FTAI Aviation Ltd. (FTAI) Earnings Call Transcript & Summary

Okay. Great. So go ahead and get started again on the transportation track here at the conference. Again, I'm Chris Wetherbee, transportation analyst at Citi. Really pleased to be joined by Fortress Transportation and Infrastructure, FTAI, as I call it, I think as most of us call it here. Joining us from FTAI is Joe Adams, the Chairman and CEO of the company. Joe, thanks so much for joining us. Really appreciate it.

Thank you.

I think what we're going to do is I'm going to turn it over to Joe for a couple of quick comments, introductory comments about the business and sort of the way things are kind of trending right now. And then we'll dig into Q&A. And just as a reminder, there is the ability to ask questions via the webcast. And obviously, for those of you in the room, you have instructions in front of you on the tables there. So feel free to bring in questions, and we'll get them to Joe that way. But without -- with that being said, Joe, let me just turn it over to you for a quick intro on the company, which is a little unique within the transportation coverage and sort of maybe a quick thought on what's going on now and then we can kind of dig into questions.

Thank you very much. Thanks for having us, and great to be here in person. And I hope you mean unique in a good way, right?

A very good way. Yes, unique is a good thing.

Now just as by way of background, as a starting point, we formed this company, FTAI -- and we're actually going to rename the 2 businesses FTAI, so I think that's going to stick. But we started 10 years ago, we had this debate internally as to whether we should be one company or two companies. And we chose one company, and we had two strategies that we had pursued in our private equity years that worked very well, which one was aviation and the other was railroads. And so we decided to keep them together, create critical mass, grow the businesses, recognizing that it was -- there are 2 very different markets that drive them. So we got to the point last summer after acquiring the Transtar assets, we had built up and started the Long Ridge power plant. So we have a lot of EBITDA coming from infrastructure, a much bigger platform now. We decided that it was a great time to split them. And as such, we announced our intention to spin out infrastructure as a freestanding company. And we expect that to be completed hopefully in early April. That's the timeline. So we've actually made a lot of progress. We're very close to that. And it solves, one, the problem I just mentioned, which is reduces the complexity of the story so that we'll have -- instead of one 20-minute meeting to describe 2 different businesses, I'll have two 20-minute meetings. The whole burden on me. But it will be fun. And the other advantage is that today, we're structured as a publicly-traded partnership. And so when we complete the spin, we will be changing the corporate format to a C Corp for the infrastructure business and a foreign corporation for the aviation company, which means that investors will no longer receive K-1s, which is a big negative in the market. It also means, today, we have no passive money. We have no ETFs, no index funds. So as I said to Alan, our Investor Relations, we can only go up from zero. So we should have some positive impact from having new capital available to us. So that's exciting. Just a little bit about the 2 companies. On Aviation, we're really looking forward to the recovery in the aviation market, which we've been hoping was going to come sooner, but it feels like it's every quarter, it feels a lot stronger, and we're seeing very, very strong advanced bookings in second, third quarter from the airline customers, who actually are now taking new aircraft on lease, which is probably the best indicator, best sign in my mind of the demand for travel is ramping up. And so that's a good thing. And we're also -- over the last 5 years, we've built a portfolio of service products to offer to the engine market. So we're one of the largest engine owners in the world. And we've built a portfolio of products to give us the ability to manage those major engine maintenance events at a lower cost than anyone else in the world in the business. And so we have a great ability to leverage our invested capital base and grow our service business, which is a non-asset-based activity, which can expand exponentially without us having to go continually buy more assets. So that's very exciting on the aviation side. On the infrastructure side, as I mentioned too, Transtar we added in the summer, a big, over 200,000 railcars a year that we move. We interchange with all 7 Class I railroads. We just hired a new CEO, Gary Long, who came out of Genesee & Wyoming. And we see great opportunities to grow that business as we did when we owned RailAmerica, Florida East Coast, both similar opportunities to increase the third-party business that we do away from U.S. Steel to maintain the U.S. Steel business but add significant other business. And then Long Ridge, Jefferson, Repauno are all development projects, which are ramping up and growing. So it's been an exciting year for that. We've got now high energy prices, again, which is sort of an interesting backdrop for some of our businesses, and we're also looking a lot at some low carbon or no carbon initiatives to grow the business by adding products to our terminal business that are complementary and also have an ESG benefit to it as well. So good things happening in both companies, and will be exciting to see them stand on the children or leaving the house, so they're getting their own place to live now.

