管理層發言
Good day, and thank you for standing by. Welcome to the FTAI Aviation Third Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Andreini, Head of Investor Relations.
Thank you, Marvin. I would like to welcome you all to the FTAI Aviation third quarter 2025 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer; Angela Nam, our Chief Financial Officer; and David Moreno, 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. Angela will provide a detailed overview of the numbers. But first, I'd like to highlight a few key updates. First, we passed a significant milestone this month with the successful close on the final round of equity commitments for SCI, which is strategic capital initiative number one. We've had tremendous interest from institutional investors in the partnership throughout the year. And given this high level of demand, we have upsized the total equity capital of the 2025 partnership to $2 billion. FTAI will co-invest up to approximately $380 million, including the $152 million we have invested year-to-date for a 19% minority equity interest compared to our original expectation of 20%. With the $500 million increase in equity capital, our new target is now to deploy over $6 billion in capital through the 2025 partnership, up from our previous target of $4 billion and double the original goal of $3 billion we announced in December of last year when we launched SCI.
This expanded partnership corresponds to a larger total portfolio size of approximately 375 aircraft, with full deployment of capital now anticipated by mid-2026. Today, we now have over 190 aircraft either closed or under letter of intent commitment and continue to have confidence and visibility from the SCI investments team on sourcing the remaining aircraft through a combination of lessor counterparties and direct sale-leaseback transactions with airlines. The successful $6 billion launch of this partnership creates significant value and positions FTAI for sustained long-term earnings growth. The MRA agreement, which provides fixed price exchanges for all engines in the SCI portfolio establishes a multiyear contractual pipeline of demand for rebuilt engines within our Aerospace Products segment. Additionally, our role as servicer and 19% minority equity investment is expected to generate attractive returns within our Aviation Leasing segment.
For our equity partners, SCI represents a compelling opportunity of enhanced returns relative to the traditional leasing business model. Through the MRE or Maintenance Repair Exchange agreement, limited partners benefit from higher, more predictable cash flows combined with lower residual risk across a highly diversified lessee pool. For our airline counterparties, engine exchanges also provide clear, meaningful value by eliminating the financial and operational risk and burden of managing engine shop visits. With this significant value proposition to all parties, FTAI, our equity limited partner partners, and airlines, we see strong opportunity to launch additional SCI partnerships each year going forward. Turning now to Q3 results. Aerospace Products delivered another strong performance, generating $180 million in adjusted EBITDA at a 35% margin, up approximately 77% year-over-year. This positive momentum underscores the strong and accelerating global demand for prebuilt engines and modules in the CFM56 and V2500 aftermarket.
We continue to see adoption of our aerospace products expanding across both new and existing customers, supplemented by our MRE agreement with the SCI. Airline operators and asset owners increasingly recognize FTAI as the most flexible, cost-efficient alternative to traditional shop visits, which are more expensive, more complex and more time-consuming than a simple and cost-effective exchange with FTAI. A recent example of this is Finnair, with whom we announced a multiyear perpetual power program. Through our scale, asset ownership, and extensive in-house maintenance capabilities, FTAI's engine exchanges help Finnair manage their maintenance costs, improve reliability and ultimately deliver a better service to their passengers. The trend toward longer-term partnerships like Finnair is increasing, and we expect to announce additional new airline perpetual power programs in the future. Overall, we're confident our differentiated business model and competitive advantage positions FTAI to be the long-term leader in engine aftermarket maintenance for these engine types.
We're well positioned to achieve our goal of reaching 25% market share in the years ahead. Moving over to production, we refurbished 207 CFM56 modules this quarter between our three facilities in Montreal, Miami, and Rome, an increase of 13% versus the last quarter, and we remain on track for our goal of producing 750 modules in 2025. In Montreal, our recently established training academy has also already enrolled over 100 trainees who are graduating significantly faster than traditional methods, thanks to our technology-driven approach using virtual reality and AI technology protocols. Combined with our emphasis on specialization and operational efficiencies, these initiatives are delivering measurable improvements in throughput and productivity. We remain confident in the trajectory of substantial production growth ahead as we scale the Montreal facility to capacity. In Rome, our operations continue to develop at an impressive pace.
