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

Good afternoon, everyone, and welcome to Barclays Americas Select Conference day 1. And I think this might be the last fireside chat session, and then we have drinks afterwards. But for those of you who joined us on the webcast, I'm Brandon Oglenski, Airline and Transport Analyst, and we're very happy to host FTAI Aviation Next. And with us from the company, Joe Adams, CEO. And you guys are running a very unique MRE and Aviation leasing business. So [ I figured ] I'd just give you maybe a couple of minutes to maybe introduce the business to those that don't know, and then we definitely have a lot of questions.

Yes. Thanks very much, Brandon. Thanks for having us. Very happy to be here today, and we do have an increasing amount of interest in Europe from a number of investors. So good to be invited and included and look forward to doing this in the future. FTAI Aviation is an outsourced provider of engine maintenance in the aftermarket for primarily 2 engines, the CFM56 and the V2500, which happened to be the engines that fly all 737NGs and A320ceo aircraft, which is the largest part of the world's commercial aircraft fleet. So we focus on those 2 engines. And what we do as a business is we acquire engines that are run out or have limits on how continued flying. We rebuild those engines through our own network and our own facilities, and then we go to market to the airlines or lessors with a product where we either sell that engine, exchange it for a runout engine or lease the engine to them. So effectively, it allows the owner or the airline to not have to do their own engine maintenance on those engines. In the aftermarket that becomes an increasingly complex process, higher prices today, and we can provide a tremendous amount of flexibility and cost savings directly to the customer. So it's a product that we introduced really going back 3, 4 years and has been widely accepted. We now have over 100 customers who have endorsed it and it is a growing number. Last year, we estimated about a $22 billion annual spend on maintenance for those 2 engines. We generated about $1 billion in revenues, so under 5%. And our goal over the next several years is to grow that to approximately 25% market share. And we think that that is achievable given the direct cost savings that customers and owners received as well as the new strategic capital initiatives that we launched earlier this year, whereby through a partnership, we'll end up owning -- being a direct owner of those 737NGs and A320ceos that are on lease. And as part of that arrangement, that partnership will contract to do all the engine maintenance and exchanges directly with FTAI Aviation. So the immediate conversion of that business over to our FTAI Aviation model as well as a growth and commitment and visibility for future engine shop visits, which will have a virtuous effect of giving us increased visibility and planning as well as allowing us to increase the efficiency and our ability to produce those rebuild engines.

Joe, I appreciate that. And maybe just as context for those, again, aren't that new to the story -- are new to the story, when you IPO-ed this business, it was really more focused on the aviation side, leasing aircraft and leasing engines. Can you talk about the evolution of how you got into the products business in the first place?

Yes. It started -- years ago, we started directly as an engine leasing business and then realized the biggest expenditure you make owning an engine is on the maintenance that you need to do to restore hours and cycles approximately every 5 years. You have to take apart that engine and rebuild it. And it's a very complicated and expensive process in the aftermarket. So at that time, we discovered PMA as an alternative to OEM parts, PMA is, as I call it, the generic drug equivalent for aviation, where you can go to the FAA and -- and if you can prove you can make a part equal to or better than the OEM part, you get a license to make it. And so that was a company called Chromalloy. We had a great experience with PMA and the CF6-80 engine, and then we realized the same opportunity was available for CFM56 engines. And that was about 2018. We realized that's the largest engine market in the world. It is a market that was maturing. It was -- most of the engines were moving off of power-by-the-hour programs with OEMs into aftermarket and we could take that competitive advantage proprietary product and really create a tremendous business model for that engine. So we decided to go all-in on CFM56 and as part of that, we wanted to vertically integrate and be able to do our own -- in addition to parts manufacturing, do our own engine shop visits, do our own teardown activity and do our own piece part repair business. And we've done all of that to bring out as much cost as possible, which makes us the best perform -- the best, most capable, most efficient provider of aftermarket maintenance for that engine in the world.

I guess, the evolution of that now has led to this SCI, Strategic Capital Initiative where you want to grow lease portfolio off balance sheet. Is that right?

