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

Good day, and thank you for standing by. Welcome to the Second Quarter 2026 FTAI Aviation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference will be recorded. I would now like to hand the conference over to your first today, Alan Andreini, Investor Relations. Please go ahead.

Thank you, Marvin. I would like to welcome you all to the FTAI Aviation Second Quarter 2026 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer; David Moreno, our President; Nicholas McAleese, our Chief Financial Officer; and Stacy Kuperus, our Chief Operating Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Thank you, Alan. FTAI today operates in 3 principal businesses. aerospace products, asset management and power, which are each driven by our expertise in aftermarket turbine performance. Each of these 3 achieved amazing results in Q2 and including aerospace products increasing production over 60% year-over-year and adding new capacity, bringing our total physical CFM56 module production capacity to 3,000 modules per year which is enough to achieve our 25% market share objective and produce 100 Mod-1's per annum. SCI finished investing the 2025 SPV, made a regular and special distribution to investors and launched the 2026 SPV with a target raise of $6 billion, which will take us in just 2 short years to over halfway to our target for asset management of $20 billion of AUM. Power signed an anchor customer for our proprietary Mod-1 with many more expected to follow, which, if it is as successful as we believe it will be, we'll extend the economic useful life of the CFM56 by decades. Well done to everybody and a big thanks to the dedication and enthusiasm of our 1,500-plus employees. The second quarter was a continuation of many of the themes we discussed on our first quarter call. So this morning, we'd like to build off those key objectives we laid out and update you on the progress of each. Starting with aerospace products, first, let's discuss market share. Last quarter, we said accelerating market share growth was our top priority for 2026, and that's exactly what's playing out. Our market share grew from 12% to 14% this quarter as gains from our production capabilities, parts procurement strategies and overall maintain repair and exchange MRE customer adoption continued. We're confident this trend will continue as the market develops and our differentiated approach to engine maintenance delivers time and cost savings to our customers. Second, as the market for CFM56 and V2500 engines matures further, demand for engine solutions from top-tier airlines, even those with in-house engine MRO capabilities remains very strong. We offer flexibility, customized pricing and scale that no one else can match and these large programs are very sticky. We made more progress again this quarter. As some of our peers have noted, the CFM56 market is supply constrained, not demand constrained. Today, our module production is increasingly directed toward our third-party customers rather than to our own aviation leasing pool. This is a deliberate shift in allocation and it reflects the strength of third-party demand the superior economics of putting our module output to work in customer-facing channels and our ongoing focus on an asset-light balance sheet. In the second half of the year, we will continue to prioritize market share and long-term customer relationships over our on-balance sheet assets. Third, production and footprint. We've always talked about expanding production capacity well ahead of growth and more recently about adding maintenance capabilities east of Rome, Italy. This quarter, we advanced 2 exciting developments, one in Egypt and one in Indonesia that bring us closer to our customers, add module production and diversify our footprint. David will talk more in a few minutes on those. Now on strategic capital. The 2025 SPV is now fully committed from an investment perspective and execution is on plan, with the vehicle completing its first targeted quarterly cash distribution on June 30. SCI's inaugural asset-backed security or ABS issuance during the quarter also enabled a special distribution to investors in July. And we've launched the 2026 SPV, and the vehicle is actively making commitments to acquire aircraft today. Our business plan for SCI has always been to make the vehicle launches programmatic and we are excited to have graduated to the second SPV. We've demonstrated that combining our investment capabilities with our engine maintenance solution creates a differentiated outcomes for our partners. And this has resonated and resulted in strong support across our investor base. Finally, FTAI Power. The business continues to make great progress towards its commercial launch in the fourth quarter. As we announced last week, J&F Power Systems, our joint venture with Jereh Group signed a master supply agreement with a leading U.S. hyperscaler and an initial purchase order valued at $1.465 billion, for 2027 Mod-1 deliveries. We're very proud of our combined teams for their hard work in establishing this great long-term relationship. I'll now hand it over to David to share more details.

