FTAI Aviation Ltd

FTAI Aviation Ltd has been a long-term holding and we think it remains materially undervalued. The stock declined alongside other aerospace aftermarket stocks as many investors fear that higher oil prices will raise airfares, leading to reduced travel, airline capacity drawdowns, and weaker demand for FTAI’s services. Our opinion is different. Ironically, pressures such as rising oil prices have historically compelled airlines to cut controllable costs, resulting in increased demand for cost-saving maintenance services like FTAI’s module swapping service. We believe that the current strain on airlines should allow FTAI’s customer base to expand and ultimately accelerate the company’s growth.

FTAI Aviation has transitioned from a special situation to an 'emerging compounder.' It is the leading independent MRO franchise for the CFM56 engine, operating a vertically-integrated platform that enhances engine life by refurbishing older engines with proprietary parts. This model allows FTAI to capture high-margin Aerospace Products revenue alongside leasing, especially in a supply-constrained market. The company reported strong growth, with adjusted EBITDA of $325.6M and a 96% year-over-year increase in refurbished modules. The shift towards a capital-light business model is evident, with a new 2027 target of $2.3B introduced, and a raised dividend for the third consecutive quarter.

FTAI Aviation has transitioned from a special situation to an 'emerging compounder.' It is the leading independent MRO franchise for the CFM56 engine, utilizing a vertically-integrated platform to manufacture 'green time' by refurbishing older engines with proprietary parts. This model allows FTAI to capture high-margin Aerospace Products revenue alongside leasing, with a shift towards a capital-light approach through Strategic Capital vehicles. The company reported strong growth, with adjusted EBITDA of $325.6M and a 70% increase in Aerospace Products revenue. The recent partnership with CFM International signals robust economic positioning.

FTAI Aviation is a global aviation company specializing in the acquisition, leasing, and sales of aircraft and aircraft engines, particularly focusing on CFM56 and V2500 engines. The company operates through two main segments: Aviation Leasing, which generates rental income, and Aerospace Products, which develops and sells aircraft engines and aftermarket components. FTAI has established a differentiated business model that maximizes profits from a highly attractive niche within the aerospace aftermarket. The company's recent launch of FTAI Power, a platform to convert retired CFM56 engines into gas turbines for AI-driven data centers, has opened an entirely new addressable market, capturing significant investor enthusiasm.

FTAI Aviation (FTAI) buys, repairs, and leases jet engines and engine parts, primarily for Airbus and Boeing narrowbody aircraft. We like the company’s shift away from capital-intensive aircraft leasing and toward a higher-margin MRE (Maintain, Repair, Exchange) business, which should improve earnings quality and durability over time. Favorable CFM56 aftermarket dynamics, including growing shop visits and tight industry repair capacity, support the volume opportunity, and initiatives around new supply deals and use of PMA parts should drive higher profitability in the MRE segment. We also see additional upside if the company executes on its power-generation initiative, a new market for FTAI.

FTAI Aviation has transitioned from a special situation to an emerging compounder, driven by its leading MRO franchise for the CFM56 and a capital-light model through its Strategic Capital Initiative (SCI). The company captures superior economics in aftermarket aviation by operating a vertically-integrated platform that creates 'green time' at lower costs than OEM pathways. With a significant increase in adjusted EBITDA to $671M in 2025 and a raised 2026 guidance to $1.625B, FTAI is well-positioned for growth. The recent acquisition of Airbus narrowbodies and the successful execution of FTAI Power further enhance its competitive advantage and growth potential.

FTAI Aviation continues to deliver strong results to start 2026, leveraging its compelling value proposition and lower-cost Maintenance, Repair, and Exchange (MRE) solutions. The company has captured market share, currently ~12% of the CFM56 aftermarket, up from 5% just two years ago, and is targeting a 25% long-term market share. FTAI's recent joint venture with Jereh Group aims to scale production of its Mod-1 CFM56 aeroderivative units, with a potential $1 billion EBITDA opportunity next year, which remains largely overlooked in current analyst estimates.

In Q1, we added FTAI Aviation to our portfolio, reflecting our belief in its potential for growth driven by secular trends in aerospace and power generation. The company is positioned to benefit from the ongoing AI infrastructure buildout, which we see as a significant growth driver. Our investment philosophy emphasizes high-quality growth businesses with sustainable competitive advantages, and we believe FTAI Aviation exemplifies these characteristics.

FTAI has quietly become the lowest-cost provider in a required, recurring part of aviation—engine maintenance—using a differentiated model that MROs/aircraft lessors cannot easily match, driving share gains and rising margins as it scales. This competitive advantage positions FTAI well for future growth in the aviation sector, as it continues to capture market share and improve profitability.

Our position in FTAI Aviation exemplifies how markets often fail to recognize the impact of cyclical improvements on companies with high operational leverage paired with diminished capital requirements. Despite analysts expecting 42% revenue growth for Q2, the market continues to value the stock as if a broader commercial aviation recovery is uncertain. FTAI captures attractive economics in aftermarket aviation by operating as a vertically integrated industrial platform. The company is uniquely positioned to capitalize on a market that remains drastically short refurbished engines, leveraging its scale to create cost savings for customers. FTAI's business model transformation positions it as a top compounder in the aviation space for many years to come.