We have successfully integrated FTAI's MRE operations with the facility, and technicians from Rome have conducted extensive training seminars at our Montreal Training Academy to improve skill development and optimize production efficiency. We're also actively investing in upgrading Rome's infrastructure and component repair capability, enabling heavier and more complex module repairs, which will position us to ramp production next year to double our 2025 target. We're also pleased to announce an agreement to acquire ATOPS for approximately $15 million, an MRO with extensive CFM56 engine operations, strengthening our presence in Miami. This acquisition will transform our Miami MRE operations by complementing our nearby module and test cell facilities, adding expansion space and adding experienced technical staff to support increased production next year once the integration into our operation is complete.
Additionally, the purchase includes an ATOPS facility in Portugal, which will serve as a logistics and field service hub in coordination with our European operations in Rome. We've also made good progress in expanding our component repair capabilities through the launch of a 50-50 joint venture called Prime Engine Accessories with Bauer, Inc. out of Bristol, Connecticut. The Bauer team brings tremendous experience and expertise in accessory test equipment. And together, we're building an industry-leading MRE repair facility for accessory parts. Once operational, which we expect by the end of this year, this facility is expected to deliver up to $75,000 in average savings per shop visit. Our initial $10 million working capital investment will enable us to redirect FTAI volumes to this facility rather than to outside vendors, driving meaningful cost efficiencies and time savings. This investment, like Pacific Aero, which we did last quarter, further differentiates our offering and aids us in both expanding productivity and expanding margins.
With substantial activity in enhancing our facilities and the broader MRE ecosystem, we are now targeting growth in production next year to 1,000 CFM56 modules, an increase of 33% compared to this year's production. We also continue to expect Aerospace Products margins to grow to 40% plus next year as we optimize our parts procurement and repair strategies, including the approval of PMA Part number 3, which we continue to expect approval of in the very near term. Next, let's talk about adjusted free cash flow. In the third quarter, we generated $268 million, which includes $88 million from the sale of the final 8 aircraft from the 45 aircraft seed portfolio, which were sold to SCI 1. Year-to-date, we have now generated $638 million in positive free cash flow, positioning us on track to our revised goal of $750 million for all of 2025 prior to our expanded contribution to SCI 1. As FTAI pivots to an asset-light model focused on aerospace products and strategic capital, we continue to expect substantial growth in free cash flow in the years ahead.
Our primary use for available cash is to pursue investments in high-impact growth initiatives, and we're seeing today a significant number of these opportunities and possibilities. FTAI's targeted disciplined approach is to identify opportunities complementary to our MRE operations in areas where we can accelerate production, expand margins and further differentiate our product offerings to customers worldwide. We do expect a surplus cash balance above these investment opportunities, and therefore, we are announcing an increase to the dividend this quarter from $0.30 per quarter to $0.35 per share. The dividend of $0.35 per share will be paid on November 19 based on a shareholder record date of November 10. This marks our 42nd dividend as a public company and our 57th consecutive dividend since inception. Additionally, we will also continue to evaluate future opportunities for capital redistribution to shareholders.
And finally, we remain confident in our full year 2025 estimates of $1.25 billion to $1.3 billion business segment EBITDA for all of 2025, comprised of Aerospace Products EBITDA ranging from $650 million to $700 million and Aviation Leasing EBITDA of $600 million. Looking ahead to 2026, for Aerospace Products, we're estimating $1 billion in EBITDA for next year, which represents significant further growth versus the $650 million to $700 million this year and approximately $380 million, which we generated just recently in 2024. For Aviation Leasing, we're estimating $525 million in EBITDA in 2026, which is in line with our expected results for 2025, excluding insurance recoveries and gains on sale. Within the Leasing segment, we estimate the growth in servicing fees and our 19% minority equity investment will offset the decline in on-balance sheet leasing revenues from the seed portfolio sold to the SCI as we continue to pivot to an asset-light growth model.
Overall, we now anticipate total business segment EBITDA in 2026 of $1.525 billion, up from our original estimate of $1.4 billion. Based on these projections, we expect to generate $1 billion in adjusted free cash flow next year, representing a 33% increase over the $750 million we are targeting in 2025 prior to our expanded contribution to SCI 1. With that, I'll hand it over to Angela to talk through the numbers in more detail.
