Just a framing question. Obviously, you've got two very distinct businesses, sitting under the umbrella. Maybe talk about the connection of the two and maybe the top-level trends you're seeing in each of them. Yeah, great. Well, thanks very much, Miles, for having us again this year. Appreciate the opportunity to come, and like the new location too, so that's great, and congratulations on joining Wolfe. It's a great organization. Just in terms of framing, I think, as I mentioned a couple of times recently, the environment has switched from being an environment that was very much, you know, wind in our face to now, you know, tailwinds on really almost every level. The benefits we get from, you know, recovery and travel, delays in new delivery, problems with new engines coming off wing ahead of schedule, supply chain disruptions, inflation. They are all good for us. It feels a lot different than it did two or three years ago, so I'm happy about that. In terms of the framing of the business, I mean, we don't really think of it as that distinct of a business because what we really offer to our customers is two things. We offer them, the airline customers and the maintenance customers, we offer them flexibility and cost savings. The flexibility comes from the fact that we can own assets. Sometimes we buy assets from the airlines, or if they're looking to lease assets, and we can have a very flexible return conditions because we are in the business of providing engines when they're needed. We collect maintenance reserves along the way, so we don't have big fights at the end about return conditions. We've created a business model that's very much user-friendly to the airline community. In many cases, they can also raise capital that way if they're looking ahead and saying, "I'm gonna phase my fleet out in the next three to four years," they might sell the assets today with the ability to return them when they don't need them any longer. The second thing is cost savings. We want the airlines to get out of the business of maintaining jet engines. We wanna do that for them. We've put together a portfolio of products in our Aerospace Products group that we think is something that nobody else can offer, nobody can copy, and provides tremendous cost savings, which we can share with the airline community. It's really a pretty simple pitch to the customer, and it's very different from anything anybody else offers. We go in and say, "We can save you money," which is not what typically what leasing companies, you know, do. We're not really a leasing company. Then added benefit is if you need capital or if you want additional assets or you want the flexibility in when you know, schedule the return of those assets, we can accommodate that very easily. People are almost shocked by that 'cause they're like, "Wow, I mean, nobody does that. Why is that? You pointed out that few people, if any, are doing this approach, this model. What allows you to do it that others can't? Well, we focused in the very beginning on. I had previously you know, started Aircastle, which is an aircraft leasing company, when I was at, in the Fortress private equity group. We took it public, and it was very good. From an asset ownership and a timing point of view, we did well, but I realized there's really nothing differentiating most leasing companies from one another. You basically are trying to go in and get the highest lease rate you can get from the airline customer a nd immediately after we went public, five companies copied the Aircastle business model, and I was like, "Well, that's a bummer," 'cause, you know, sort of, we had a great idea, but there's no, there's no protection to it. What we then did is we started 10 years ago working on this FTAI Aviation, and said, "Let's do something that adds value and that has proprietary products." The area where you can really do that is the engine. Every five to years years, that engine has to go through a major overhaul, and the major overhaul can cost, in many cases, more than you pay for the engine on the front end. It's a huge issue of the economics of ownership. It's also a huge opportunity to save money and to figure out how to do that for less than what other people can. We really started focused solely on that, and I'm not aware of anybody else, you know, really taking that, taking that approach, alongside the fact that we actually can lease and own assets and provide them to it. Through this, we really want to be. If you think about the life of an engine being 20 or 40 years, in some cases, the first 10 to 12 years are covered by the original equipment manufacturer's Power by the Hour programs, and that's. My analogy is that's like if you go to P.C. Richard & Son and you buy a refrigerator, they give you a warranty when there's no events ever gonna happen. That's their business model. The next, you know, segment of that life from years, you know, 10 through 30, airlines and owners are on their own. It's like if you had a 10-year-old Mercedes, you can't go to the Mercedes dealer anymore and say, "Could you give me a maintenance