Yes, absolutely. So definitely some exciting stuff coming up. So let's talk about the spin a little bit. So the spin occurs in April. Can you tell us from a structuring standpoint, what needs to be done in terms of any capital that needs to be raised in that scenario? What does sort of the balance sheet of infrastructure and aviation look like as separate companies?

Yes. So the -- we are raising $800 million of new capital at infrastructure. So -- and that will be roughly $500 million of debt and $300 million of an equity-like instrument, probably some kind of preferred structured equity investment. And that $800 million will be remitted over to aviation, because aviation is keeping all the public debt that exists at the corporate level today. So think of that as effectively transferring $800 million of debt from aviation over to infrastructure. And so then each one of those companies, aviation will maintain its current debt ratings, and it will have a little bit less debt, roughly around $1.8 billion of total debt. And then the infrastructure business will have the existing $700 million of debt plus $500 million of new debt. And that probably will also be -- have a high yield, strong B rating. So both balance sheets, I think, work out to be strong and available to have additional access to capital, if needed.

Okay. Got it. And then as you think about separating the 2 businesses, separate management teams for both aviation as well as transportation?

Yes.

Okay. Got it. Makes sense. Okay. And so that occurs in April, are there any -- what are the last steps that you need from either an SEC perspective or a regulatory standpoint to get to that point? Anything else that needs to happen?

Really just finishing up the audited financials and putting those into the document is the main thing.

Okay. Got it. That makes sense. Okay. So we have that coming. You talked a little bit about the business update. I want to kind of focus then in on what's happening in the market as it stands currently. It's been a unique start to the year, to say the least. Obviously, the COVID impacts that we're carrying over from December into January, were impactful in terms of just attendance, but I was curious in terms of the demand, particularly on the aviation side, have you seen any sort of "ripples" in demand as that kind of worked its way through? Or have people generally begun to start to look through out into the future?

There's definitely a pickup in demand because we see it, as I mentioned, when an airline starts to go out and look for new assets to add to the fleet, that's the best indication that their forward bookings are strong, because they wouldn't be taking on additional assets if they didn't see the ability to sell them. So what we're hearing from our customers is first quarter is likely to be fairly soft. It's never a big travel quarter anyway. People -- generally, February is probably the worst month of the year for travel because there's -- other than us coming down here, nobody goes on trips. So the first quarter is relatively light. But starting in April, the demand in the forward booking is quite robust. And so you see most -- other than China, most other companies are dropping travel restrictions on a blanket basis and requiring just people to be vaccinated. So the -- I think the outlook is quite good. And the airplanes, if you're not adding capacity like right now or soon, you won't have it available for the summer. So we're seeing strong demand across the whole fleet.

Okay. Got it. And when you look at the market, what type of deals are out there on the aviation side? Are there -- you mentioned that there's starting to be some more activity. Do you think that's wholesale fleet type of dynamics where you can maybe bring some capacity in? How do we think about sort of what's on the table in the market today?

