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. Please go ahead.
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 #1. We've had tremendous interest from institutional investors in the partnership throughout the year. Given this high level of demand, we 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 LOI 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, LPs 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 LP partners and airlines, we see a 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 places 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 3 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 the 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. 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 over 40% next year as we optimize our parts procurement and repair strategies, including the approval of PMA Part #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. 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. 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 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. 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 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 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 of 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’m thinking about our plans to increase the number of aircraft in SCI by 33%, raising it from 250 to 375. We're likely to accelerate this more than we initially anticipated due to the current investment activity. Our intention has always been to carry out additional SCIs each year, so this mainly means we're speeding up our growth in SCI. Initially, we projected that the SCI business for FTAI would account for about 20% of our Aerospace products volume, but with this faster fundraising for SCI, that percentage might rise to 25%. Going forward, we're looking at a range of 20% to 25%. It's crucial to note that 100% of all engines in these partnerships are dedicated to FTAI Aviation throughout the entire ownership period, which we expect to last 5 to 6 years. This ensures a locked-in volume, and we understand everything needed about the engines we have access to, allowing us to plan our production effectively.
We can have engines prepositioned, and there are numerous advantages to our management of these capital pools. It also enhances our appeal to airline customers. Owning a substantial portion of their fleet as a lessor increases our chances of securing additional business from them for other engine products. This creates cross-selling opportunities that will also benefit FTAI. Ultimately, the key takeaway is that we are poised for quicker market share gains 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, there are two main themes at play. We're making investments to either enhance our margins or expand our capacity ahead of our production needs. Specifically, ATOPS falls into the latter category, as we are increasing production in advance of our requirements. As Joe mentioned earlier, ATOPS has two facilities. The primary facility is located in Medley, Florida, which is in close proximity to our test cell, creating immediate synergy. This facility employs 60 people and has the capacity to process 150 modules, thereby raising our overall production capacity from 1,800 modules to 1,950. The second facility is situated in Lisbon, Portugal, which has a small team we aim to grow. Our intention for that facility is to support our field service operations, specifically handling module exchanges for European customers, and we see significant local talent available for recruitment.
The focus of the ATOPS transaction is primarily on increasing capacity. We also announced the Bauer transaction, which aligns with our first theme of enhancing margins and pursuing vertical integration. This is a 50-50 joint venture called Prime Engine Accessories, located in Bristol, focused on engine accessories such as fuel pumps, HMUs, actuators, and valves—components that manage air, fuel, and oil flow between the engine and the aircraft. Previously, we did not have the capability to carry out certain repairs, but now we can in-source them. We are pleased to partner with Bauer, a leading manufacturer of test and bench equipment. For this specific investment, we anticipate achieving approximately $75,000 in savings per shop visit, with plans to handle about 350 engines annually once we ramp up 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 on that. If you think about the market, there are 2 different sellers of these narrow-body current tech aircraft. One is lessors, and they own roughly half of the world's fleet. So if you think about 14,000 aircraft, that are 737NGs and A320ceo family aircraft, about 7,000 are owned by lessors. As lessors begin to take delivery of new aircraft into their portfolios, they need to sell off older aged equipment. One of the big drivers of that is just to maintain ratings. Those rating agencies and debt investors and lenders look to that metric of average age of your portfolio as one that they track very carefully. So during COVID, I think a lot of lessors were able to hold on to assets longer. They extended the average life of their portfolio, maybe, for example, from 12 years to 14 years. But now people are saying, you got to sell the older stuff. That portion of the market represents north of probably 1,000 aircraft a year that are sold by lessors.
So we're buying from that group. We have a very significant competitive advantage in that we can do engine exchanges. We're an advantaged buyer, and we're one of the larger pools of capital that are focused really solely on NGs and ceos. The second source of deals is airlines. A lot of airlines had deferred as much of the engine maintenance as possible during COVID. They've kicked the can down the road pretty far. But there are a lot of shop visits coming up in the near future and airlines are looking to do sale leasebacks, which allow them to avoid both raise capital today and avoid a shop visit. That investment in that shop visit can be a significant amount of their capital for an airline, and they're looking at alternatives for how to do that, and we present the perfect alternative, which is an engine exchange. There's no downtime, no shop visit and they're back in service and they totally avoid the capital investment in that engine shop visit.
So it's a perfect product. The industry sort of have all cited that airlines in the maintenance world, there's an increasingly heavy orientation on heavier shop visits. The core restoration is the most expensive part. There's more of that, that's going to be needed in the next few years, and that plays perfectly into our strengths because that's what we do in our facilities as we rebuild those. So that's the supply side. In terms of the investors, when we look at this compared to a traditional approach, what we show the investors is that we solve problems. MRE, Maintain Repair and Exchange is a better way of doing engine maintenance. We solve problems and save people money. When you solve problems and you save money, that means higher returns for investors and less risk. It's a very simple explanation, people get it immediately. Who in the credit world doesn't want higher returns with lower risk?