Thank you, Joe. The key metric for us is adjusted EBITDA. We maintained our strong momentum this quarter with adjusted EBITDA of $297.4 million in Q3 2025, which is up 28% compared to $232 million in Q3 of 2024 and in line with Q2 2025 results after excluding the one-time benefits from insurance recoveries and seed portfolio gains on sale we recorded last quarter. During the third quarter, the $297.4 million EBITDA number was comprised of $180.4 million from our Aerospace Products segment, $134.4 million from our Leasing segment, and a negative $17.4 million from Corporate and Other, including intersegment eliminations. As we have predicted, Aerospace EBITDA is now exceeding leasing's EBITDA. Aerospace Products had yet another great quarter with $180.4 million of EBITDA and an overall EBITDA margin of 35%, which is up 9% compared to $164.9 million in Q2 of 2025 and up 77% compared to $101.8 million in Q3 2024.
We continue to see accelerated growth in adoption and usage of our aerospace products and remain focused on ramping up production in each of our facilities in Montreal, Miami, and Rome as well as expanding component repair operations at our recent acquisition in California and our new joint venture launched in Connecticut. Turning now to leasing. Leasing continued to deliver strong results, posting approximately $134 million of adjusted EBITDA. For gains on sale, we continue the year with $126.8 million of asset sales proceeds, generating a 7% margin gain of $8.3 million as we closed on the final 8 aircraft of the seed portfolio to SCI 1 and divested several noncore assets, including several Pratt & Whitney 4000 and CF680 engines. Overall, the total 45 aircraft seed portfolio contributed an aggregate gains on sale of $50.1 million to 2025 leasing EBITDA at a margin of 10%. The pure leasing component of the $134 million of EBITDA came in at $122 million for Q3 versus $152 million in Q2 of 2025.
But included in the $152 million last quarter was a $24 million settlement related to Russian assets written off in 2022 as well as leasing revenue generated from the seed portfolio, which we have now sold to the SCI. With that, let me turn the call back over to Alan.
Thank you, Angela. Marvin, you may now open the call to Q&A.
分析師問答
Our first question comes from Sheila Kahyaoglu of Jefferies.
Congratulations on upsizing SCI. It looks like great traction from the investor base and sourcing these aircraft, and I think you have now 375 aircraft target or the size of United Airlines CFM fleet. So can you maybe walk us through the financial implications of the upsizing, both from a segment EBITDA and free cash flow perspective?
Sure. I believe we are increasing the number of aircraft in SCI by 33%, moving from 250 to 375. We anticipate this will happen a bit faster than we initially expected due to the current pace of investment activity. Our ongoing strategy has been to continue adding SCIs each year, so the primary effect here is the acceleration of growth within SCI. Initially, we forecasted that the SCI business for FTAI would account for about 20% of our Aerospace products volume, and with this faster SCI fundraising, that figure might rise to 25%. Moving forward, it will likely be between 20% and 25%. A key point is that all engines in these partnerships are fully committed to FTAI Aviation for the duration of their ownership, which we estimate to be 5 to 6 years. This guarantees volume for us, and we have complete visibility on the engines available, allowing us to plan our production efficiently. We can position engines ahead of time, maximizing benefits from managing these capital pools. Additionally, it enhances our profile with airline customers; owning a substantial part of their fleet as a lessor increases our chances of securing business for other engine products we provide. This creates cross-selling opportunities that will also benefit FTAI. Overall, our primary goal is to achieve faster market share growth in the MRE business and aerospace products.
Got it. And then maybe, if I could ask one on the ATOPS acquisition, if you could give any color on how that came about, how it adds 150 modules worth of capacity? And similar to Pacific Dynamic, if you could give color on EBITDA contribution as we think about the savings from that?
This is David and I'll address that, Sheila. Regarding our M&A strategy, we are focusing on two main themes. We are making investments to either enhance our margins or expand our capacity ahead of our production requirements. Specifically, the ATOPS acquisition falls under the latter category, where we are boosting production significantly before our actual needs arise. ATOPS has two facilities, with the primary one located in Medley, Florida, near our test cell, which fosters synergy between the two. This facility employs 60 people and allows us to process 150 modules, thereby increasing our overall production capacity from 1,800 modules to 1,950. The second facility is in Lisbon, Portugal, which has a small team we anticipate expanding. This location will help us manage our field service operations, specifically handling module exchanges for our customers in Europe. We see great potential in recruiting local talent to support the growth of that facility.