program?" They don't do it. You're on your own, you're in the aftermarket, and therefore, that's where you can develop proprietary products to lower the cost. One of the big ones is vertically integrate, make your own parts, right? We did that. The second one is control the maintenance activity, and this, the engine we focus on, the CFM56, is uniquely modular, so it divides very nicely into three modules: a fan, a core, and a low-pressure turbine, which big airlines over the years have always taken advantage of by swapping modules, but there was no storefront for most of the airlines to be able to find a low-pressure turbine. You know, you don't put an ad in the paper and say, "Anybody have an LPT today?" We created the storefront and take advantage of those cost savings of time and money by doing module swaps. We also part out engines because sometimes an engine is worth more, you know, dead than alive, and the parts have great value as Used Serviceable Material. Now we have a Hospital Shop that we own, where we can control the customer experience and deliver module swaps. We've step by step, really vertically integrated all the way back in the chain. We're working now on developing a repair business. You know, repair when parts come, you know, for part out, a lot of those parts have to be repaired before they can be used in an engine again. We spent $50 million last year repairing parts. We're looking at, you know, developing that capability with a partner, most likely. Every aspect of that engine we study. We have a very obsessive focus on it because it is the largest engine in, you know, by number in the world. It's gonna be around for, you know, the next 30 years. More and more of those engines need to be repaired in the aftermarket. You sort of rattled through the individual pieces, value added, that you're doing on the aerospace product side. Maybe talk about the availability of the input, fighting for those engines against others who want to do tear down, do USM. What is that market like today? Obviously, you have aspirations to grow that number. Yes Proportionally in pretty significant numbers over the next few years. Is the market big enough to support what you're looking for? Yes, is the answer. It's the biggest market by count. 22,000 engines were manufactured. There's more than 20,000 in operation today. It's 3x larger than the next largest engine by count, which is the V2500, which we also participate in. It is the biggest, most liquid market, and as I mentioned, the modularity of it makes it even more attractive. It is getting tighter. You know, during COVID, as everybody predicted, you know, if an airline has excess equipment, they don't put, you know, they don't invest in a major shop visit or restoration. A lot of those shop visits have been deferred. Green time is burning off. Airlines now are scrambling to get engines. That drives up lease rates, it drives up values, but there still are 20,000 engines out there. We own 350 approximately today, which is not a huge percentage. We're still seeing good opportunities to acquire assets, mostly from off-lease equipment. If you think about, you know, the market recovery, a lot of leasing companies are raising capital, they want to invest. Nobody wants to buy an off-leased asset because they want cash flow attached. That's what they sell to investors. That market is very competitive, but the off-lease market is still not very competitive. You know, we're acquiring right now seven aircraft that came out of an airline that went bankrupt. We're gonna scrap the airframes. That's 14 engines. We have another deal we're acquiring from an airline on a sale-leaseback, another 15 engines. There's a number of other opportunities in onesies and twosies to keep acquiring things. We're confident that we'll be able to replenish, you know, because o n the module side, we sold 100 modules last year. Mm-hmm. At least half of those, we took back another module. It was not a net 100 loss, it was a net 50 loss that we have to replenish, which is 15 engines, basically. We keep doing exchanges, and we love that. If you sell a refurbished module to someone and you take back a module that needs to be rebuilt, then we can rebuild it, manufacture it, and sell it again. That's really the model we're developing, is manufacturing pre-built modules for the CFM56. If you think about, you know, supply chain disruptions, shop visits taking longer, delays in new engines coming into the fleet, it's a perfect time to have a pre-built module because it's gonna get worse before it gets better. This summer is gonna be, you know, very, very, tight. There's potential for engines to be grounded as they are with GTF and LEAP right now. Mm-hmm because there's not enough parts available. Are your parts, obviously, within the context of your business, you're still needing parts? Yes From other sources? Yes. Well, we buy in advance- Yes We try to think ahead. That's one thing that helps you because we know, you know, with 350 engines, pretty sure you're gonna need, you know, a certain number of parts, and we get ahead of that. Then