Yes. So as part of that, we mentioned customers can be airlines and owners, owners being a lessor. And we started seeing that by delivering a rebuild engine, you can eliminate a lot of the negative experiences lessors have with either cost overruns, delays, getting engines in or managing the process themselves. And so as part of that, we realized that, that benefit that we can provide by doing these pre-built engine exchanges, we might as well confer that on a partnership that we could run and manage. And it was a part of the market that we hadn't really focused on necessarily before that because it's very capital-intensive. So about a year ago, we started thinking about that as a big opportunity to invest in owning these. We can do it in an off-balance sheet way with Strategic Capital is our -- the name is [ eventually ] Strategic Capital Initiative. And our first partnership was concluded at the beginning of this year. Our objective is to be able to invest $4 billion through that partnership which effectively translates into owning about 250 aircrafts. As part of the arrangement, FTAI Aviation will do all engine maintenance required for those aircraft in that partnership through engine exchanges. So if you think about the math of that, it's -- 250 aircrafts comprises about 500 engines, roughly 20% of those are due for a performance restoration or shop visit every year, so that's 100. If we do an engine exchange and each one of those generates roughly today for us about $2.5 million of EBITDA, that's $250 million of EBITDA from the new partnership that goes directly to FTAI Aviation. In addition, we'll get paid a management fee for running the partnership being the general partner, and we'll own 20% of it. So that allows us to build a customer that is 100% committed to engine exchanges and to accelerate our capture of market share via that method and to do -- potentially do a new partnership every year so that the cumulative effect of that would be very major and make us the largest owner of narrow-body aircraft in the world.

And Joe, on that first partnership, I think the first capital closed in late March. Is that correct?

Yes. Well, the first aircraft were closed in late March. We actually had equity capital committed at the end of December of last year. We then arranged debt financing, which was committed in mid-February. And then the debt financing was available to fund at the last -- the end of last week of March. So the first aircraft, which is 4 aircrafts that were sold from our balance sheet FTAI Aviation into see that portfolio closed in March. And then as also as part of that, there were a number of -- we've now got 98 aircrafts in the SCI lined up under letters of intent, of which today, approximately 30 have closed, and a lot of those were in the works for the first few months of this year would need immediate engines to replace engines that were run out and we had a sale leaseback with an airline that had a number of engines that were run out of time, so they needed immediate engines as part of the deal. So as part of that, we sold $100 million of engines from the Aerospace Products business to SCI in the first quarter, which represented about 30% of the total activity in this -- in the Aerospace Products segment for the quarter. We've indicated that that was a little bit high compared to what we expect the run rate to be. We expect for the full year to be about 20%. So -- but as I mentioned, there were some stacking requirements from the lease portfolio and a sale leaseback from an airline that made that number slightly elevated. So all of that came together and happened in the first quarter, which we view as a huge positive and a huge accomplishment to put all that together and get that done early this year, and we see that as a major driver of both the activity level in Aerospace Products as well as the visibility in terms of future pipeline. The more you know about what your engine requirements are going to be, the more you can plan, the more efficient you become and the better your margins are over time.

I think specific to the $100 million, there was a footnote in your earnings release that maybe caused a little bit of confusion last week, definitely some volatility in the stock. But effectively, this was associated with those other 26 aircrafts being closed into the portfolio. Is that right?

Yes, yes. And it was -- we view that as -- we had lots of alternatives of what we could do with those engines. The market is extremely strong, but we prioritized those engines for the Strategic Capital Initiative because we want to grow that business. We want that business to be very successful. So it was both a commitment and a financial goal to grow that and make that very successful.

I guess it's almost a validation of why you did the SCI. Is that right?

Yes.

Well, and I guess, along those lines, margins in the business have been, what, north of 35%, right? But recently, you guys have been talking about targets that maybe could reach close to 50%. What's -- there's been some discussion why is your margin so much higher than maybe a primary MRO competitor that's generating 10%, 15% margins?

Yes. So I mean, we combine a number of activities. And as I mentioned, our business model is unique in that we both do the maintenance and we own the engine. And so, we view the margin as a combination of 3 different components. First of all, the active repairing and repairing something for someone else tends to -- as a third-party MRO would generate typically 15% margin. The second part is, we have the ability by virtue of owning inventory and by having our maintenance capability, the ability to optimize green time. And we showed an example in our February slide deck where we took 3 engines that we acquired in a real-life example, perform maintenance, recombine them and created $6 million of value on a $10 million total investment. So that's a real optimization solution that we can bring to the table because of the extent of our ownership of assets and our maintenance facilities and our -- and then the third part of the margin will come from -- today comes from parts where we acquire and repair a lot of used serviceable material, which we recycle in our own shop visits and we also generate a lot of used serviceable material from our own inventory that we tear down. And then the growth opportunity will come from the addition of PMA which we think will contribute a significant amount of potentially 5 to 10 percentage points of additional margin once the full portfolio of PMA products is available.