Well, we did 3 relatively large sale leasebacks to generate capital. It was -- one was Air France; another was ITA, which is the old Alitalia -- or the -- I guess, the new Alitalia; and then Avianca. And all of those were related to generating capital to help the airlines through the period and they're selling off some of the older aircraft in their fleet, so they'll be phasing those out over time. And those are great deals for us because we look at it as an income stream that ends up turning into great engines, engines at a very good cost. So we can take those older aircraft, scrap them and just keep the engines for our portfolio. So I think a lot of that has been done now in the last few months and airlines are coming out of this. They're starting to sell more tickets. So I don't see a lot of that. Most of the activity we are finding attractive is buying an asset today that's off lease. So if you have an income stream on it, and it's got an airline that most everybody thinks will survive, it's -- the pricing and the bids for that have gone up significantly. There's a lot of capital that has come into the market with new money being raised to invest. So that market is strong. But very few people want to buy an aircraft that's off-lease, because there's no cash flow and it takes -- it's work to put it on lease. So what we're doing is buying anything we see that has good engines that's off-lease, we would be an ideal buyer for that. And then in some cases, we put a lease on it. What we're looking at is potentially selling that asset for a gain and retaining the engine service agreement. So it's a new product for us that we would -- and it gives us the best of both worlds. It would give us the ability to recycle capital and give us the engine business so that when an engine is due for a shop visit, we take back the engine that's run out and we give them a new engine for an exchange, and we keep the engine maintenance reserve income that we collect.

Yes. Okay. Got it. That makes sense. And then how about the services business? How are things trending in the services business? I know -- I think the guidance is for around $100 million of EBITDA in 2022. I'm just kind of curious about how that ramps up and maybe what the run rate is going into next year?

Well, I think it was $50 million to $100 million. But...

Fair enough.

You focused on the $100 million.

I'm a glass half full kind of guy.

Okay. But there's a range, and I think we feel very good about it. I think we talked a lot about the module factory and the growth in that, and that's really -- that's our point-of-sale terminal or I used to say cash register, except they don't have them anymore. It's -- that's where we monetize the products by doing modules and exchanging modules and selling modules. And we just did have a nice win with the deal for Lufthansa, where we provide modules for their maintenance program that they won from WestJet. So we are a supplier to the -- to Lufthansa Technik, who won the engine maintenance contract from WestJet for 10 years. So it's a great validation of our value-added products in a very competitive setting that was well examined and bid and analyzed by everybody. And so I think I feel very good about how we can take advantage of these products and really access the entire ecosystem of the CFM56 aftermarket. So we want to be the best source of engines for aftermarket users for that engine after they come off their original OEM or power by the hour contracts.

Got it. Okay. That makes sense. And then I guess we're always trying to conceptualize what the business can ultimately grow to over time. And obviously, I don't want necessarily specific numbers, I'd love them if you're willing to give them. But just conceptually, what is the market opportunity for that business -- for the combined sort of big 3 of the service piece of the business?

Yes. So I do have some numbers. So to the question of -- one way to think about it is we have about $2 billion invested in hard assets, the engines, mostly. Over time, I would see our mix shifting more and more towards CFM56. So we own Pratt 4000s and CF6-80s and Pratt 2000s. Over time, I think those will come down and CFM56 percentage will go up. So if I were able to own and maintain $2 billion of invested capital -- we had previously targeted a 25% EBITDA to invested capital ratio, we hit at one point, I think, in the third quarter of 2019, 30%. But call it 25%, that's $500 million of leasing EBITDA. On the service side, if you look at the entire fleet of CFM56 engines, this is roughly 22,000 engines. Today about 12,000 to 13,000 of those are served in the aftermarket. So they're not on the OEM PBH programs. So that would be done by the MTUs, the Delta TechOps, Lufthansas. That's our target market. And that number grows over time. But takes 12,000, 13,000 of engines in that universe, if -- that works out to about 3,000 shop visits per year, somewhere between 2,500 to 3,000, but call it 3,000 because it's easier math. If those 3,000 engines, if we were able to get a 10% of that market, that's 300 shop visits a year. And 300 shop visits a year, each engine has 3 modules, that's 900 engines, 900 modules per year. And if we make -- pick a number, $0.5 million per module, that's $450 million of EBITDA from that.

Got it.