we also create a lot of Used Serviceable Material. We've also bought life-limited parts in the aftermarket, so we're active in many different aspects in that ecosystem. We have great relationships with all the maintenance shops around the world. We partner with them, and so we think ahead on that, and it's you know, if you're an airline and you said, "Oh, my God, I forgot, you know, and I have to put the shop in now," or, "I had a you know, foreign object, a FOD," and you have to put it in, then you might not have thought about, like, how do I get, you know, availability of parts? We, we plan ahead. Okay. You know, when I look at the geographic mix of your sales, you're pretty North America, European-centric, just by where you started. Is that geographic mix where you'll think it'll be three to five years from now? Is that the right mix? Well, I would put it slightly different. I think we've been very successful in North America, South America, North America, and Europe. We have not focused enough on Asia, and I think that's something we're looking ahead now. We have an office in Dubai. We're gonna add staffing there. We're talking to various maintenance shops about increasing our capability there. We're doing a few deals in India now because India is, you know, the market for everybody. You look ahead at growth in the industry. I think that's an opportunity for us, as opposed to something like, well, we did well in, you know, North America, South America, and Europe, now let's, you know, do the same thing in Southeast Asia. Got it. Got it. China's a tougher market. China's not easy to get into. The opportunity is more Southeast Asia and India. Okay. Then in terms of your customers, I imagine you haven't seen any slowdown in desire in terms of incoming calls for what you can do for them, I know you also have aspirations of growing a customer base. How do you pick which customers you're actually gonna bring into the fold? You have, you know, relatively speaking, more limited capacity. Well, we talk to them all. Yeah. This initial screen is you first figure out who owns CFM56 engines. Everybody. Is the easy part, which is almost everybody. you tend to look at older fleets, you're tending, y ou know, after that 10-12-year period, then you look at those who don't have an OEM contract on the aftermarket repair, or it's gonna be running off. that's kind of initial screen, then you're really just a one-on-one sales event, you go out and you say: "What are you trying to accomplish? How are you trying to do things? What can we? You run down the list of You know, our sales pitch, it starts with, the best shop visit is no shop visit. That's the initial one, is like, get out of the shop visit business. If you want to do your own shop visits, then, you know, we can sell you modules. If you want to build it yourself and use a maintenance shop, we can sell you Used Serviceable Material. There's nobody in the ecosystem that we can't offer something to. The highest value, you know, product, though, is, don't do your own engine maintenance. Almost every airline in the world you talk to has had a bad experience where they initially sent the engine into the shop, and the estimate was $3 million. When they finally got the bill, it was $8 million. That happens all the time, and that, we can eliminate that risk. I mean, that's career-ending for some people. There are many, many, many people that have had that happen, and we eliminate that risk. I think you sort of your value proposition on the shop visit side is you say, "You know, this could cost you $6 million-$7 million. We'll save you a couple of million dollars." Then I think what happens is, you're using, you know, lower-cost source materials, PMA, you're trying to get into. Maybe just talk about your certainty of that $2 million lower cost base that you can or $2 million lower price base you can pass to them while, obviously, at the same time, making money. Yes. Well, I mean, we have Used Serviceable Material available now to us, so that's part of the savings. We have the deal with Lockheed Martin, we have the ability to exchange modules. All of those combined, if you think about the $3 million savings, is almost $1 million from those three that we currently have full access to. The $2 million savings is PMA, that's the manufacturing parts through the Chromalloy joint venture. We have one of the five parts available, and we're using that today. The next four are all in advanced development. Should be submitted for final approval in the coming months, you know, in the middle of this year, call it June to September, and we hope to have all of those approved and available next year in 2024. We're pretty confident about that. Chromalloy is, you know, a great company. They have 12 hot section PMA parts that they've had approved, and they sell today. They've flown over 2.5 billion hours with those parts and never had an airworthiness directive. The quality of the product and the customer acknowledgement of that is extremely high. We're very excited about that. As I've said to people, you know, we have, today, what