So we're finding a high receptivity to that. It's relatively predictable cash flows, relatively short duration, and it's an asset-backed structure that's uncorrelated to public markets. It fits nicely into today's investment world and we have a terrific group of investors, all of whom will – as I say, if we deliver the returns that we show people, then we'll be able to raise a lot more 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, yes, so it will show up in our equity pickup line. 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. 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. But I would say 2 things that we did. Looking back, there's one important factor: focus. The majority of businesses tend to diversify, but we consciously decided that with these engines, this was the best opportunity in the industry and that we should do nothing else. I would attribute a large part to that decision to say, let's get out of the other engine types. So let's just focus on CFM56 and ultimately V2500. The second factor is really the people. You have to attract great people and retain them. We have a terrific team of people across the entire organization. It’s ultimately about that, and which requires selling the vision so that people buy into it. I think they have. When you meet with customers, that kind of reinforcement is huge because they say, I really want to avoid shop visits; I've had bad experiences. I want to do anything to avoid a shop visit. When you show up and say, I can solve your problem, that really invigorates people because they feel like they're doing something worthwhile.
Our next question comes from the line of Josh Sullivan of JonesTrading.
Congratulations on the quarter. Regarding ATOPS, securing $15 million in equity for 150 modules is an impressive accomplishment. How can we better understand the calculations behind module capacity potential in this context? If we consider FTAI USA as an example, what are the key factors involved in identifying these relatively small investments that yield significant increases in module capacity? Is there ample opportunity to pursue these smaller investments, or will we eventually need to consider larger investments to achieve substantial module capacity growth?
No, I think there's a surprising number of what I refer to as almost empty buildings that once were in the business, but they've left their tooling there. There's a building and someone is trying to figure out what to do with it. We can walk in and say, well, we can deliver engines immediately. These opportunities do exist, and the math on them is attractive because there is no vibrant business operating inside these buildings today, so we can acquire them at low prices and fill them up. The gating factor is the people. It’s the mechanics. That's why our training facility in Montreal is a big initiative; we found we could hire people but couldn't make them productive quickly as we wanted, which can be problematic. You have to focus on how to increase yield and shorten that time to get people into a mode of being contributors.
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 in-sourcing at FTAI? 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 it were a multiple-choice question, I would choose E: all of the above. I mean, it's phenomenal. The engines are complicated in some ways and simple in others, but these accessories are very complicated and the know-how from Bauer is phenomenal. They manufacture all the test equipment that everyone uses. Partnering with them, we've already had interactions with our engineers and theirs with sharing experiences. We think they'll elevate our process, and we hope we can contribute to theirs as well. It expands our circle with specialized knowledge, and we feel like we found a phenomenal partner that works. The math works for both of us, making our margins better, making our people smarter, shortening turnaround time.
Our next question comes from the line of Giuliano Bologna of Compass Point.
Congratulations on the continued great execution on all fronts here. As the first question, you mentioned several conferences and on some calls that we should think about FTAI as being in the spread business. Can you expand on that? And as it relates especially to both weak and strong markets?
Yes. Increasingly, we think of our business as operating in 2 different areas. One is the manufacturing business, where we buy, run out engines, rebuild them and sell them. The other is asset management, where we raise capital and buy airplanes that get committed volume to FTAI aviation. In the manufacturing side, we buy engines at one price in the market, then rebuild it and sell it at whatever people will pay based on hours and cycles. That's where the spread is. In a soft market, you might buy cheaper on the runout side and sell a little bit cheaper too, but usually not for long. In a strong market, the price of rebuilt engines is influenced by the OEM list prices on parts, which is your alternative. As long as people are flying aircraft, they'll need to replace hours and cycles on those engines.
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. As you mentioned, we did include the pro forma cash flow statement on Slide 39 of our supplement. What you will see is that for 9 months ended 9/30, we would essentially be moving about $722 million in cash proceeds from our sales of assets from investing to operating activities. We’ve outlined the line items specifically changed, but you've hit on them where it would include the gain of assets and the proceeds from asset sales. Starting in the third quarter, we classified all of our inventory purchases under operating. You'll 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 contracts from Finnair or the acquisition of ATOPS and the launch of the JV, et cetera? I'm assuming it's a mix of all, but if there's anything that stands out, a little detail would be great.
If you break it into two parts: volume and margin. On the volume side, the MRE product continues to grow. Our production is expected to rise by 33% next year. We'll have both new customers and existing ones. I want to emphasize that there are larger volumes from existing customers, as we've allowed them to try the product and understand how it works. Customers are returning with bigger orders. This aligns perfectly with our expectations from the initial orders. We're also continuing to add new customers. We mentioned Finnair last quarter and anticipate larger volumes soon from existing clients. On the margin side, we expect margins of 40% next year, driven by our parts acquisition strategy and repairs. We've noted the PMA as one of those contributors, and we're waiting for approval on the third part, in addition to our acquisitions of used serviceable material. We’ve also added Pacific Aero and now Bauer.