On top of that, we still have a part-out business, and it doesn't count anything from the Chromalloy joint venture. So I think -- my goal is if I could generate $500 million of leasing income and $500 million of service income and have $1 billion of EBITDA in 2025, that would be like -- that's my goal.

That's the goal for the aviation side of the house.

Yes.

Got it. Okay. That makes sense. You have -- I think you're still waiting on FAA approval on part of the Chromalloy joint venture. You got one piece of that about a year ago. What's the update in terms of the FAA side?

Yes, we're still working with them. We have several parts in the process. So we expect more approved this year and hopefully soon. But it's inherently hard to forecast that process, there's a lot of back and forth and a lot of work being done, but great progress on all of them.

And then conceptually, when you think about the leasing portfolio, the $2 billion of leasing assets that you guys have, when -- how do we sort of think about the opportunity set relative to the health of the airline industry? So we've gone through periods of ebbs and flows in the relative health of the airline industry. Is there a particular sweet spot in the market for the airline industry that works best for you in terms of acquiring good deals, good assets?

Well, I think what we are trying to offer is something that appeals to everyone, which is how to spend less money on your maintenance, and it should have universal appeal now. Obviously, if you're talking about United, Delta, American that have their own engine inventory and a big maintenance shop, they're not going to have the same needs for the entire product offering that we offer. We might sell used serviceable material to them, where we might do module exchanges if they need a fan for a particular engine. But the programs like the WestJets or the Aviancas, the ITAs, that sweet spot is sort of the middle-sized airline that wants a flexible power solution at a low cost. And that's a huge market. So it encompasses all but the biggest and/or the smallest.

Okay. Got it. So it can work for you kind of in multiple different sort of parts of the cycle from an aviation perspective?

Yes, because at that point, it's not about do I need money or am I super profitable, it's like, do I want to save money. And the answer is always yes, because all those contracts are bid out. It's like, do I want to save $1 million per shop visit? Okay. I would do that.

Got it. So let's talk about competition in this business because, obviously, you guys have been very successful as you've grown the leasing portfolio since you went public and then now adding the services piece. You're ramping that piece up on it. Let's take them one by one and think about the leasing side. So you generated very strong returns. Obviously, there's a focus on engines and there's been sort of an outsized return on that side. But why -- what is the competitive landscape there? Why -- what could cause it to become more competitive and potentially impact those returns?

At this point, I don't -- I think very little because we've been -- we started on this, as I said, first, 10 years ago, and we've been focusing on this development of these products, really over the last 6 years. So -- and they're exclusive. So I don't see anybody that has the capability to put together the same portfolio, and that gives us a cost advantage that nobody can match. So does that mean that people couldn't come in and do a deal and earn less? Of course, they could. But we are -- have such an advantage, given that cost reduction and the size of our fleet. We have 300 CFM engines today. So there's nobody else that could -- that has that. So there's a lot of things that somebody would have to do. And I still don't see -- I've worried about this for years, somebody is going to come and say, I'm going to do that. And almost all the new money I see coming out is focused on buying airplanes and leasing them, the same business model as people have done before.

Okay. So that is just -- it's sort of just following the same path as opposed to being a bit more creative and focusing on niches where there's opportunity?

Yes. But I mean, we'll always keep trying to figure out innovative. 3 years ago, I wouldn't have told you we would had a module factory, because I didn't -- we didn't know exactly how that was going to unfold and -- but we've now realized that there's tremendous savings in taking the engine and breaking it into 3 modules, which big airlines do internally already. But those types of developments, we think about this every day.

Yes. Got it. No, that makes sense. And then I think, I guess, maybe switching gears a little bit to the infrastructure side and sort of thinking about the landscape there. So I guess, can you talk a little bit about the sort of financial performance of that as you look out through this year? How should we expect the ramp-up in EBITDA from infrastructure to look, particularly Jefferson and some of the other pieces of the business?