we think is a great business, when we have that, it's gonna be extraordinary business. That's what we're, you know, we're looking ahead for. There was recently a transaction with Wencor and HEICO in the PMA, MRO, and distribution business. Any thoughts on that in the marketplace? Yeah, I think it's a good for the industry. We talked to HEICO a lot. You know, we work together with them. We use their PMA. There's no overlap between Chromalloy's products and HEICO's products, so they're complementary. I think PMA penetration in the industry is, like, 2% or something. When you think about the potential, having HEICO as a very strong company, you know, publicly owned, permanent capital, that's good for the industry. We're very supportive and think it's a good transaction for advancing the whole industry. Got it. When you look at the sort of the Aerospace Products, EBITDA ramp and going from $100 million to $500 million by 2026, is that a linear profile? What are the building blocks that would be set along the way? Yeah, it should be fairly linear. I think it's always difficult, you know, exactly, because we're the math that we walk through is, if you take the module factory as the biggest part of that, ultimately $150 million of EBITDA last year growing to $400 million of EBITDA. It comes about because, first of all, we sold 100 modules last year to 25 different customers. You're talking about four modules per customer, which we think is a very low number because you have big airlines that are just starting to use the product, and nobody has used it who's said, "I'm not doing that again. Mm-hmm. They've all come back and done more, so it's 100% repeat customer. If we can grow the 25 customers to 50, and we have more than 25 new customers that we're already engaged with, we have a pipeline that's, you know, we can go name by name and say, "That's a candidate, that's a candidate, that's a candidate," so that feels achievable. We can go from four modules to eight modules, and that right there, you know, 100 modules goes to 400 modules. That's how you know, you grow the module factory. We made $500,000, and we're making about $500,000 per module today and last year. With full PMA availability, we estimate that that will double up to $1 million per module, which is probably on the low side, but call it a double, and so then $500,000 per module goes to $1 million, that's how you get the $400 million. Yeah. How exactly is the customer base gonna ramp? You know, we don't, we can't you know, be too precise about that. It in the Q1, we sold 39 modules to 10 different customers, seven existing, three new. We think we can just keep building that business. The other two pieces are really just continuing to part out engines. We did approximately 30 engines last year. We'll probably do about 40 engines this year. Grow that to 50, that's a $1 million per engine, that's $50 million there. The Chromalloy joint venture, just selling those PMA products to third parties, we get 25% of the profits from that. That should be approximately $50 million from that investment opportunity. Got it. Got it. The $500K per module is, I think, pretty variable between, you know, $250K and $1.5 million. Is that just because of the core, the fan, the LPT? Yeah. Even the, I mean, the bigger number opportunity is in the core. I mean, that's where when you, when you look at the money in the engine, I have an engine up at Lockheed Martin, which people go see. There's a, like, a slice of the engine about this, six inches wide. Mm-hmm. That's $2.5 million of parts right there. That is the biggest, you know, upside, and that's where a lot of the PMA will be, as I said, that's probably why $1 million is maybe conservative. Yes. Yeah You can still do very well on a fan and a low-pressure turbine, because even though we're making $500,000, we're saving the customer probably $500,000. Hmm. Because of the time, you could do a Phoenix swap. We just did one in Spain for the first time for a Spanish airline that, you know, had a good fan, and they had a good engine with a bad fan, and they wanted to get a fan replacement. The big MRO shop that they typically dealt with was like: "You shouldn't do that. That's never gonna work," and they badmouthed it. We came in with Lufthansa, did it in a warehouse in 48 hours. They're extremely happy. They want to do more of them. That saved them from having to send that engine into the big MRO shop, 'cause guess what happens when you send that engine into a big MRO shop? They find stuff. Other stuff. Yeah, just like your car. It is. It's saving time and money that makes it very valuable, on many levels, and justifies, you know, the price and the profit that we make. You mentioned you'd partnered with Lufthansa in that particular exercise. Yes. Is that how you usually do it? You go with a larger, MRO? Well, they had the ability. In that case, we can do our own module exchanges in Miami. Mm-hmm And at Lockheed Martin. But in that case, the engine was in Spain it didn't need to fly to Miami. They have a field service team. You can actually do a fan exchange on