Thanks, Joe. First, I'd like to talk about our mindset at FTAI. At our core, FTAI is a company of entrepreneurs. Each of our businesses, aerospace products, strategic capital and power. We are disrupting industries with large addressable markets and deploying capital where it generates the most attractive long-term risk-adjusted returns. We're always thinking ahead to the next challenge because the next challenge creates the next opportunity. This quarter, we focused not only on execution but also on continued investment in the foundation for future growth. I'll start with execution. Aerospace Products delivered strong top line revenue growth of 78% year-over-year and 18% quarter-over-quarter. Second quarter adjusted EBITDA of $250 million was up 51% year-over-year and up 12% from the $223 million in the first quarter. EBITDA margins of 29% were in line with the prior quarter, which is a continued reflection of our decision to prioritize market share and large customer penetration. We expect this to be the trend line going forward as our scaled production capabilities allow us to bring volumes to markets that others cannot. On the production front, we refurbished 296 CFM56 modules this quarter across our 4 facilities, an increase of 61% compared to Q2 2025. That brings first half production to 566 modules, which is ahead of our midyear target. We now expect total module production for 2026 to be 1,200 modules, up from 1,050 we originally projected, reflecting the continued momentum in our shops as well as the hard-working commitment of our fast-growing team. Joe mentioned that we're in a supply constraint, not a demand-constrained environment for the CFM56 engine. And I want to drill down on that a bit. First, the CFM56 population remains very young. Forecasted aircraft and engine retirements remain low and aircraft lives are being extended. Against that backdrop, we have made a proactive shift to direct our available module production for third-party customers. Long term, this is structurally positive for FTAI and for the longevity of the CFM56 business, but it does negatively impact our near-term aviation leasing results. Between prioritizing an asset-light balance sheet with less asset reinvestment and placing a small portion of our module production back into our leasing fleet, we now expect 2026 aviation leasing EBITDA to be lower than our most recent guidance. Nicholas will share revised outlook shortly. This is a further reflection of our strategic evolution from an asset-heavy leasing business to a company focused on advanced turbine technology, built to disrupt the world's aviation and power markets. We are confident we are allocating our capital and resources to the most value-added markets for our investors with a commitment to creating long-term shareholder value. Against a supply-constrained backdrop, we have now -- we have spent considerable time and resources over the last 12 months identifying the best maintenance partners worldwide in key regions where adding capacity is both strategic and drives network efficiencies. Today, we are pleased to announce 2 new strategic shop partnerships as well as our expansion at our Rome, Lisbon and Montreal facilities. The first strategic partnership is with GMF AeroAsia in Jakarta, Indonesia. This 250,000 square foot facility has both 5B and 7B heavy repair capabilities as well as an engine test cell and over 200 technicians. The facility is majority owned by Garuda Group, an important FI customer, and we look forward to moving large volume of engine work for airline in Southeast Asia to this shop. The second is with EgyptAir, Cairo. This facility is over 100,000 square feet, also has a test cell on today's focus on the 7B. We believe labor availability in Taro is very attractive, and we look forward to building connectivity between the EgyptAir shop and our Rome and Lisbon facilities to further strengthen our Europe and Middle East maintenance network. Staying on the theme of expanding capabilities, we are also developing a new test sell at our QuickTurn Europe facility in Rome that will include both CFM56 and LEAP testing capabilities. We've talked about LEAP engine maintenance being an important part of FTAI's future, and this is an intentional investment in our broader LEAP plant. As the LEAP engine matures, we want the infrastructure in place to extend our maintenance model to next-generation engines and Rome will be an important anchor for that. We are also grateful for the strong support of ADR at Fiumicino Airport, a critical partner in our -- in the continued growth of our QuickTurn facility. Finally, we have been very impressed with our Lisbon team, and we're committed to making them a significant player in Europe. We're adding a 113,000 square foot facility to our network with the goal of expanding production capacity to over 300 modules per year. On the cargo front, we announced a partnership with AEI, a leader in 737-800 freighter conversion. The combination of FTAI's engine maintenance capabilities and AI's conversion leadership will deliver customized freighter solution at a scale and at a lower cost. This partnership also reinforces how we think about the CFM56 life cycle, maximizing value in passenger operations, extending life through cargo and ultimately redeploying proven turbine technology into mobile power. Next, I'll share a few updates on the strategic capital. The 2025 SCB is now fully committed with over 300 aircraft closed or under LOI and has transitioned to harvest mode, making its first regular quarterly distributions on June 30. We expect distributions to continue every quarter until the vehicle is fully realized in 4 to 5 years. Our team continues to focus on capital market transactions that maximize returns by reducing the cost of asset level debt and optimizing the financing structure to align with portfolio cash flow. One big accomplishment during the quarter was SEI's first ABS issuance MRE 2026 which consisted of $612 million of bonds and allowed for a special distribution to investors in July. We've officially launched the 2026 STV and are actively putting aircraft LOI for the vehicle. FTAI will remain a large co-investor in the vehicle with a 15% commitment and the investment strategy in structural will remain consistent with the 2025 SPV. Importantly, with all the engine maintenance being performed by FTAI creating a large competitive advantage. Turning to FTAI Power. This was a landmark quarter for the business. As Joe mentioned, our joint venture with Jereh Group signed a 5-year master supply agreement with a U.S. hyperscaler along with an initial purchase order valued at $1.465 billion. This single order fulfills a key portion of our targeted 2027 Mod-1 delivery equipment delivered in batches through November 2027 to support customers' rapid power infrastructure build-out. The commercial structure of this agreement is worth highlighting. The order came with a significant advance payment at signing followed by milestones-based progress payments through production, testing and commissioning. Meaning the customer is funding the production ramp as we go, which meaningfully derisk our working capital investment in the business, and the 5-year master agreement is built for expansion. It establishes the framework under which -- the customer can issue additional purchase order, so incremental volume can be added quickly without renegotiating terms. Beyond this agreement, we are in active customer conversations to build further backlog for '27 and beyond. We won't be providing further commercial updates until agreements are finalized, but the level of inbound interest reinforces our conviction in the market opportunity. Importantly, the Mod-1 is not a stopgap solution. It's a platform we are already evolving. Our technology road map includes SCR for emission reductions and combined cycle for efficiency gains, product advancements that position the Mod-1 to compete with grid power on cost and reliability. This is a product built to last for the next 2 decades. And with an anchor customer signed and commercial launch on track for the fourth quarter, we're just getting started. I will now hand it to Nicholas.