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 at market rate? Or how should we think about that?
Hi, Hillary, this is David. Yes, they're in line with a large program that we have with customers. I'd say they're largely in line. Just to give you more info on the Finnair program, we're covering their entire fleet, so 36 engines, and we're prepositioning engines ahead of shop visits. We effectively provide them a serviceable engine and then take back the unserviceable one. This provides cost savings for the airline, lowers maintenance costs, and provides more flexibility. We focus on winning large programs that cover their entire maintenance — this is an example we've won and expect others to happen soon after.
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 management and performance fees for managing the SCI vehicles? I ask this because Leasing assets have declined 30% year-to-date, and that's 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. It may spend too much time covering alternative asset managers and private credit, but it would seem like Leasing ultimately turns into an asset management business over time. If that's the case, you have 2 high multiple earnings streams, not 1. Any thoughts here would be appreciated?
Yes, Brian, we think alike. First of all, the fees are market-based. The asset management fee that FTAI earns is on total assets. So that would be on the $6 million. And 1% or higher is typically market for that type of structure. The incentive compensation will be low double digits, provided returns exceed this hurdle. They're meaningful. As we mentioned, we're aspiring — why not manage $20 billion in this way? We started out at $3 billion, now we're at $6 billion. It may not be crazy to get there. It’s a much better way to own assets in a private capital structure than in a public company. We have 2 businesses: one is a factory that makes engines, and the other is an asset manager that manages the money that owns the aircraft that has the engines.
Got it. That's super helpful. Then maybe just a related follow-up. FTAI's ownership in the first vehicle, SCI vehicle, came down to 19% from 20%. If demand remains elevated, and it feels like it's pretty robust here given the upsized commitments, is there an opportunity for your ownership or essentially the GP stake to decline to something lower than that? It would create a more capital-light model. I’m just trying to work through that.
Yes, it's possible. We wanted to make the first — as you can imagine, one of the concerns that investors always have is whether you are aligned? Do you have the same interests that I have the manager? That equity commitment goes a long way to answering that question. Over time, if you demonstrate a track record and you show people good numbers repeatedly, everything is negotiable.
And our next question comes from the line of Andre Madrid of BTIG.
This is Ned Morgan on for Andre this morning. I just wanted to ask, how should we think about the pace of long-term partnerships to materialize in terms of scale? Will future deals be more in line with the major U.S. carrier deal or the Finnair deal? And also, if you're able to comment on the margin impact of these partnerships, what that could look like?
The pace of investing, as I said, we started the first partnership really at the beginning of this year, where we have under LOI or closed about $3.5 billion, and it's next week is November. Our original thought was we could invest $4 billion in the first year. I expect that it will go up as we have more of a backlog than we had when we launched the first partnership. I think the pace of investment, I'm pretty optimistic. This is a $300 billion market where we should be able to deploy that type of capital regularly. The margins in SCI are treated just like any other third-party customer from pricing. The only difference is it's contracted. So it is 100% committed. The margins and profitability from the SCI business for FTAI are very similar to the other third-party customers. As indicated, next year, we expect improvement in margins to 40% while seeing larger orders from existing customers, so we expect that trend to continue.
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 foresee long-term needs for build-out of incremental capacity?
We expect to continue to expand our capacity, but we're doing this in a way that doesn't cost a lot of money. If you look at the other deals we've done in Rome or Miami, we’re adding significant capacity, but the total investment is around $20 million or $30 million. I apologize that it’s not bigger; we're not trying to invest more capital. We intend to gain more capacity at the best price. The M&A repair side is equally attractive, with deals being extremely accretive. When we look at a part or repair activity, we evaluate all different ways to enter that space: buying, building it organically, or partnering with other companies. We just try to find the best way in with the most accretive effect.
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. Going forward, we expect that it will maintain similar levels. Further, we don't expect that to increase as well. As we've mentioned, most of all of our SCI work with the engines are structured as exchanges, where we will give serviceable engines and receive unserviceable ones back. Thus, 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 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. We're 2 years into a 5-year deal, and we're around halfway in terms of the volume. It's going quite well. That engine is more complicated to perform a restoration on due to its cost structure, but demand is incredible, particularly due to the ongoing GTF grounding effects. We have many operators eagerly trying to avoid shop visits, and that's exactly what we've been delivering. We expect this will continue, and we may talk about an extension or alternatives down the line, but we're committed to that 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. I see timing is an aspect of that. As you think out a couple of years and the subsequent versions of SCI continue to gather capital, how much of the Aerospace Products segment or revenue do you think will eventually be SCI-related? And do you see a natural cap on that?
The natural cap is to keep growing our third-party business because how SCI grows will also grow our third-party business at a similar rate. I expect SCI to be roughly 20% to 25% of FTAI Aviation’s business for the foreseeable future. Therefore, the answer is we will grow both.
Thank you, Marvin, and thank you all for participating in today's conference call. We look forward to updating you after Q4.
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