FTAI Aviation Ltd. Q2 FY26 Earnings Analysis

- Aerospace Products: - Significant volume growth with 270 CFM56 modules refurbished in Q1 2026, a 96% increase YoY. - 2026 goal: 1,050 modules, with strong momentum from facilities like Rome and Lisbon still ramping. - Market share expanding, driven by long-term, programmatic partnerships with airlines. - Long-term visibility with multiyear customer agreements through 2027 and beyond. - Aviation Leasing: - Shift towards a capital-light, fee-driven asset management model. - Increasing lease extensions due to combined engine maintenance leasing offering. - FTAI Power: - Commercial launch of MOD 1 expected Q4 2026, ahead of schedule with strong customer interest. - Targeting 100-unit production run in 2027. - Growth supported by joint venture with Jereh Group, providing geographic reach and manufacturing scale. - Long-term service agreements driving recurring revenue and multiyear sales visibility. Overall, strong production growth and market share gains position FTAI for sustained revenue and volume growth through 2027 and 2028.

- Adjusted EBITDA outlook for 2026 is reaffirmed at $1.625 billion, with $1.05 billion from aerospace products and $575 million from aviation leasing. - Adjusted free cash flow for 2026 is expected to be approximately $915 million. - Aerospace Products segment shows strong momentum with 70% year-over-year EBITDA growth and expanding EBITDA margins (~30%) driven by market share gains and larger shop visits. - Production is scaling rapidly, with module production more than doubling from 138 in Q1 2025 to 270 in Q1 2026, and capacity expansions planned especially east of Rome and the Middle East. - Power segment expenses will grow with headcount increase, expected to become a separate reporting segment by 2027, indicating substantial growth in that business line. - Dividend increased to $0.45 per share per quarter, reflecting confidence in growth and cash generation. - Long-term growth driven by expanding market share, strategic capital deployment, and commercial launch of FTAI Power in late 2026.

- Approximately $75 million in prepayments under a multiyear CFM56 parts agreement. - Around $81 million in induction prepayments for V2500 engines to support strong demand for full performance restoration. - Strategic investments to support targeted 100-unit production run in 2027 for FTAI Power. - Capital deployment for the 2025 SPV is largely complete; fully deployed by Q2 2026. - Active fundraising for 2026 SPV, with capital deployment expected in H2 2026. - Investments in M&A focused on adding capacity to the overhaul business, including plans for a new facility east of Royal, Middle East. - Additional M&A in piece-part repair and manufacturing to vertically integrate and reduce overhaul/build costs. - Investments in FTAI Power, including building out engineering, technicians, and support staff with incremental headcount and R&D expenses. - Upsizing and extension of revolving credit facility to $2.025 billion through 2031 to support liquidity and capital needs.

- The company is actively in equity fundraising mode for the 2026 Strategic Capital Initiative (SCI 2), expecting to deploy capital in the second half of the year, timing dependent on equity closing cadence (Page 11). - The 2025 SPV’s warehouse debt facility was upsized by $1 billion, now totaling $3.5 billion across 10 lenders, ensuring strong debt capital capacity going forward (Page 3). - The revolving credit facility was upsized from $400 million to $2.025 billion, maturity extended through 2031 with improved pricing, supported by 15 lenders, providing long-term liquidity and improved financial flexibility (Page 5). - The shift in the leasing business model is towards more capital-light, fee-driven asset management, indicating reduced reliance on balance sheet aircraft leasing and possibly less debt dependence (Page 5, 11).

- The company is in advanced negotiations for 2027 volumes and expects to be "sold out imminently." - Customers involved include hyperscalers, data center operators, gas distributors, and financial sponsors. - Conversations extend beyond 2027, with multi-year, multi-block orders for 2028 and beyond. - The 2027 production target is roughly 100 units for the power business. - The aerospace products platform is focused on meeting customer demand with a production plan of 1,050 CFM56 modules in 2026. - The company notes significant order momentum, with an increase from 138 modules in Q1 2025 to 270 modules, reflecting strong growth and ramp-up in facilities like Rome and Lisbon. - Multiyear deals and long-term service agreements feature prominently in the customer base, reinforcing durable demand.