Thanks, David. The key metric for us is adjusted EBITDA. We continued the year positively with adjusted EBITDA of $291.4 million for the quarter. The $291.4 million EBITDA number was comprised of $249.7 million from our Aerospace Products segment, $88.2 million from our aviation leasing segment a negative $46.5 million from Corporate and Other, including interest segment eliminations and start-up expenses associated with our power initiative. Aerospace Products delivered another good quarter with $249.7 million of EBITDA at an overall EBITDA margin of 29%. This is up 12% sequentially from $222.6 million in Q1 of 2026 and up 51% year-over-year compared to $164.9 million in Q2 of 2025, reflecting continued momentum from production growth and operating leverage. Turning to Aviation Leasing. As David mentioned, we continue to evolve our business model to be more asset light with SCI now being the home for leased assets. This, in turn, will result in a smaller aviation leasing business in the near term until growth resumes in 2027. The remaining leasing portfolio continues to perform well and generated approximately $88.2 million of EBITDA in the second quarter. This included $5 million of insurance recoveries, $48 million in balance sheet leasing and gains on sale and $35 million from 2025 SPV management fees and co-investment returns. Our balance sheet continues at a leverage profile in line with our target range of 2.5 to 3x and ended this quarter at 2.7x. During the quarter, we also redeemed a part the $105 million of 8.25% Series C preferred shares outstanding and received a credit rating upgrade from Moody's to Ba1 underscoring our continued balance sheet strength and the success of our transition to an asset-light strategy. Next, in the first half of the year, we generated $255 million of adjusted free cash flow, which included funding the final $95 million capital call under our 2025 SPV equity commitment for SCI. For the full year, we are maintaining our target of approximately $1.2 billion of adjusted free cash flow before new growth initiatives. This reflects our decision to reallocate module production to aerospace products, over maintaining the engine leasing portfolio as well as an additional $30 million of R&D investments in FTAI Power to advance new capabilities. These impacts are partially offset by enhanced economies of scale in aerospace products, driving an improved working capital outlook. On new growth initiatives, we are accelerating the Mod-1 production build-out by $150 million following successful engineering testing and robust commercial demand. While a capital coal financing facility for the 2026 SPV will bridge a substantial portion of FTAI's equity co-investment funding into 2027. Inclusive of this, overall, we are updating total adjusted free cash flow for 2026 from $915 million to $878 million. To expand on David's earlier point, as we continue to prioritize an asset-light balance sheet, our aviation leasing EBITDA will naturally decline until SCI's contributions fully kicks in. Given the strong demand we have discussed from third parties for our module production, this has shifted more than expected year-to-date. Therefore, we are revising our 2026 aviation leasing EBITDA to $475 million for the year, and we are reaffirming our 2026 Aerospace Products EBITDA of $1.05 billion. Next, I would like to discuss 2027 guidance. We expect to generate total business segment EBITDA of $2.3 billion, broken down as follows: Aerospace Products of $1.4 billion, Aviation leasing of $450 million and Power of $450 million. With that, I'll hand it back over to Joe for final remarks.