Well, can we talk about the economies of scale you get by owning the engine fleet as opposed to just a traditional MRO shop visit where it's one engine, one owner and billable hours?

Yes, that's a great question. I mean, we run our shops very differently in that we only do our maintenance and restorations on engines we own. So we have no third-party engines owned by others in the shop. And what that allows you to do is 2 things. One is you can specialize, so you can have -- each one of those engines can be managed by a fan, a core and a low-pressure turbine and recombined at the end of the process, and you don't have to track whether those are part of someone else's fleet or not. The second thing you can do is, you don't have to track someone else's parts, so you can have parts inventory available, so you can operate like an assembly line. So as an engine comes down the line, you take whatever parts are available. You put it together at the end of the shop visit, you've got a fully built engine. So those efficiencies, the specialization and the efficiency of not having to track on the people's parts creates a very, very -- faster turnaround times and lower cost for refurbishing engines.

And this is effectively what a large airline like Delta will do with their own TechOps facility, is that right?

Exactly. So when we think about -- our business model is more similar to what the major airlines who own their own maintenance facilities do internally. So if you think about, if you own 400 aircraft and you have your own maintenance facility, your operation is very similar to the way we operate and -- or you could argue, we copied that model. And of the 600 owners of CFM56 engines in the world, there's only 5 that effectively have that ability. So the 595 other airlines that operate, we can provide that functionality to them on an outsourced basis, save them money and make great margins for ourselves at the same time, whereas that product was never really available because the major airlines who do it for their own fleet, they don't provide that to other -- that function to other airlines.

And what's been the response from your customer base?

It's been great. I mean, we now -- we announced we have over 100 customers. So we've had very, very high-level of repeat usage. Our pitch is almost always like just try it and use it once. And if you don't like it, then don't do it again. And we've always found that people were like, "Wow, this is amazing. I save so much time and money and I eliminate the potential cost overrun of having an engine being inducted into a third-party MRO shop." So we haven't had anybody that hasn't wanted to use it again or said anything about like -- they love it, they love the product. So we see the adoption growing and increasing throughout the entire industry, really. I don't see -- I've never had anybody say there's something wrong with it. If you could provide the same engine to someone for a lower cost with no other associated expenses, why wouldn't people do it?

Okay. Can you talk about physical capacity in your network to reach your EBITDA targets? I think this year is $1.1 billion or $1.1 billion to $1.5 billion, $1.4 billion by next year.

Yes. So we have -- today, we have the capacity, physical capacity to do about 300 shop visits in Montreal, 150 in Miami. And then closing this quarter is an investment in facility in Rome, which will add another 150 engines. So that engine, that adds up to about 600 shop visits of physical capacity per annum. And we are increasing our production rates in Montreal, the most this year, so that's ramping up, and we will bring on Rome this summer. And we've made a substantial investment in advance in parts. You saw in the cash flow statement, we called out $200 million investment in the first half of this year in parts inventory, which is in anticipation of that. And so, the only remaining piece of that is mechanics. You have to have people to do that, we are adding mechanics in Montreal as we speak this quarter. We've invested a substantial amount in that in the first quarter. And then we will ramp up Rome the latter part of this year, in the second half. So we believe that what we have today in place will be more than enough capacity to hit those targets.

Okay. I think some fair concerns around your margin profile has been what the aftermarket has been really on Aerospace, especially with the GTF grounding, especially with MAX delivery delays and just overall aggregate OEM challenges. Once we finally get that worked out maybe in the next 2 or 3 years, if asset values decline, especially on the CFM56 platform, won't your margins be impacted by that?

Yes. So we view our business as more of a spread business and that we buy -- as I said at the very beginning, we buy runout engines, we rebuild them and then we go to market. And the cost of shop visits is not cyclical because it's driven mostly by parts prices which only go one way. They always go up. So when you think about an engine, it's replacement cost is driven off of what it would cost you to rebuild it as long as you continue flying and you have to do shop visits, you're going to have to do that. That's going to be your benchmark for comparisons. The only thing that, cyclically, what can drive engine prices in the secondary market is if you have a downturn and you have a lot of excess equipment available, but the engine market is the best self-correcting market for supply-demand in any market. And that if you have to do 20% of your engines are due for a shop visit in any 1 year, if you have a cyclical downturn like we had in COVID or other times, people stop or reduce the amount of shop visits they're going to do, which means that if you stopped all shop visits, 10% of the fleet, you'd retire that in half a year. So it tends to be self-correcting and self-regulating in terms of the price. And then the price is really set off of the OEM's parts prices. So you can see temporary disruptions, but we view ourselves as -- that would also give us an opportunity to buy cheaper and rebuild and still on the same margin.