Yes. Jefferson has been the hardest one to get going. But really, our future is tied to the relationships and the partnerships we've formed with Exxon and Motiva. And so we have seen significant volume increases in Q1. And we're effectively about 1/3 utilized on that asset today. So as we move up that, percentage-wise, that's when you will see an outsized expansion of the EBITDA because, obviously, you've covered your base expense, your fixed expenses and then it becomes incrementally much more profitable. So we've told people $50 million this year of EBITDA for Jefferson, and we'll start to see that in the second, third quarters ramp up. But it also moves with -- the movements of products from those 2 players have the biggest impact. And that's what we're really tied to going forward. It happens to be Motiva is the largest refinery in North America today. They're moving a lot more crude now through the terminal. And Exxon is expanding their refinery from 360,000 barrels a day to over 600,000 barrels a day, which will make it the largest refinery in North America. And last year, we pipe connected both -- to both terminals. So that was a big step and a big investment. And I think we'll see the rewards from that over the coming years, for sure.

And the pipe is part -- is included in the $50 million?

Yes.

Okay. Got it. That makes sense. And what about storage? Where are we in storage in terms of building out the capacity there?

So we have 4 million barrels built and we're building 2 million for the -- we received a 10-year -- we won a 10-year contract from Exxon for a refined products export terminal, which starts in 2023. And so we're building 2 million barrels to serve that. And so that will kick in roughly $20 million, $25 million of EBITDA starting in 2023. And that will add -- the total terminal storage capacity will be roughly 6 million barrels at that point.

And what is the tenor of the conversations in the environment that we've had over the course of the last, call it, 6 or 8 weeks, where we've seen just a consistent steady rise in energy prices? And obviously, now with some geopolitical unrest and potential for further volatility.

And a refinery going out on the Louisiana market as well. It's good. I mean it is -- we will do better in a high oil price environment for those products. So it's definitely -- you present options to the refiners to access different markets from time to time. They always want to be able to change the slate on the inputs and the outputs. And by having a terminal to be able to offer those different alternatives, it gives them a lot of value. So it's a good environment.

Got it. How about Repauno? How do we think about -- so we get $50 million from Jefferson, how do we think about Repauno this year?

So Repauno had a great year from -- achievement wise. Its EBITDA is still very low, and this year probably would be roughly $10 million. But the terminal has got fantastic capabilities and potential. And so what we -- we started there by doing butane and moving -- I think we moved maybe 4 million barrels -- or 4 million gallons in 2020. This year, we'll move -- last year, we moved 130 million gallons and this year, it could be 150 million to 175 million gallons of -- and we've added propane to that. So we've now got butane propane. We also just transloaded a shipment of propylene over to Braskem, which is on the other side of the river in the Philadelphia market. So we're expanding the capability. We've added refrigerated capability now. We can transload directly from rail to truck. So we've really expanded the portfolio of products. Next year, the plan is to add a 600,000 barrel aboveground storage tank refrigerated, which will put us in the VLGC loading business. That is a huge big uptick, but we're able to do that because we picked up a lot of customers this year that use the terminal for the first time. So the volume capability then would triple from the numbers that I just mentioned once that comes online. And then we've got below ground storage that we will start building in granite. And that could be multiple caverns, and we could be doing products like butadiene, we could do ammonia, hydrogen. So it could be truly a unique asset on the East Coast of the United States with multimodal capability, multiproduct capability, and we provide a very high service level to the customers, which they don't get from the marketplace today. So a lot of -- it's -- that's why I've always loved that asset because of the location, the flexibility, the resources they have, and it's really come into its own this year in terms of being able to show all of that to the market.

Got it. So $10 million now, but certainly, there seems to be opportunity beyond that of size?

Yes.

Got it. Okay. How about Long Ridge? Let's talk a little bit about that. I think you're at 49%?