Thanks, Nicholas. This is a quick summary as our Aerospace Products business continues to benefit from a supply-constrained environment. we make further strides to an asset-light model and FTAI Power advances, we remain confident in both our 2026 and 2027 outlook, including our free cash flow expectations. As a result of this confidence for the fourth consecutive quarter, we're announcing another increase to our dividend from $0.45 a quarter to $0.50 per share. The dividend will be paid on August 24 to shareholders of record as of August 12. This marks our 45th dividend as a public company and our 60th consecutive event since inception. As we look ahead to the rest of 2026, our focus remains on building and expanding on the durable, scalable and differentiated platforms that deliver value over the long term. The investments we are making across aerospace products, strategic capital and power will continue to strengthen our competitive position, expand our addressable markets and support sustainable growth for many years to come. And with that, I'll turn it back to Alan.

Thank you, Joe. Marvin, you may now open the call to Q&A.

[Operator Instructions] And our first question comes from the line of Kristine Liwag of Morgan Stanley.

So maybe following up on your 2027 outlook and FT Power. I was wondering if you could clarify a few things. So you've talked about a $250 million EBITDA for Power in 2027. But at the same time in your supplemental deck, you've talked about an over 100 module deliveries in 2027. So if we just do that math, that seems to imply only about $4.5 million per module, which seems to be significantly below the economics that you had provided before. So I was wondering, can you clarify whether your 2027 outlook accounts for 100 air derivatives? Or is this a lower number? And how do we reconcile this with the terms of the strategic agreement you provided with Jereh. Is this an apples-to-apples on 100? Or are there changes in units we should think about?

Sure. Sure. Happy to do that. So just the first point is the $450 million does not assume 100 units, it's materially less than the 100 assumption. And just as by background, since this is a new business for us, and happily, we have the first signed contract in hand for material portion of next year's production we took a look at a range of outcomes possible for 2027 and came up with a range of $450 million to $750 million. So -- and what we decided to do was start with the $450 million at the bottom end of the range, where we have the highest conviction and the most visibility such that as we sign up additional customers and contracts, which we very much expect to do we hopefully will be raising that number up from $450 million, not decreasing that number. So the economics we're seeing on the first contract are consistent with our previous expectations. We're very pleased with the outcome to date. But we want to -- since it is a new start-up business for us next year, we wanted to start out on very firm footing.

Great. So -- and Joe, just a follow-up on that. I want to confirm that with the economics for Power going forward, is it still about that $1 million to $2.5 million per megawatt for the CFM56 conversions?

Well, do you want to chime in?

Yes, this is David. So Kristine, as you can imagine, it's commercially sensitive, so we're not going to be providing exact numbers. Obviously, we're working through various customers, and that is an important piece. I would just reiterate what Joe said, right? The unit economics are -- there's not been any change to those unit economics. I would think about -- obviously, we're still targeting 100 units for next year. As you know, it's a building we're starting -- it's a business we're starting for 0. There are going to be some ramp-up costs and there are going to be -- the timing could shift. So we just wanted to start off with a number that was the most conservative and then be able to build from there.

Super helpful. And if I could sneak a third one in. On Aerospace products, you are clearly spending money for capacity to be able to get to your long-term market share target. In terms of margins, can you talk more about what's driving that pressure? Any color on how we think about mix? And also, right now, EEG has said that they are 40% oversubscribed on service visits this year, 20% spare part delinquency. It seems like that's a fairly robust environment for engine MRO. So even if you were increasing market share, I would have thought that margins could have been maintained. Can you talk about the dynamics there and where you think margins could bottom in this industry for your specific business?

Sure. So, I'll start with that. And as we talked last quarter, a lot of the margin compressors come from mix and that we have a higher percentage today of the heavy shop visits more of the full performance restoration which means you make a similar amount of dollars per engine, but you have to invest more to get that. So it naturally mathematically produces a lower outcome. And where we want to get to with customers is where we do everything for the customer so that they no longer have to do any engine maintenance, CFM56 maintenance on their own. And so we are inclined to go for, say, yes and take market share. And we indicated that for the -- what we classified as the near term, which I would say is probably 1 to 2 years we expect margins to be around 30%. We can take a look at it as we get out further, and we have increasing market share, increased penetration about whether we take price up, but we're trying to set expectations around 30% for the near term.