The main focus of the ATOPS transaction is to enhance our capacity. Additionally, we announced the Bauer transaction, which aligns with our strategy to increase margins and pursue vertical integration. This joint venture, called Prime Engine accessories, is based in Bristol and focuses on engine accessories such as fuel pumps, HMUs, actuators, and valves—components essential for regulating air, fuel, and oil between the engine and the aircraft. This partnership enables us to insource a repair we previously did not provide. We are excited to collaborate with Bauer, a top manufacturer of test and bench equipment. For this investment, we anticipate achieving roughly $75,000 in savings per shop visit and plan to service about 350 engines annually when we ramp up operations in 2026.
And our next question comes from Kristine Liwag of Morgan Stanley.
I just want to follow up on SCI. I mean you guys are significant buyers of aircraft engine assets now in a time where there still seems to be a shortage of assets out there. Can you talk about the availability of assets that you're able to buy, pricing, expected returns? I mean, ultimately, what were your conversations with investors like? What do they like about SCI? And where are areas of potential concern?
Sure. I'll start with the market overview. There are two main types of sellers for narrow-body current technology aircraft. One group is lessors, who own about half of the global fleet. Considering 14,000 aircraft, around 7,000 belong to lessors. As they receive new aircraft, they tend to sell off older ones to maintain their ratings, which is closely monitored by rating agencies and investors. During COVID, many lessors extended the average lifespan of their portfolios, but now there’s pressure to liquidate older assets. This segment of the market sees over 1,000 aircraft sold annually by lessors, and we are active buyers in this space, having a competitive edge with our ability to do engine exchanges. We focus specifically on NGs and ceos. The second group consists of airlines, many of which postponed engine maintenance during COVID. With upcoming shop visits, airlines are looking into sale leasebacks to raise capital and avoid the costs associated with maintenance.
Our engine exchange provides a quick solution, allowing them to bypass significant capital expenditures related to shop visits. Industrially, there's a growing trend towards more intensive maintenance, which aligns with our core capabilities in rebuilding. On the investor side, we emphasize that our Maintain Repair and Exchange model is more effective for engine upkeep. This approach addresses issues while providing savings, resulting in higher returns and reduced risk for investors. The benefits are straightforward and appealing—who wouldn't want higher returns for lower risk? We're seeing positive interest due to predictable cash flows and a structure that's asset-backed and not tied to public markets. This is a good fit in the current investment landscape, and if we deliver the returns we promise, we expect to attract substantial additional capital.
That's super helpful color, Joe. And maybe a follow-up question, it could be for Angela. When we look at your 19% equity portion of SCI, I mean, with the upsized amount, this is a pretty sizable leasing income. How do we think about that portion? Is that going to be reflected in the adjusted EBITDA in the leasing segment? Will this be reported in the other line? I mean, ultimately, what's the treatment of SCI in your financials?
Yes. On that 19% specifically, as you mentioned, it will show up in our equity pickup line. So you'll see that as the equity income line pick up for the 19% that we own from SCI's leasing returns. But in addition to that, as Joe mentioned, as we are the servicer, we'll also pick up servicing revenue, which is currently in other revenue in the Leasing segment. So that will grow with the asset base also growing. And then we'll also see in our aerospace products business, the engine exchanges that are coming through for all the engines that are coming up for exchanges with the SCI at the fixed price that we've already committed to.
We will include that in adjusted EBITDA. The 19% will be included in adjusted EBITDA in Leasing.
Good. Super helpful. And look, sorry, there's just so many things going on. So if I could ask a third question here. Look, I want to take a step back on the module facility. I mean, I think sometimes we kind of gloss over the success you've had in the past few years, but ultimately, you're targeting 750 modules by year-end, and you've already gotten 9% of the market share for CFM56 and V2500. I mean, 5 years ago, you guys were at 0. And so this has been a fairly astronomical growth and penetration, especially for what was a financing company to really enter into the wrench-turning MRO business. I wanted to ask you, can you share with us some of the secret sauce and how you were able to execute, I mean, fairly seamlessly with this kind of volume that we've never really seen others be able to accomplish?