And by the way, if there's Q&A in here, I think we have a mic if you guys want. But Joe, I guess along those lines, as we think about competition, why is another MRO provider not doing this? And won't your margins entice more competition or maybe a reaction from the OEMs as well?

Yes. And we think about that all the time. And I think you're right, the MRO industry, third-party MROs have the capability to do what we do, but the key is, as I mentioned at the beginning, is our business model is to combine ownership of assets with maintenance. So if you're a third-party MRO today, I'm not aware of any third-party MRO that owns a significant amount of their own engines. They mostly are going out and pitching airlines and other customers to give them third-party -- to do third-party work on those engines. So step one would be acquire a bunch of engines, get a bunch of capital from somewhere, buy the engines and then most third-party MROs have more than 1 engine they do. So you have to select one. We -- 7 or 8 years ago, we said we're just going to do CFM56. We sort of did the opposite of what most people do is we were anti-diversification. We went all in to concentrate on one engine. So somehow the MROs would have to say, okay, I want just to do this engine and then you have to take some of your capacity, which right now is very full with LEAP and GTF work that's been promised to third-parties and promise third-party turnaround times and you'd have to allocate that somehow to your own engines. So there's a lot of reorganizing that people would have to do. I'm not saying it's impossible. The other impediment people have is that we don't have OEM ties restricting us from using PMA. Many other people do and many other customers wouldn't necessarily embrace PMA. So you reduce some of the cost savings opportunity available. So I think there's a lot of things that people have to overcome. And at the same time, those businesses are doing quite well given the amount of GTF and LEAP business they have. So I'm not sure they have necessarily the incentive to do all that.

Okay. We talk about cash flow because I think that's another concern. Especially last year, just didn't see a lot of cash from operations, but there were a lot of things moving underneath the surface there, especially the buildup in inventories because you do have 2 different accounting treatments for your lease portfolio versus your aviation products portfolio. So maybe you can speak to that.

Sure. So last in 2024, we had 3 great strategic initiatives to grow the business, which we capitalize on. One was acquiring the Montreal facility for $150 million. The second was the V2500 deal we did with Pratt & Whitney involved over 100 shop visits. So we increased the size of our fleet, owned fleet of V2500 up to 150 engines. And then the third was buying out the management contract from Fortress. So none of those are repeating cash flows. So we go into 2025, and we showed $650 million of cash from operations this year. The first half of the year has the Strategic Capital Initiative transactions in there, which we broke out in detail where we're selling 46 aircrafts from the balance sheet of FTAI Aviation to see the SCI portfolio and we're investing $300 million in replacement CapEx, which is to replace some of the engines that moved with those aircrafts from the balance sheet of FTAI to acquire in the secondary market, which we've largely done this year. And then the third part was really on building up the parts inventory in anticipation of a ramp. But all told, we're seeing $650 million of free cash flow this year. And as EBITDA ramps up, that should only increase.

And on the SCI, can you talk about the economics? I think you guys are committed to 20% of the equity. Is that right?

That's correct. So we're estimating $4 billion invested this year, roughly 70% of that will be debt financing, which has been committed and is being provided by Apollo and Deutsche Bank. The balance would be equity of $1.2 billion and our 20% would be $240 million of that, of which the first half of this year will be roughly $100 million, the second half, $140 million, so that's our -- that's the structure. We're a limited partner investor for 20%, then we're also the general partner where we receive a fee for managing the partnership on total assets and also all of that FTAI Aviation Engine Exchange business from the partnership is committed to go to FTAI Aviation, which is that's the $250 million -- that's the 100 engines a year. We estimate that will be done through engine exchanges once the partnership is fully ramped up. So there's a tremendous amount of benefits for all parties. It's both FTAI Aviation benefits for those 3 reasons, the fees, the equity investment plus the engine exchanges and the partnership benefits because the economics of those engine exchanges are fixed and optimized, so that the objective for the partnership is to generate higher returns with lower risk. So we think it's a win-win on every side, and it's something that we intend to continue to advocate for growing that over the next coming years.