Yes. Yes. So we built that -- we started the construction of that plant, and then we contracted up the power and we secured the gas, and we sold a 50% interest, 2 years ago, basically took our equity money out. So we still own half. The plant came online in November and was uncontracted, which happened to be a good thing because power prices in November were really high, like double what they have been. December, they came down a little bit. So we'll have a good fourth quarter. We did have a service outage, a maintenance outage in January that was unscheduled that was all under warranty. But took the plant offline for about 6 weeks in January. And then the hedges -- the long-term power contracts agreements start in March. So then we go under our roughly $120 million of EBITDA contracted starting there. So it's good, would have been better without an outage. But these start-ups, sometimes stuff happens, and it's all fixed and running. And then the real upside remaining there is to have other companies locate at the property and buy power or gas at good prices that we can sell them and make more money on. And the one that's the furthest along is a company that makes a biodegradable plastic, which they sell to restaurants and people that don't want plastic staying around for hundreds of years, which is probably all of us, but they pay a huge price to market that. And that company is in the final site selection process. They use a lot of -- they use natural gas, microbes and energy, which is like perfect for us. So we're hopeful that, that site selection will prevail, and then we'll have that as one of our showcase tenants to grow. And then we also have hydrogen, which we've now -- because of the outage we had in January, we put in the hydrogen blending equipment so we can use hydrogen as a fuel for the power plant, which will be the first large frame turbine in the United States to be able to do that. And the Biden administration has put forward this program to pick 4 hydrogen hubs, and we are raising our hand obviously, to be a hydrogen hub because why not? It would be a great thing. So that's going to -- I think the submissions are due in second quarter this year and the final selections are the second quarter next year. So it's a great location, and it's got multiple avenues to keep growing. But the base business is fully contracted for 8.5 years.

Got it. And so then you have the railroad and that kind of rounds out the infrastructure side of the house. So when you think about everything from -- just like we talked about on the aviation side, let's talk about sort of the opportunity set for infrastructure as Jefferson ramps up, you get Long Ridge going, Repauno going. Sort of what do you think the opportunity is for the transportation side of the business -- the infrastructure side of the business rather?

I mean, it's big. We have growth embedded, organic growth in every one of those assets that we currently own. And then we think we can layer on things like we have a very exciting plastics recycling opportunity. We signed a joint venture with Clean Planet, which is a U.K.-based company that's building in France and England to recycle nonrecyclable plastics, which is a big issue and particularly in this country and everywhere. But we think we'll put the first plant at Repauno in New Jersey and we could finance basically 100% of it with tax-exempt debt. So it's not a big capital user, but if that works, then it's scalable, you can take it to other terminals and other locations and grow that. And it's also a great thing to be not using more plastics, taking what we have and recycling it. And then we also have a business -- we're partnering with a company in Texas that processes spent catalyst from refineries and it's basically a metal separation business. And we're looking at investing with them in lithium-ion battery recycling and using our terminals, Repauno, Long Ridge, Jefferson as collection points for those batteries. So I don't know if you saw the cars that caught on fire in the ocean.

Yes, I did.

Because transporting lithium-ion battery is challenging and you have to recycle. I mean, literally, you're not going to take a battery and throw it away. It's going to have to be recycled. So it's a huge market opportunity. This company is in business -- a related business already. And we can use our existing infrastructure in order to -- way to leverage that up. So there's lots of good things that we can do to keep growing that business and take advantage of what is some really valuable and unique properties in great markets. We all have multimodal -- when we were running RailAmerica and Florida East Coast it was always -- the railroads that were the best were the ones where rail and water met each other, and they were short. You want short railroads, high volume and near where you can change modes. And that's what we have.

Yes. No, it's a unique -- like I said before, a unique asset and that applies to the infrastructure in a good way as well. I guess when you think about the market now, are you a buyer or a seller in this market on the infrastructure side?