Thank you. I would like to highlight two key aspects of our approach. First, we maintained a strong focus. While many in the industry tend to diversify by exploring multiple areas, we made a strategic decision to concentrate solely on CFM56 and eventually V2500 engines. This decision was crucial as it allowed us to capitalize on what we deemed the best opportunity in the industry. Secondly, our success is largely due to our people. It's essential to attract and retain talented individuals, and we have built an exceptional team throughout the organization. Ultimately, it's all about the people. We need to communicate our vision effectively, and it seems our team has embraced it. When engaging with customers, the most gratifying feedback often comes from those expressing their dissatisfaction with shop visits and their desire to avoid them. When we present ourselves as a solution to their problems, it energizes them, making them feel they are part of something meaningful.
Our next question comes from the line of Josh Sullivan of JonesTrading.
Congratulations on the quarter. I wanted to follow up on ATOPS. The $15 million in equity for 150 modules is a fantastic trade. How can we understand the potential in module capacity here? Using FTAI USA as an example, what are the key factors to consider for identifying these relatively small investments that yield such significant increases in module capacity? Is there ample opportunity for these small investments, or will we eventually need to make larger investments to drive substantial growth in module capacity?
No, I think there are surprisingly many vacant buildings that were once operational, where previous owners left their tools behind. These spaces present an opportunity for us to step in and deliver engines quickly. Since there isn’t an active business in these buildings right now, we can acquire them at low prices and utilize them effectively. However, the key challenge is hiring skilled mechanics. That’s why we’ve emphasized the training facility in Montreal, as it has shown us that while we can hire workers, getting them up to speed takes longer than we’d like. Sometimes, new hires don’t become productive at all, so we need to focus on increasing our efficiency in training and onboarding. We believe there are more facilities we can locate, and we’re frequently being approached with deals. Our goal is to identify the options that are easiest for us to integrate and have a sufficient number of mechanics available nearby.
Got it. And then I guess similarly, just on the JV of Power, $75,000 cost saving per visit. Is the capability more about improving turnaround times for your customers or margin insourcing at FTAI? And I guess, were customers pushing you to add this capability, which might lead to additional new MRE customers. Or is it just a good asset to have in house to drive margin?
If I had to choose, I would select all of the options. It's remarkable how the engine is complex in some aspects and simple in others, yet the accessories are quite intricate. The expertise that Bauer possesses is outstanding; they manufacture all the testing equipment used industry-wide. We are collaborating with them, and our engineers have already interacted with theirs, sharing valuable experiences. We believe this partnership will enhance our capabilities, and we hope to bring some benefits to them as well. It’s about expanding our network with experts who have specialized knowledge and intellectual property, particularly in areas that can be very costly to address. We feel fortunate to have found a strong partner, and the arrangement is beneficial for both parties. It should improve our margins, enhance our team's expertise, and reduce turnaround times. Previously, sending accessories to a third party meant relying on them to return them promptly for our production needs, but now we have greater control over the entire process.
Our next question comes from the line of Giuliano Bologna of Compass Point.
Congratulations on the continued great execution on all fronts. As the first question, you mentioned several conferences and that we should consider FTAI as being in the spread business. Can you elaborate on that, particularly in relation to both weak and strong markets?
Yes. We view our business as encompassing two main areas. One is manufacturing, where we purchase, rebuild, and sell engines. The other is asset management, where we raise capital to buy airplanes, which contributes to committed volume for FTAI aviation. In the manufacturing sector, we acquire an engine at market price, rebuild it, and then sell it based on the added hours and cycles. The difference in price is our profit margin, as we control the costs of rebuilding and selling. This process is similar to how Apple assembles iPhones by sourcing parts, putting them together, and selling the finished product. In a down market, we may purchase engines at lower prices and sell them for slightly less, but typically not for long. Overall, I see the market as robust; the pricing of rebuilt engines largely reflects the OEM list prices of parts, as those are the alternatives. As long as aircraft are operated, there will be a need to maintain them by replacing hours and cycles on engines. Should there be a surplus of engines, as seen in past engine types and during COVID, I would consider that a 3- to 6-month opportunity for us to gain market share, as the market always recovers. If we can acquire inventory at reduced prices or expand our capacity during such periods, we will be better positioned for the rebound. We have consistently implemented this strategy throughout our careers.
That's very helpful. And I appreciate that. Maybe the next question for Angela. I see the new slide on Slide 39 of the supplement data details the way that the cash flow statement would change and the reporting would change using industrial accounting versus lease accounting. Is the right way to think about it that effectively all of the gains on sale or economics that were flowing through cash spread by investing activities would effectively move into operating cash flow when you change the industrial accounting because of a more streamlined methodology there?