Yes. And I would add that, look, we're thinking about the business in a long-term environment, right? So we're looking for over the next decade. And for us, we're -- as we mentioned, we're intentionally working with and targeting Tier 1 airlines, right? We see enormous benefits not only for CFM, but other engines, future engines as well as benefits with fleets, for example, being able to enter into new leaseback transaction. We mentioned it on our previous call, but it's important to reiterate. This, for us, scale is very important because it benefits all our businesses. And that's the way that we're thinking about it. So 30% margins or it's the margin that we're going to hold. We feel very good about the long-term value add of achieving those margin profiles.

Our next question comes from the line of Sheila Kahyaoglu of Jefferies.

I wanted to ask about Aerospace Products margins. So 2 questions on that. The first is just a follow-up to Kristine's. When we think about the 500 bps of margin contraction, I guess, how much of that was due to customer share gains versus heavier work scopes and how SCI as a customer factors into that?

Yes. I think the mathematical example I walked through is helpful in that. A lot of it is driven by the percentage of the heavier performance restoration work that we do. And if you take, for example, a 6,000 cycle engine, which we might sell for $6 million. We can make approximately $2.5 million, which is about a 40% margin. If you add to that a full 10,000 cycle engine and you sell that $12 million, let's say, we make $3 million on that. When you blend -- if you do one of each mathematically on one, you're making 40% on the bigger ones you're making 25%, the average is about 30%. So a lot of the -- most, I would say, of the compression comes from the mix. And we want to do that because we want -- as I said at the beginning, we want the customers to be using all of our engine capabilities. So we're even though you make less -- in terms of percent margin, you make more dollars. And so more dollars is what we're prioritizing.

No, that makes tons of sense, Joe. And then maybe -- as a follow-up to that, you announced Cairo and Jakarta. You guys are busy traveling all around, how do you think about how those 2 new sites funnel into just whether it's winning new business locally? Or how do you think about how that helps source engine feedstock as well as spare parts as well?

Sheila, this is David. I can take that. Yes. So first off, obviously, it increases our production capability. So overall, we're raising production capability capacity from 2,000 to 3,000 modules, which is obviously very important, especially when we're increasing market share and then introducing power. So we're well ahead of what our target -- the capacity we need to achieve our '27 EBITDA as well as our 100 mod productions. As we mentioned, it's always important for us to build a presence near our customers, right? We did not have a facility east of Rome. So that was something that we continue to reiterate. We're very happy with both locations, right? They all -- number one, they have the infrastructure already built out of both. They have world-class facilities, they have capabilities, tooling. They have also a test cell. Number 2 is they have access to technicians, right? So both areas have a lot of young talent. Jakarta, for example, has close to 40 million people within the city and the outskirts and then Cairo has over 20 million. So we obviously -- I've done this a few times. We have a playbook. We're going to effectively put a lot of throughput through those shops and they're going to guarantee capacity. So that's really kind of the goal. Each of these strategic partnerships have 2 phases. The first phase is we, again, guarantee throughput and we get capacity. And the second is we want to be a long-term shareholder and being a partner. So they're effectively the same exact framework that we've done the other shops, and they're key to getting closer to each of the airlines in those regions as well as getting closer to the country.

Our next question comes from the line of Josh Sullivan of Jones Trading.

Just as far as the comments on shifting away from the legacy leasing and towards the asset-light model, how should we think of that whole segment as SCI becomes a bigger contributor. Is it still primarily a leasing business next year? Or are we going to be calling it something else? Is there any reorg at some point, I guess?

Josh, this is Nicholas. I can take that. So as we exit the year, we expect Q4 to be a majority earnings stream from the SCI. And so going into next year, you can think of it over a majority of SCI earnings will be -- or sorry, a majority of aviation leasing earnings will be from the SCI. So as we look to potentially resegmentation in next year, effectively, that's how you can think of it as the 3 businesses we speak of. So aerospace products, power and strategic capital, our financial reporting should be reflective of that.

And I've started to refer to it as you may have noticed, is asset management. So that wasn't an accident.

