FTAI Aviation Ltd

Previous wording

We own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of June 30, 2024, we had total consolidated assets of $3.4 billion and total equity of $69.6 million.

Current wording

We own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. As of September 30, 2024, we had total consolidated assets of $3.7 billion and total equity of $118.5 million.

Previous wording

In connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the Services for a transition period during which the Company will procure replacements for the Services. The Services will be provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The Company is required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. Unless the Transition Services Agreement is terminated earlier or the Company elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to provide certain Services to the Company until October 31, 2024. In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days. We incurred $3.4 million in costs for Transition Services during the three and six months ended June 30, 2024, and these costs are reported in Acquisition and transaction expenses in the Consolidated Statements of Operations.

Current wording

In connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager. Under the Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the Services for a transition period until October 31, 2024, during which the Company procured replacements for the Services. The Services were provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%). The Company was required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions. In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025. The Company is required to continue to provide the Reverse Services until the later to occur of the dissolution or sale of the entities receiving Reverse Services. The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.

Previous wording

The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting.

Current wording

The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting.

Previous wording

Comparison of the three and six months ended June 30, 2024 and 2023

Current wording

Comparison of the three and nine months ended September 30, 2024 and 2023

Previous wording

(1)Includes the following items for the three months ended June 30, 2024 and 2023: (i) depreciation and amortization expense of $56,691 and $38,514, (ii) lease intangible amortization of $3,786 and $3,616 and (iii) amortization for lease incentives of $5,332 and $6,804, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) depreciation and amortization expense of $106,611 and $79,440, (ii) lease intangible amortization of $7,762 and $7,599 and (iii) amortization for lease incentives of $10,558 and $10,665, respectively.

Current wording

(1)Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation and amortization expense of $56,775 and $43,959, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation and amortization expense of $163,386 and $123,399, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.

Previous wording

Other revenue decreased $6.9 million primarily due to a decrease in end-of-lease redelivery compensation.

Current wording

•Other revenue decreased by $6.3 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and six engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.

Previous wording

Acquisition and transaction expenses increased $5.3 million primarily due to higher professional fees related to strategic transactions and fees associated with the Internalization.

Current wording

•Acquisition and transaction expenses increased by $13.3 million, primarily due to higher professional fees incurred in evaluating and completing strategic transactions and fees associated with the Internalization and the acquisition of LMCES on September 9, 2024.

Previous wording

Net income decreased $274.6 million and $264.4 million for the three and six months ended June 30, 2024 as compared to prior years primarily due to the changes noted above.

Current wording

Net income increased by $45.2 million and decreased $219.2 million for the three and nine months ended September 30, 2024 as compared to prior years, primarily due to the changes noted above.

Previous wording

As of June 30, 2024, in our Aviation Leasing segment, we own and manage 391 aviation assets, consisting of 99 commercial aircraft and 292 engines, including eight aircraft and seventeen engines that were still located in Russia.

Current wording

As of September 30, 2024, in our Aviation Leasing segment, we own and manage 393 aviation assets, consisting of 96 commercial aircraft and 297 engines, including eight aircraft and seventeen engines that were still located in Russia.

Previous wording

As of June 30, 2024, 88 of our commercial aircraft and 175 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation equipment was approximately 81% utilized during the six months ended June 30, 2024, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 45 months, and our engines currently on-lease have an average remaining lease term of 22 months. The table below provides additional information on the assets in our Aviation Leasing segment:

Current wording

As of September 30, 2024, 86 of our commercial aircraft and 184 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease, or held in short term storage awaiting a future lease. Our aviation equipment was approximately 79% utilized during the nine months ended September 30, 2024, based on the percentage of days on lease in the quarter, weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes. Our aircraft currently have a weighted average remaining lease term of 45 months, and our engines currently on lease have an average remaining lease term of 21 months. The table below provides additional information on the assets in our Aviation Leasing segment:

Previous wording

(1)Includes the following items for the three months ended June 30, 2024 and 2023: (i) depreciation expense of $52,672 and $35,713, (ii) lease intangible amortization of $3,786 and $3,616 and (iii) amortization for lease incentives of $5,332 and $6,804, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) depreciation expense of $98,756 and $73,853, (ii) lease intangible amortization of $7,762 and $7,599 and (iii) amortization for lease incentives of $10,558 and $10,665, respectively.

Current wording

(1)Includes the following items for the three months ended September 30, 2024 and 2023: (i) depreciation expense of $52,455 and $41,141, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) depreciation expense of $151,211 and $114,994, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.

Previous wording

(2)Includes the following items for the three months ended June 30, 2024 and 2023: (i) net loss of $61 and $35 and (ii) depreciation and amortization of $21 and $63, respectively. Includes the following items for the six months ended June 30, 2024 and 2023: (i) net loss of $207 and $134 and (ii) depreciation and amortization of $84 and $126, respectively.

