025. The company declared cash dividends on ordinary shares of $1.35 ⁴⁶ per share for 2025, and $0.40 ⁴⁷ per share for the quarter ended December 31, 2025, payable on March 23, 2026. Dividends on Series C Preferred Shares were $2.06 ⁴⁸ per share and on Series D Preferred Shares were $2.38 ⁴⁹ per share for 2025. The company is currently evaluating several potential transactions and related financings, including additional debt and equity financings, within the next 12 months.

The company faces structural headwinds and execution risks, including potential conflicts of interest in allocating investment opportunities between itself and partnerships in its Strategic Capital Initiative. Such allocation decisions involve significant and subjective judgments, which could harm its reputation with investors. The Strategic Capital Initiative is also subject to market risk, liquidity risk, valuation risk, key personnel risk, litigation risk, leverage risk, regulatory risk, and diligence risk.

Geographically, the company has assets in emerging market economies of Eastern Europe, including Russia, where eight aircraft and seventeen engines were still located as of December 31, 2025 ⁵⁰. The conflict in Ukraine and related sanctions could materially adversely affect its business and delay or prevent access to these assets. The insured value of the aircraft and engines remaining in Russia is $210.7 million ⁵¹, and the company intends to pursue claims under these policies, though timing and amount of recoveries are uncertain.

The company faces material risks including uncertainty relating to macroeconomic conditions, which may reduce demand for assets, lead to non-performance of contracts by lessees, or limit access to capital. Instability in geographies where the company operates, such as Eastern Europe and Russia, due to military action and civil unrest, poses a risk, with eight aircraft and seventeen engines still located in Russia as of December 31, 2025 ⁵⁰, and an insured value of $210.7 million ⁵¹ for these assets. The aviation industry's cyclical nature and potential for oversupply could depress lease rates and asset values. Regulatory risks include stringent governmental regulations, particularly in the aviation industry, where failure to comply with FAA or equivalent agency requirements could lead to adverse effects. Obsolescence of assets due to technological advancements or increased noise/emissions restrictions could reduce asset value and leaseability. Supply chain disruptions for component parts could jeopardize contract fulfillment, leading to reduced revenues and profits. The Strategic Capital Initiative introduces risks such as market, liquidity, valuation, key personnel, litigation, allocation and conflicts of interest, leverage, regulatory, and diligence risks. The company's substantial indebtedness of $3.4 billion ²⁸ as of December 31, 2025, means its ability to make payments depends on future cash flow generation, and covenants in debt agreements restrict operational flexibility. Cybersecurity threats could disrupt IT systems and lead to loss of business information. As a Cayman Islands exempted company, investors may face difficulties in protecting their interests through U.S. federal courts. Tax risks include potential PFIC or CFC status for U.S. federal income tax purposes, and increased tax liabilities from international tax initiatives like BEPS 2.0, with Bermuda enacting a 15% corporate income tax regime effective January 1, 2025.

Management's message emphasizes a strategic shift towards an asset-light business model through the Strategic Capital Initiative, which involves managing third-party capital for investments in on-lease aircraft and engines. This initiative, exemplified by the 2025 Partnership with $2.0 billion ⁴¹ in equity commitments, is positioned as the primary buyer for future on-lease 737NG and A320ceo aircraft. A key strategic priority is the continued expansion and enhancement of the Aerospace Products segment, evidenced by recent acquisitions like Pac Aero and ATOPS, and the launch of FTAI Power to convert CFM56 engines to power turbines. Management also highlights the successful internalization of its management function, effective May 28, 2024, which is expected to result in operational cost savings. The Board of Directors declared a cash dividend on ordinary shares of $0.40 ⁴⁷ per share for the quarter ended December 31, 2025, payable on March 23, 2026, to holders of record on March 13, 2026, and cash dividends on Series C and Series D Preferred Shares of $0.52 ⁵² and $0.59 ⁵³ per share, respectively, for the same quarter, payable on March 16, 2026, to holders of record on March 9, 2026.