New to FTAI? Start with Will Cleary’s conversation. This update draws on FTAI’s Q3 presentation and call.
The Aerospace Products margin was the number I most wanted to see this quarter. It returned to 31% after a dip below 30% in Q2.
Aerospace Products
The margin held up. Aerospace Products earned $282 million of adjusted EBITDA on $910 million of revenue, a 31% margin versus 28.5% in Q2. Adjusted EBITDA grew 13% sequentially and 57% year over year. Companywide adjusted EBITDA was $348 million; management reaffirmed its 2026 and 2027 segment outlook.
The mix question. Larger airlines and heavier shop visits can bring lower percentage margins. Adams said the current mix of customers and work is representative of what he expects, and roughly 30% remains a reasonable margin for the next couple of years. That was the part of the call that mattered most to me.
Production is growing into that margin. FTAI produced 311 CFM56 modules in Q3, up from 207 a year ago, and 877 through September. It is targeting 1,200 for 2026 and 1,700 for 2027.
United expanded its exchange agreement from V2500s to designated CFM56-7B engines. FTAI has not disclosed the expected volume or economics.
FTAI estimates it has 15% of the $25 billion annual CFM56/V2500 maintenance market, based on annualized Aerospace Products revenue, and targets 25% or more over time. There is no dated deadline.
Aviation Leasing
SCI contributed $54 million of Aviation Leasing’s $104 million Q3 adjusted EBITDA, versus $35 million in Q2 and $25 million in Q1. Management guides to $450 million of Aviation Leasing EBITDA in 2027 versus $475 million in 2026.
SCI I’s invested capital reached $3.9 billion at September 30 on 212 closed aircraft. Another 30 closed in October, taking invested capital to about $5.1 billion; management expects about $6 billion by year-end. Adams pointed mainly to these closings when asked about the implied Q4 EBITDA increase.
SCI II had $271 million invested and 10 aircraft closed at September 30, versus 109 closed or committed. Management expects more Q4 closings. The commitments give it a pipeline, but only closed aircraft are funded.
The WestJet transaction used both sides of FTAI. Seventeen on-lease 737-700s went into SCI II through a sale-leaseback, with WestJet continuing to operate them. FTAI bought 10 off-lease aircraft for Aerospace Products; their engines can become module feedstock.
Most reported SCI EBITDA comes from FTAI’s co-investment. Q3 included $46.2 million from its 19% SCI I stake and $7.4 million in servicing fees. Co-investment also dominated Q1 and Q2. Those are adjusted EBITDA contributions, not cash distributions. SCI I distributed 17.5% of investor commitments through September; that is not a 17.5% investment return.
FTAI Power
More than 100 Mod-1 units are under contract for delivery in 2027-28, mostly in 2027. FTAI identified customer projects in the U.S. and Canada; Canada appears new this quarter as a customer location. It did not break out units by country. The July $1.465 billion initial purchase order is the only one with disclosed dollar terms.
FTAI received $234 million of Power customer deposits in Q3. They offset inventory funding, though FTAI has not disclosed which orders supplied them or the cancellation terms. At least some contracted demand is backed by customer cash; revenue still depends on delivery.
Mod-1 reached 25 MW peak and about 23 MW continuous output on natural gas and liquid fuel. FTAI plans to produce 10 to 15 units a month by year-end 2027. Its 2027 Power adjusted EBITDA guidance is $450 million to $750 million, with the low end in the $2.3 billion segment target. Moreno said the range reflects production and delivery timing.
The combined-cycle add-on could add 9 MW by using exhaust heat without more fuel, water, or emissions. FTAI says existing units could be retrofitted; testing is planned for the second half of 2027. Management expects a higher price but has not quantified it. I am not adding the extra output to a valuation yet.
Cash and capital allocation
The 2026 cash outlook moved down for two different reasons.
Adjusted free cash flow before new growth initiatives: $1.107 billion, down $61 million from Q2 because FTAI bought more engines for Aerospace Products.
New growth investment: $463 million, up $173 million, mainly for Power development and facilities.
Adjusted free cash flow after those investments: $644 million, down from $878 million in the Q2 presentation.
Power spending supports the 2027 delivery ramp. While execution risk is higher than in its established engine-buying program, FTAI has contracted units to build and needs inventory and capacity to deliver them. The growth-investment bridge includes $250 million of net Power inventory working capital, $86 million for facilities, $86 million for Power R&D and startup costs, and $40 million for SCI II, with rounding.
Customer deposits offset the Power inventory build. FTAI projects $484 million of gross production inventory in 2026, less $234 million of deposits, leaving $250 million of net working capital.
Adjusted free cash flow includes aviation asset-sale proceeds. The $644 million guidance therefore differs from operating cash flow less capex.
No 2027 free-cash-flow guidance yet. In July, the CFO put 2025 and then-current 2026 conversion around 60% to 70% of EBITDA. He expects better conversion next year, citing inventory already on hand, Power deposits, and shared Aerospace/Power infrastructure. I still want to see when the inventory build eases.
The $500 million accelerated repurchase is sensible. FTAI had bought $80 million of shares since September and plans to finish the ASR in Q4. The board raised total authorization to $1 billion, leaving about $420 million afterward. I would have preferred more buying earlier, though engines and Power inventory also need cash.
FTAI has room below its leverage target. Net debt was about $3.1 billion, or 2.2 times annualized Q3 adjusted EBITDA, before the ASR. Management targets 2.5 to 3.0 times and expects to remain below 3.0 times after financing the repurchase.
M&A remains on the table. Adams named additional engine maintenance facilities, piece-part repair, and manufacturing as priorities. FTAI is also spending roughly $50 million to $60 million on tooling and capacity at existing facilities, including a Rome test cell.
Questions
Will the shift to LEAP create an aftermarket demand gap? FTAI expects to enter LEAP in 2028 or 2029, likely first through SCI aircraft. I want to understand when LEAP shop demand can offset declining CFM56/V2500 work and how much maintenance the engine makers will retain.
How much cash will a LEAP exchange pool require? SCI may reduce the aircraft ownership burden, but FTAI would still need serviceable engines and modules ready for customers. This is a longer-term question than the Q3 margin or Power ramp.
How far can FTAI take its current-generation share while holding a roughly 30% Aerospace Products margin? Management targets at least 25% of the CFM56/V2500 maintenance market, with no deadline.
Which part of SCI ultimately creates the most value for FTAI?
Aircraft-management and servicing fees for work FTAI performs for the vehicles.
Separate profit-participation distributions if the partnership’s investments generate them.
Returns on FTAI’s minority co-investment.
Engine and module transactions with the vehicles, recorded in Aerospace Products.
Sources: FTAI Q3 release · Q3 supplement · Q3 call transcript · Q2 supplement · Q2 call transcript · Power order · United agreement.
Disclosure: None of this is investment advice. I/we may own positions in securities mentioned.
Aerospace Products margin returning to 31% on $910 million of revenue, with adjusted EBITDA up 57% year over year, shows the business is scaling well. Production of 311 CFM56 modules versus 207 a year ago also supports the ramp toward the 1,200 target.