wing. That particular you know, event was one where we do partner. They have an excellent field service team. We partnered with Lufthansa on the WestJet, maintenance contract. They love us, and they love our products. They've been able to win additional business. It's a great relationship. It sort of I said we help everyone in the ecosystem except for one party. That's otherwise e veryone else is, you know, working together. That one party tries to make your life tougher by putting little performance improvements into the actual engine itself. It's the assumption that, you know, your, the value proposition you're proposing is more than offsetting whatever little tweaks they're making to a 25-year or 30-year-old legacy engine. Well, they can change part numbers, and sometimes they do that, but you have an enormous installed base. The CFM56 engine is a very stable platform, so unlikely that they're gonna make a modification that. Even if they did, I don't know that a lot of operators would do it, and they can't disenfranchise, you know, 20,000 engines, just to, you know, smash us. It's sort of like, there are things they have a playbook, but in the end, you know, you're talking about 10% market share. They will do extremely well. It's a great company. They'll raise parts prices, as they love to do, and they'll make a lot of money, and, you know, what's not significant for them is tremendously significant for us. As they raise parts prices on your maintenance reserves, on the leasing side. Automatically go up. You're obviously getting that benefit? Yeah. Yeah. Okay. Within the leasing profile, what is the expectation for that growth algorithm over the next several years? We want to roughly maintain about $2 billion of invested capital. It'll be more. We're now, I think, over 90% narrow-body engines between CFM56 and V2500. Instead of growing that number significantly, we're looking to turn it over more frequently. We will do more sales where we sell the leased asset and then retain the management of that engine, which is the dream scenario. Sort of like we did a deal with Avianca, which was a portfolio deal, so you got lots of different aircraft and different vintages and different durations. We're taking the younger aircraft with the longer leases, selling them. We sold them in two different transactions to two different leasing companies, and we made a gain on that transaction. We took our money out, plus a gain, and we retain an engine management contract for the next eight years, where we make a little over $1 million per aircraft per year from that. Total transaction is extraordinary. You know, it's an incredible IRR, and we free up the capital to go do it again and hopefully, you know, do it in a way where you just keep building that engine servicing contract. In those managed contracts, you're basically guaranteeing a performance level, and then? You guarantee that if an engine is due for a shop visit, they give it back to us, and we give them a new one. It's like if Hertz, you know, you rented a car, and now it needs an oil change. You drive it to Hertz, and they give you another one. Yeah. That's all. It's basically all it is. Again, that's our top-level product, which is: Get out of the engine maintenance business. Yeah. You know, we'll do it for you. Any questions in the audience? Yeah, go ahead. [audio distortion] Yes. How does that work? We. Just maybe repeat the question. Oh, yeah. Oh, sorry. Do you source any parts directly from the OEMs in your maintenance and overhaul? Yes, we do, because there are many parts in an engine, like all of the life-limited parts, that are only available from the OEM. If you have to have new life-limited parts, for example, that's the only source. It's a single-source supply, and that's obviously what gives the OEM leverage to increase pricing. That is their business model: Make the engine, sell it at a very low profit, and then raise prices for the next, you know, 30 years. We do. We buy and t hey have to sell to everyone. They can't discriminate. We are an engine owner. We own 350 engines. You know, maybe someday we'll own more than anybody else in the business, and we'll be their biggest, you know, I'm their biggest fan, and it's a great asset. Yes, we do buy parts. Great. How many of the CFM56 engines in circulation are in China t hat would probably maybe not be a part of the target market? Well, when I say China is a difficult market, I say it because they typically buy a lot of new assets. They'll have a 10 to 12-year period where you know, you don't have opportunity to do any of the aftermarket maintenance. We have been successful at buying assets out of China. Oftentimes, when they come to renew their fleet, they'll be selling 737s, A320s, and we've been a buyer of assets out of the big Chinese fleets and source business that way. I don't think of it as, like, not available for, you know, activity, but it's a harder market to penetrate because most of the aircraft they put into China are new and with Power by the Hour contracts. Thanks. Any other questions in the audience? Yeah. Joe, just on