And traditional lessor would be pushing out the maintenance on to the airline, is that right?

Yes. The typical structure of -- if you have a 5-year lease with an airline and an engine is due for a shop visit, the lease would require maintenance reserves to be paid to the lessor, then the airline does the engine shop visit however they might decide whether it's a third-party MRO and then they would withdraw those maintenance reserves to pay for that shop visit. So what we do is we've ended up doing exchanges, so that the outflow from that engine exchange is less than it would be if you were doing it the traditional way. And secondarily, the residual value would be less because that engine is targeted to have the number of hours and cycles needed to complete the lease -- so you reduce the investment, you increase the cash flow, which reduces the risk and increases the returns.

On the 45 or 46 aircrafts that you've committed to the SCI, you've delivered a few already, but I think you're guiding to about $500 million of leasing EBITDA this year, which is similar to what you did last year. Is that going to be made up by those $300 million of incremental purchases?

Yes, it's several parts of it. We think it will exceed the original EBITDA from a gain on sale of those 46 aircrafts. The 20% ownership of EBITDA that we pick up from the partnership -- from the partnership, the SCI partnership that flows into the leasing business. And then the EBITDA from the $300 million replacement CapEx, those 3 and the management fee, the combination of those items would exceed the EBITDA from the prior year.

And then on the Aerospace Products side, $600 million to $650 million is the guidance this year for EBITDA. Is that right?

Correct.

And again, what's the targeted mix coming from the SCI deal?

So 20% roughly for the year.

On the $1.4 billion of EBITDA target for next year, have you guys provided any indication of where you'd like to see your leasing versus the Aerospace Products business?

Yes, it's $550 million of leasing EBITDA and the balance was Aerospace Products.

Okay. I guess, longer term, another concern investors have, though, is like this is a great business. It's clearly working. They can understand that this is economies of scale for a small airline. That's why you're getting the demand you are, but ultimately, this is a platform that's out of production. So how do you put a long-term value on the business?

Two things. First of all, I think that the platform for the CFM56 and the V2500 is basically from way we looked at it is we're going to have locked in growth for 10 years. So that's where -- that's a starting point. And then secondly, our expectation is starting in 2028-2029, we will begin investing in the next-generation engines, which would be the LEAP and the GTF. So at that point, you'll have enough engines coming off OEM power-by-the-hour programs. You'll have a stable platform. And most likely, there will be some announcement of another engine coming which has a tendency to depress secondary market prices, so you can buy at better prices. So our expectation is that starting towards the end of this decade, we will begin moving into the next engine.

Okay on the PMA side, I know you've had this JV with Chromalloy now, I think, since 2018. I think you have 2 parts approved in for sale in the market. Is that right?

Yes.

I guess I've been covering you guys a long time. We've always been waiting on the third and fourth and fifth part. Any update on time lines there?

Yes. What I've said is excellent progress being made. We're nearing the home stretch, and it is very close for the next part to be approved, which is the most significant part. The 80% of the savings will come from the first 3 parts in the program.

Okay. And maybe on the used serviceable materials side, how does that work? Because you have a partnership with AAR? Is that correct?

Yes. So we decided years ago that as part of our acquiring engines and harvesting, when we split them into modules, fan, core and LPT, sometimes it's better strategy to part out one of the modules. We did not want to build our own parts distribution business. So what we did is we went to AAR and said, when we have a engine teardown or module teardown, for the parts that we don't recall for our own engine build, we will sell them through your network for a fee. And AAR manages the repair process on those parts and then gets paid a distribution fee when they sell those parts. So these are parts that we're not looking to be using in our own engines and it allows us to be able to optimize, again, the waste nothing aspect of our business, which is to harvest the value from each part of those -- every part of that engine in the most efficient way.

Okay. And I want to come back to a concern just around the idea that once -- well, [indiscernible] figure out the GTF fix and get those airplanes in the air. And Boeing is obviously ramping up production. At some point, we'll get better utilization of the newer narrow-body technology. Doesn't that just depress MRO activity and engine overhauls in aggregate in the sector that you're in?