I can imagine it was. And maybe just shifting over to the LEAP, LEAP to test cell for '28, what time line could LEAP enter the whole FTAI ecosystem, say, across an FTAI, our global facilities. And then how do we get our hands around the size of that LEAP market potential versus your CFM56, V2500 market share comments as they are currently.

Yes, I'll start. I mean the most people expect that the LEAP market will be 2 to 3x the size of the CFM56 market in terms of annual maintenance spend. So it's going to be a very, very large market. And we still expect to be in that engine in 2028, 2029, most likely starting with investments through SCI through the SPVs, which will get us in. But we have the engineering know-how. We have the capability. It's a similar construction of that engine. We have licenses and we will have a test cell. So we have a full playbook ready to use at the time we think the economics work out in total.

Our next question comes from the line of Brandon Oglenski of Barclays.

So I was wondering if you could update us on the power Mod-1 prototype because it's my understanding that you do have one up and running in Florida. Is that correct? And I guess, is it initially meeting your expectations? And obviously, you announced customer backlog. Maybe if you can elaborate on that, please?

Brandon, this is David. I'll take it. So we're very pleased on the Mod-1 testing. It's been going through a rigorous testing and performance has been exceptional. Just to reiterate, we started the majority and completed the majority of the testing first in Montreal, the first 5 months of the year. And we used our test cell, which for us is a huge advantage, right? Many folks don't have a test cell and let alone has the ability to dedicate a test cell for R&D. So that allows us to work through the engineering process very efficiently. Now you're right, the testing has moved to Miami, where we have a gen set and the unit is up and running, and we're very pleased with the testing thus far. The way I would think about it from here on out is the turbine will just continue to run, right? We're building hours. We're building time on the field. That's a very important piece when it comes to being able to talk to customers. is the more hours that we accrue. So that's going to continue ongoing from here on out, but we couldn't be happier with the Mod-1. I would also reiterate this, this is obvious to folks in aviation. But the CFM56 is the most reliable unit ever produced. It's got over 1 billion hours. We're expecting that to be the most reliable unit on the ground as well. So we couldn't be more pleased with the testing thus far.

And maybe for Nicolas, but you guys are targeting like 40% production growth next year in core aerospace products. I guess how much of that do you think you can attribute to the FCI vehicle too? And are you making any progress with longer-term contracts with airline customers as well?

Yes. Thanks, Brandon. I think I'll take the first question. So what we have communicated historically is that the SCI will be about 20% of Aerospace products revenue. And so going forward, we still expect that's a good range for analysts to model in. So regarding module production, you can basically reflect that it will be an alignment with that as well as revenue.

Yes. And just on the module production. I think this is an important piece to clarify. So we did set out module production targets for next year of 1,700. The way I would think about that is our internal production goals for the shops, right? I wouldn't necessarily try to do division based on EBITDA. Obviously, the goal is to produce extra excess modules to be able to continue to ramp the business as well as to be able to use into leasing.

And any development [indiscernible] contracts with your airline customers?

Yes. We -- yes, as we've always mentioned, the product itself is very sticky. So we have many customers that effectively we have visibility for their fleet for the next 4 to 5 years. where we work through exchanges. Obviously, the timing could shift quarter-to-quarter depending on utilization. We like to effectively give them or transact an engine right before the engine comes do. That's very good for the airline because they're able to use every cycle within the engine. That's always our motto is we wanted airline to use every cycle. So we have these programs with airlines, and that's exactly what we've been building out, I'd say, for the last 5 years.

You might talk about the cargo business opportunity as well.

Yes. So one thing that we did announce was our partnership with AEI on the 737-800 cargo. And that's important, right, because really, there's right now a shortage of engines that are fit for cargo, right? And when you think about the operations on passengers and cargo, they're very different, right? The cargo aircraft could operate, let's say, 1/4 of the utilization versus passenger. So it's important to build engines that have smaller cycles for that operation, right? So for us, it's great because it allows us to use those engines and be able to maximize the returns for those engines. And for cargo customers is great because they don't want to effectively overbuild engines and have to, let's say, pay extra or -- it would impact the leasing economics. So look, that's always been the goal was to do the full life cycle. We think about it as you start off in passenger, right, that has its own utilization. Then moves into cargo, right? That's got a less utilization and then ultimately into power, where effectively the engine is either operating base load or is operating -- could operating theory back up. So it's going to be very little cycles per year. So that really allows us customer -- different customer types where we can effectively target the engines we're building remanufacturing or the best mission.