Well, we sold the Central Maine & Quebec Railroad, as you remember, we -- to Canadian Pacific that was here this morning. We bought it out of bankruptcy because no one else wanted it. It was the terrible accident in Canada. But we have looked at it when we owned RailAmerica, and we knew that railroad had potential. So we bought it for $14.5 million in bankruptcy. We invested $20 million, upgraded the track, put it really in working order. It was abysmally run. But we sort of looked at the market in Maine as a tough place to get a lot of -- there's not a lot of industrial and new industrial activity there. So we did what we thought we could, and the best value was really for Canadian Pacific to reconnect what was originally their railroad. So they bought it back for $140 million, and we said that's good because that's a very high multiple and we could never add what they could add. And so part of this is we like to build things at 3 to 5x EBITDA. We expect -- they've usually traded in the market at 12 to 14x EBITDA. And sometimes, if people will pay you 20x EBITDA, you'll sell it. But it's only after we feel like we've done what we could do or we've exhausted our -- what value we can add. So I think we'll do a little bit of both. It's hard for us not to take advantage sometimes of things that are really attractive when you build something that somebody else really wants and needs.

Yes. How is the sort of pipeline in terms of what you look at in terms of new opportunities for acquisitions coming across? I would imagine it's pretty good.

It's pretty good. It's pretty good. And with the Transtar acquisition, I think that's given us a base of -- we now have repair and maintenance business, we have transloading locations. We have 4 new industrial sites in Cleveland; Detroit; Longview, Texas, there's a huge property down there that could be developed which, as I mentioned, we hired Gary Long, and he's now on board. There are other terminals, I think we can operate for people. So there's a lot of avenues off of that, that I think will help us grow.

Okay. And what's the most exciting piece about running the Aviation business on a standalone? I -- we always viewed it as someone who's been there since the IPO, we always viewed that as the cash generation side of the business that had the ability to fund other opportunities. But now that you're going to have that as a stand-alone business, sort of what's the most exciting opportunity for you on the aviation side?

Just growing the service business to be able to create an income stream that's not predicated on just owning more assets. Because I think that's always been the biggest impediment with these leasing companies is that every year, you start the year and everybody wants to know how many assets you're going to add. And inevitably, you get pressured into doing deals, and that's when problems happen because you have to deploy the capital. And so not having that pressure is like we don't have to. And I think that's the exciting part, is to create a revenue stream that's not linked to owning -- always owning more assets.

And the contribution you envision over time is basically 50-50 from the lease book to the service book?

Well, I think it's important to have the leasing component. People said, well, why don't just jettison the leasing at that point. But if you think about it, we own these engines and we can monetize the residual value of the engine by leasing it and collect the full benefit of the savings. And so if you wanted to sell somebody a part and you say, okay, I'll give you a discount, I'll give you an incentive to do that, well, we've embedded the savings into our own engines and we're collecting the same rent as an OEM engine would collect. So why sell it?

Yes. Got it. And then a question coming in from the webcast is about risks around growing the services side. So is there something there that would be more of a challenge to kind of growing that back out? Is it just getting the FAA approval? Is that something -- dealing with obviously, the regulator side of it?

Yes, there's no one thing. I mean that's why we built a portfolio of services. We won the Lufthansa-WestJet deal with no PMA. So we can do business. There's no one risk, it's really about execution. And anytime you're trying to change the way an industry does something, it's hard. It's hard to get people, it's like, "Oh, you shouldn't do it that way anymore, you should let me do it or you should let me on your engine, or I'll exchange it to" -- it takes a lot of effort and people would be like, "Oh, go back to the other way." So that's the hardest thing. It's just getting -- changing a way that an industry operates in to some degree. But as I said, we're not looking at like -- 10% market share is like, okay.

Yes, so that really is it. I guess, it's just sort of how you think about the opportunity to ramp up towards that 10% share over time?

It's so big this market -- there's nothing -- I don't think there'll ever be an engine market as big as that engine.

Yes. Got it. So growth coming from both sides of the business, a spin coming in the not-too-distant future to potentially unlock that and then more growth to come after that, I'm guessing?

That's what we like.

Sounds good. Well, listen, Joe, thanks so much for spending the time. We're out of time, but I appreciate you participating in the conference again this year.

Thanks again. Thank you.

Thanks, everybody.