Current wording

(2)Includes the following items for the three months ended September 30, 2024 and 2023: (i) net loss of $0 and $108 and (ii) depreciation and amortization of $0 and $63, respectively. Includes the following items for the nine months ended September 30, 2024 and 2023: (i) net loss of $207 and $242 and (ii) depreciation and amortization of $84 and $189, respectively.

Previous wording

•Other revenue decreased $6.6 million primarily due to adecrease in end-of-lease redelivery compensation.

Current wording

•Other revenue decreased by $6.6 million, primarily due to a decrease in assets with end-of-lease redelivery compensation. During 2024, one aircraft and five engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.

Previous wording

The Aerospace Products segment develops and manufactures through a joint venture, repairs and sells through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance program, designed to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. Used serviceable material is sold through our exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare parts from our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or “QuickTurn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 3 “Acquisition of QuickTurn”, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings programs for engine repairs.

Current wording

The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine, module and parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair and refurbishment of CFM56-7B and CFM56-5B engines. In September 2024, we acquired LMCES to further enhance this business and establish permanent engine and module manufacturing capabilities. Refer to Note 3 “Acquisition of Lockheed Martin Commercial Engine Solutions”, for additional information. In addition, other serviceable used modules and parts are sold through our exclusive partnership, who is responsible for the teardown, repair, marketing and sales of parts from our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or “QuickTurn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 4 “Acquisition of QuickTurn”, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings programs for engine repairs.

Previous wording

•Acquisition and transaction expense increased $4.3 million primarily due to higher professional fees associated with the Internalization.

Current wording

•Acquisition and transaction expense increased by $2.8 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on September 9, 2024.

Previous wording

The benefit from income taxes increased $14.9 million and $11.3 million during the three and six months ended June 30, 2024, respectively, primarily due to the expected tax benefit from the Internalization fee paid to affiliate.

Current wording

The benefit from income taxes increased by $6.2 million and $32.8 million during the three and nine months ended September 30, 2024, respectively, primarily due to the tax benefit from the Internalization fee paid to affiliate. The Internalization fee created a substantial tax benefit, which led to an improved tax position for the Company. The impact of the fee was notable in both the quarterly and year-to-date financials, as it provided a meaningful offset against taxable income from the leasing and aerospace segments.

Previous wording

•Cash used for the purpose of making investments was $563.1 million and $380.8 million during the six months ended June 30, 2024 and 2023, respectively.

Current wording

•Cash used for the purpose of making investments was $1.0 billion and $562.8 million during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

•Distributions to shareholders, including cash dividends, were $76.8 million and $75.0 million during the six months ended June 30, 2024 and 2023, respectively.

Current wording

•Distributions to shareholders, including cash dividends, were $115.8 million and $113.2 million during the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

•Cash flows used in operating activities, plus the principal collections on finance leases and maintenance reserve collections were $165.3 million during the six months ended June 30, 2024. Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $87.3 million during the six months ended June 30, 2023.

Current wording

•Cash flows used in operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $108.7 million during the nine months ended September 30, 2024. Cash flows from operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $143.1 million during the nine months ended September 30, 2023.

Previous wording

•During the six months ended June 30, 2024, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $360.0 million and $360.0 million, respectively. During the six months ended June 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $325.0 million and $330.0 million, respectively.

Current wording

•During the nine months ended September 30, 2024, additional borrowings were obtained in connection with the (i) Senior Notes due 2031 of $800.0 million, (ii) Senior Notes due 2030 of $700.0 million and (iii) Revolving Credit Facility of $590.0 million. We made total principal repayments of (i) $650.0 million related to the Senior Notes due 2025, (ii) $440.0 million relating to the Revolving Credit Facility and (iii) $269.5 million related to the Senior Notes due 2027. During the nine months ended September 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $430.0 million and $330.0 million, respectively.

Previous wording

•Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs, were $61.7 million during the six months ended June 30, 2023.

Current wording

•Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs, were $61.7 million during the nine months ended September 30, 2023.

Previous wording

Manager. Following the internalization of management on May 28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP. Consequently, we have assumed general and administrative, and compensation and benefit expenses directly. We anticipate a savings in operation costs as a result of the Internalization.

Current wording

On May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function. As part of the termination of the Management Agreement, we agreed to pay $150.0 million to the Former Manager. Following the internalization of management on May 28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP. Consequently, we have assumed general and administrative, and compensation and benefit expenses directly. We anticipate a savings in operation costs as a result of the Internalization.