Well, the most recent estimates from Cirium where that the total $22 billion a year spend for maintenance on the V and the CFM was just extended out to 2030 to be at roughly $22 billion a year. So no decline in that number for the next 5 years, and then it starts -- will start to taper off. So very stable spend. You've had a huge shortfall in both deliveries and availability of everything in the narrow-body market for the last 3 to 4 years. So there's a big hole that has to be filled before you're going to have anything excess of what airlines need. So the combination of those 2 is creating a very, very strong environment over the next 5 years. And then the question always is, well, what is the rate of decline on CFM56 and V2500 after that? And my experience with other engines in previous generation equipment has been, it lasts a lot longer than people realize. There are 757s that are almost 40 years old that are still being utilized in 767s. And even CFM56-3C1s are still flying. So there's a long life to these assets because second-, third-tier operators, cargo carriers, they care a lot about capital cost. And to buy a new 737 MAX or A320neo in 2030 could be $60 million to $70 million. So if you look at that and you say, "Well, I could buy a 737NG for $12 million or $14 million," there's going to be a lot of people that are going to do that. I'm not saying that this is going to be anything that's outside the norm. I'm just saying, I think there's more upside for these assets flying longer than people realize.

Well, in discussing your margin profile and why you can generate better margins than your competitors, you did talk about owning the MRO capacity, but that's not necessarily the case on the V2500 program that you guys have, so can you talk to the size of that fleet and the arrangement that you have with Pratt?

Yes. So we expect -- we signed up for 100 shop visits with Pratt. We still can do our own engines outside of that Pratt agreement. So to the extent we want to do builds with using other used serviceable material or advanced repairs, we can still do that. We're focused on between 25 and 30 engines this year for the V, and it's a very good relationship. It's not -- when that agreement ends in terms of the rebuild, we'll then have to have another conversation like, do we do it, which way do we go, which is the conversation we've had always. We have a choice. We can either -- we can go one way or another, and then it's up to sort of the math for both parties to figure out what's the optimal answer to that. But the key is always to have options.

Okay. I think we're coming towards the close here, but can you give us just your expectations on how fast the SCI closes on that $4 billion target?

We think we'll be fully invested by the end of the year on the $4 billion.

And is there any concern that -- in the marketplace, everyone knows that now you're looking for 737NGs or A320ceos, does that impact the pricing or the availability of those assets?

No. I think that we've seen a very -- it's a big, big market. So if you think about -- there's roughly 14,000 aircrafts in operation, 50% of those are owned by lessors. If you just take the turnover, typical a 20% turnover from just lessors selling, you're talking about a $25 billion to $30 billion a year investment opportunity. And then on top of that, you have airlines who are looking at -- they decided recently in the last few years that they're going to keep those 737NGs and ceos flying longer and they didn't necessarily do the engine maintenance to allow that to happen. So there's a lot of aircraft that are coming up where engine maintenance events are needed. And so as part of the sale leaseback that we deliver, we can deliver replacement engines and it solves a huge problem for an airline. And no one else can provide that function in the market.

[indiscernible] FTAI. It's looking good, Joe.

I don't know what's going on out there.

But that is an advantage when you're in the sale leaseback market competing with other lessors, right?

Correct. Because if you were a typical lessor does not own a maintenance facility, so if there's a portfolio of aircraft that are presented and you have, say, for example, 10 engine shop visits you need to do in the next 2 years, that is a very scary proposition if you don't control a maintenance facility because you have to find somebody to do that. It's a very tight market. Turnaround times are increasing, parts prices are increasing. There's a lot of risk for that if you're purely a financial provider. And so we have much, much less competition for those types of deals where you're basically providing engine availability as part of the solution.

Maybe last question because I think we're about out of time. But Joe, can you just talk about the capital required to sustain this business looking forward, especially when you get beyond [ seeding ] the SCI?

Yes. So if you go back, originally, what we've said to run our business the way we want to run it, we felt like we needed to own in the system about 450 to 500 CFM56 engines and then 150 to 200 V2500 engines. We are basically at those levels now. So we feel we can deliver the engine certainty that customers need to be sure that we can always provide that engine to them. And that's part of what the commitment is, we commit to do the engine exchanges and always have an engine availability and the airline or the lessor commits to doing engine exchanges with us. So we feel that we've achieved that level. So when you look at the cash flows going forward, we will run our business with 450 to 500 CFMs and 150 to 200 V2500s and everything else should be free cash flow.

Well, Joe, thank you very much. I know it's been volatile for your stock, but it's been a good run in the last few years, and I think a lot more to come.

Thanks for the support.