the PMA side, I understand the focus on the hot side, but, you know, HEICO has, you know, thousands, like, I think they sell, like, 12,000 parts or something like that. Have you thought at all about expanding into other PMA segments, or the return just isn't as attractive and not worth the effort? We have, and we have a kit, or HEICO puts together a kit for us that when an engine is in for a full restoration, we can buy all their products for that engine. We are including their PMA as an opportunity for us to use in our engines and our shop visits. They just don't make any of the hot section parts, which is where roughly, you know, 90% of the cost is in that hot section, is in the. No, what I'm saying, for you to manufacture other PMA. Yeah, we've talked about it, looked at it, we've met with a few people. They're pretty good at it, as are a lot of other people. It would be a very different activity for us to start doing that on our own, so. It's not the magnitude of savings that, you know, we're looking at in the other, through the other parts. It's a possibility. I wouldn't say never, but it's not something, you know, that I think is highly. It's not something on the current activity list. I'm more focused today on repairs. As I said, we spent $50 million on repairs last year, and the repair market is getting, you know, having a lot of delays because there's a surge in activity. There's many repair shops, some today that tell you, "I'm not taking new orders, you know, so if you need a fan blade, for example, forget it. I'm just not even adding to my list right now 'cause it's gonna take me six months." That capacity, that market is getting tight, it's getting slow. Ultimately, that's all good for us, but I wanna be in a bigger way in that market. That to me is more, more dollars and more actionable than some of the other PMA opportunities. Just one more. I know that there's a lot of opportunity and, you know, huge installed base in CFM, but eventually, they'll age out. You know, what engine type are you thinking about as the next area to push into? Yeah, we're looking at two other engines, and I haven't really, you know, disclosed what those are at this point. We have two candidates that I think are pretty good that we, you know, because the lead time on some of these opportunities can be four or five years. We are looking at two that I think would be pretty attractive. I do think that the sweet spot for the CFM56 is probably a minimum of six years, and more likely, with what's happening now with delays in new deliveries, probably eight or 10 years before it actually, number of aftermarket shop visits start to decline. If you look at Ryanair's new order, they just put in 300 aircraft. The first delivery is in 2027. There's, you know, people are having a lot of issues, as you probably are aware, with geared turbofans and early removals of the new e-engines. They're not giving up their old equipment right away. If you look at I think Copa just announced, you know, they're gonna extend all their leases. People are they're not ready to start, you know, sort of, giving them back in any significant degree. I know you had one quick one, and then we'll probably have to. Joe, you talked about the progression of EBITDA in answer to Miles' question, but being fairly linear from $100 million-$600 million in 2026. $500. 500, pardon me. Does that presuppose PMA approval? Yes. PMA parts approval? Yes. That would happen in the end of 2023 or the beginning of 2024? Yes. Soon, beginning of 2024 is what we've been. Of the approval? Yes. Yeah. Last question is, you mentioned that the PMA market is only 2% of all parts. I didn't realize it was that small. Are there other factors that go into this, like the insurance element or product acceptance, generally amongst the clients? No, I think it is, it's a market that there's only a handful of people who've been advocating, and the more, you know, products and acceptance that they have, the better for the whole industry. I think, I, as I always look back, I talk about the CF6-80 engine, which is where we first started using hot section PMA, and we owned 80 engines. We bought Chromalloy blades and vanes for that engine every time we did a shop visit, so we put PMA in. We've did 100 leases. No airline in the world, you know, would not accept that engine or ask for a discount because there was PMA in it, and we've sold 50 of those engines. When I hear, you know, the arguments that people make about not using PMA, it's not supported by the facts. It is a lot of misinformation, and also, to be fair, that, I mean, if you're in negotiations to buy a new engine and order 100 aircraft, you're not, you know. There's a lot of leverage there. You're never gonna be, you know, majority the, of the market, but you can still have a significant amount. It's, it's real savings, and if you also listen to the airlines, they'll say it is, in many cases, it's a better product, from a reliability point of view. All right. I think we're over. I didn't get you here on time. Thanks so much, Joe. All right. I appreciate it. Thank you, Miles.