Previous wording

The following table compares the historical cash flow for the six months ended June 30, 2024 and 2023:

Current wording

The following table compares the historical cash flow for the nine months ended September 30, 2024 and 2023:

Previous wording

Net cash used in operating activities increased $254.9 million, which primarily reflects an increase in (i) Net loss of $264.4 million and certain adjustments to reconcile net income to cash provided by operating activities including a decrease in (ii) Changes in net working capital of $106.9 million, an increase in (iii) Gain on sale of net assets of $70.1 million, and a decrease in (iv) Change in deferred income taxes of $12.9 million, partially offset by increases in (v) Non-cash termination fee to affiliate of $150.0 million, (vi) Depreciation and amortization of $27.2 million, (vii) Loss on extinguishment of debt of $13.9 million, and (viii) Security deposits and maintenance claims included in earnings of $6.9 million.

Current wording

Net cash used in operating activities increased $262.9 million, which primarily reflects an increase in (i) Net loss of $219.2 million and certain adjustments to reconcile net loss to cash provided by operating activities including an increase in (ii) Gain on sale of assets of $133.8 million and decreases in (iii) Changes in net working capital of $126.6 million, (iv) Change in deferred income taxes of $8.4 million and (v) Provision for credit losses of $3.8 million, partially offset by increases in (vi) Non-cash termination fee to affiliate (issuance of ordinary shares) of $150.0 million and (vii) Depreciation and amortization of $40.0 million, a decrease in (viii) Security deposits and maintenance claims included in earnings of $21.0 million and an increase in (ix) Loss on extinguishment of debt of $13.9 million.

Previous wording

Net cash used in investing activities increased $117.5 million, primarily due to increases in (i) Acquisitions of leasing equipment of $110.7 million, (ii) Purchase deposits for acquisitions of $93.5 million, and (iii) Investments in notes and financing receivable of $19.8 million partially offset by higher (iv) Proceeds from the sale of net assets of $60.4 million, decreases in (v) Investment in unconsolidated entities of $19.5 million, (vi) Acquisitions of lease intangibles of $12.0 million, and (vii) Investment in promissory notes of $11.5 million and higher (viii) Proceeds for deposit on sale of aircraft and engine of $2.8 million.

Current wording

Net cash used in investing activities increased $251.6 million, primarily due to increases in (i) Acquisition of business, net of cash acquired of $143.6 million, (ii) Deposits for acquisitions of aircraft and engines of $152.2 million, (iii) Acquisition of leasing equipment of $115.4 million and (iv) Investments in financing receivable of $63.9 million partially offset by higher (v) Proceeds from the sale of assets of $176.9 million, decreases in (vi) Investment in unconsolidated entities of $19.5 million, (vii) Acquisition of lease intangibles of $11.6 million and (viii) Investment in promissory notes of $11.5 million and higher (ix) Proceeds (refunds) from deposits on sale of aircraft and engines of $3.1 million.

Previous wording

Net cash provided by financing activities increased $483.1 million, primarily due to increases in (i) Proceeds from debt of $1.5 billion and (ii) Receipt of maintenance deposits of $3.4 million, partially offset by an increase in (iii) Repayment of debt of $957.4 million, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $8.8 million and (vi) Release of maintenance deposits of $3.9 million.

Current wording

Net cash provided by financing activities increased $535.9 million, primarily due to increases in (i) Proceeds from debt of $1.6 billion and (ii) Receipt of maintenance deposits under operating lease agreements of $12.8 million, partially offset by an increase in (iii) Repayment of debt of $1.0 billion, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $9.0 million and (vi) Release of maintenance deposits under operating lease agreements of $6.2 million.

Previous wording

Debt Obligations—As of June 30, 2024, we had outstanding principal and interest payment obligations of $3.1 billion and $1.3 billion, respectively, of which only interest payments of $208.3 million are due in the next twelve months. See Note 7 to the consolidated financial statements for additional information about our debt obligations.

Current wording

Debt Obligations—As of September 30, 2024, we had outstanding principal and interest payment obligations of $3.3 billion and $1.3 billion, respectively, of which only interest payments of $216.4 million are due in the next twelve months. See Note 8 to the consolidated financial statements for additional information about our debt obligations.

Previous wording

Lease Obligations—As of June 30, 2024, we had outstanding operating and finance lease obligations of $1.9 million, of which $0.9 million is due in the next twelve months.

Current wording

Lease Obligations—As of September 30, 2024, we had outstanding operating and finance lease obligations of $19.6 million, of which $2.1 million is due in the next twelve months.

Previous wording

Other Cash Requirements—In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to change at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.1 million and $33.3 million on our ordinary shares and preferred shares, respectively.

Current wording

Other Cash Requirements—In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to change at the discretion of our Board of Directors. During the last twelve months, we declared cash dividends of $120.9 million and $33.3 million on our ordinary shares and preferred shares, respectively.