Yes. No, that's the right way to think about it. So as you mentioned, we did include the pro forma cash flow statement on Slide 39 of our supplement. And what you will see is that for nine months ended 9/30, we would essentially be moving about $722 million in cash proceeds from our sales assets from investing to operating activities. And we've outlined the line items that was specifically changed, but you've hit on them where it would include the gain of assets and the proceeds from asset sales. And starting in the third quarter, we have classified all of our inventory purchases going through operating. So you will see a transition of that aligning with our GAAP cash flow statement going forward.
Our next question comes from the line of Hillary Cacanando of Deutsche Bank.
Could you unpack the guidance for 2026? What's the upside driven by new customers, repeat customers, new contacts from Finnair or the acquisition of ATOPS and the launch of JV, et cetera. I'm assuming it's a combination of all of those, but if there's anything that stands out, if you take this kind of detail.
I think it's important to look at two aspects: volume and margin. On the volume front, our MRE product continues to experience growth, with production expected to increase by 33% next year. This growth is coming from both new and existing customers, with notable increases in orders from those we've already partnered with. We've managed to establish a strong presence, allowing customers to experience our product and come back for larger orders for their engines. This is precisely what we anticipated would occur with the initial orders. We're also bringing in new customers; we mentioned Finnair last quarter, and existing customers are increasing their orders. Regarding margins, we expect to reach 40% next year, largely due to our parts acquisition strategy and our repair operations. We expect to soon receive approval for a third-party PMA, and we have also acquired used serviceable material as part of our strategy. Additionally, we've been expanding our repair capabilities in Montreal and have recently integrated Pacific Aerodynamic and Bauer into our operations.
Great. That's really helpful. And then just on Finnair, how should we think about the margin impact or EBITDA contribution from that contract? I mean are they market rate? Or how should we think about that?
Hi, Hillary, this is David. Yes, they align with a significant program we have with customers. I would say they are mostly in agreement. To give you more details on the Finnair program, we are covering their entire fleet, which includes 36 engines. We are prepositioning engines in advance of shop visits. We essentially provide them with a serviceable engine and take back the unserviceable one. This results in cost savings for the airline, reduces maintenance expenses, and, more importantly, offers flexibility for the airline. As Joe mentioned earlier, we are focused on securing large programs with airlines that cover their full maintenance needs, and this is an example of one we've won, with expectations of others following soon.
Our next question comes from the line of Brian Mckenna of Citizens.
Just one more here on SCI. Have you disclosed what FTAI will be earning in terms of management and performance fees for managing the SCI vehicles? I asked this because Leasing assets have declined 30% year-to-date. And that's really just from one SCI vehicle that's not even fully deployed yet. So with a couple more vehicles, most or all of these assets will likely move into third-party asset management vehicles that you're managing. Maybe I spend too much time covering alternative asset managers and private credit more broadly, but it would seem like Leasing ultimately turns into an asset management business over time. And if that's the case, you have two high multiple earnings streams, not just one. So any thoughts here would be appreciated?
Yes, Brian, we share the same perspective. This reflects how we have been repositioning the business. Firstly, the fees are based on the market. The asset management fee that FTAI earns is related to total assets, which would apply to the $6 million. Typically, 1% or more is the market standard for this type of structure. The incentive compensation will be in the low double digits, provided that returns surpass a set hurdle, but it is significant. As we've mentioned, we always aim high; initially, we considered managing $20 billion at some point. We started at $3 billion and have now reached $6 billion, so it might not be unrealistic to think we can get there. Owning assets in a private capital structure, like a partnership, is a far better approach than through a public company. As I've pointed out, we have two businesses: one is a factory that produces engines, and the other is an asset manager overseeing the funds that own the aircraft equipped with those engines.
Got it. That's super helpful. And then maybe just a related follow-up. So it's pretty minor, but FTAI's ownership in the first vehicle, SCI vehicle came down to 19% from 20%. I mean if demand remains elevated, and it feels like it's pretty robust here, just given the upsized commitments, et cetera, I mean, is there an opportunity for your ownership or essentially the GP stake to decline to something lower than that? And then essentially, it creates an even more capital-light model. Like I'm just trying to think through that a little bit more moving forward.
Yes, it's possible. We wanted to ensure that investors feel reassured about our alignment of interests as managers. Our equity commitment plays a significant role in addressing these concerns. Over time, as we build a strong track record and consistently deliver good results, we find that everything becomes negotiable.
And our next question comes from the line of Andre Madrid of BTIG.
This is Ned Morgan standing in for Andre this morning. I wanted to ask how we should consider the pace at which long-term partnerships will develop in terms of scale. Will future deals be more similar to the major U.S. carrier deal or the Finnair deal? Additionally, can you comment on the potential margin impact of these partnerships?
We began our first partnership at the start of this year and have either closed or have letters of intent for approximately $3.5 billion. With November approaching, our initial expectation was to invest $4 billion in the first year, and I anticipate that figure will increase as we have a larger backlog than we did at the partnership's launch. I am optimistic about the investment pace in this $300 billion market, where we should routinely deploy that level of capital. Regarding margins, the SCI is treated like any other third-party customer from a pricing perspective, with the key difference being that it is fully contracted. Therefore, the margins and profitability from the SCI business for FTAI are quite comparable to those of other third-party customers. We expect to see a 40% margin improvement next year, and we are noticing an increase in larger orders from our existing customers. We expect this trend to continue, as customers order more engines after experiencing the benefits of the product.
Our next question comes from the line of Brandon Oglenski of Barclays.
Joe, I guess, can we come back to the $1 billion cash flow outlook for next year? That's pretty impressive just given where this business has been. How much should M&A factor into your outlook for capital deployment looking forward? I think you got asked the question a little bit previously, but do you see like long-term needs for build-out of incremental capacity here?
We expect to continue expanding our capacity in a cost-effective manner. For example, in our projects in Rome and Miami, we are adding significant capacity with total investments around $20 million to $30 million. While this might not seem substantial, our goal is not to invest more capital but to gain more capacity at the best price. We will maintain this approach. Similarly, in terms of mergers and acquisitions, the deals we've pursued have been very beneficial without requiring much capital to enter those businesses. When evaluating parts or repair activities, we consider various options for getting involved, including potential acquisitions, organic growth in locations like Montreal or Rome, and partnerships. We aim to identify the most advantageous entry points that yield the best returns while remaining adaptable. So far, the opportunities we've encountered have been very appealing in terms of returns without necessitating significant capital expenditure.
Okay. I appreciate that, Joe. And Angela, can you walk us through what you think is like the right sustainable level of maintenance CapEx and maybe reinvestment in the Leasing business as we look forward?
Yes. As mentioned, as you can see, our maintenance CapEx this year is targeted to about $125 million. And going forward, we expect that it will maintain similar levels. And the replacement CapEx, we don't expect that to increase as well. As we've mentioned, most of all of our SCI work that we'll do with the engines are structured as exchanges, where we will give a serviceable engine and get an unserviceable engine back. So the replacement CapEx, we don't expect to be expensive going forward either.
Our next question comes from the line of Ken Herbert of RBC CM.
Joe, maybe to start, can you just provide an update on where you are on the V2500 program? I know you'd initially committed to or procured access to, I think, 100 full performance restoration shop visits? How is that going? And where are you on that pipeline?
Yes, we're about halfway through our 5-year deal and are currently 2 years into it, which aligns with our volume progress. The engine restoration is on a more costly scale due to its design, but the demand remains high, especially given the ongoing GTF grounding issues. This has resulted in a significant extension of the engine's life. Many operators are keen to bypass shop visits, which is precisely what we are providing. We anticipate this trend will continue, and in the next couple of years, we can discuss potential extensions or alternatives, but we plan to remain focused on this engine.
Okay. That's helpful. And I know the percentage of work that has flown through or the revenues within Aerospace products dedicated to the SCI has bounced around, and I can appreciate timing is a piece of that. But as you think out a couple of years and SCI subsequent versions continue to attract capital how much of the Aerospace Products segment or revenue do you think eventually is SCI related? And how do you view sort of a natural cap on that?
Well, the way you have a natural cap is to continue to grow third-party business because the SCI business will grow, but we're also expanding the third-party business at really a very similar clip. So I expect it to be roughly 20% to 25% of FTAI Aviation's business for the foreseeable future. And the answer is we grow both of them.
This concludes the question-and-answer session. I'll now turn it back to Alan Andreini for closing remarks.
Thank you, Marvin, and thank you all for participating in today's conference call. We look forward to updating you after Q4.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.