Carriage House's Will Cleary on $FTAI

All right. Hello and welcome to the Yet Another Value Podcast. I'm your host, Andrew Walker, and with me today, I'm happy to have on for the first time, Will Cleary. Will, how's it going?

It's going great, Andrew. Thanks again for having me. Excited to be here.

Well, you've got to tell the guests—just get it out of the way. You've got to tell the guests: What are you drinking?

Andrew saw me drinking a Cherry Coke, and so he's making fun of me about it.

I'm not making fun of you. This is all—I mean, you just have to let the people know that it is value bona fides when you drink the drink of the literal investing god.

Yeah, channeling my inner Buffett. I hope the returns are as commensurate.

Yeah, right. Will is from Carriage House. I'm super excited to talk to him about it. He does great work on this stuff.

The company we're going to talk about here is FTAI, FTAI Aviation. Jacob Rubin did such an impressive call. I wish everyone had held on forever when he did the call because, even before the spin-off, he did the call on FTAI a long time ago. But that was a long time ago, a lot of podcasts ago, and the company has evolved a lot. So, I'm just going to pause here and ask: What is FTAI, and why are they so interesting?

Yeah, look, Jacob did, by the way, do a fantastic job. The story has changed a lot. And, by the way, it's a complicated story, Andrew. When you look at it on the surface, there's a lot of moving pieces. It gets more complicated by the day. There's this new Aero division. I started prepping for this podcast yesterday afternoon. I had 4 hours blocked out, and then I was like, “Oh boy, there's a lot more pieces,” and the pieces just keep moving.

But that's what I've gotten you here to explain it all for.

Exactly. And look, I want to focus first on the core of FTAI's business, which is really what got us excited about it in the first place. From a high level, at its core, FTAI is a leading provider of aftermarket jet-engine power for the commercial aviation industry. It has a differentiated model for delivering that power that saves its customers time and money and also generates outsized profitability for FTAI itself.

All of this stems from a decision the company made really only a couple of years ago, where it was, in essence, this run-of-the-mill jet-engine lessor, an owner of those assets, and it made the decision to vertically integrate into engine maintenance and repair. That decision—combining the ownership of the assets with the maintenance of the assets all under one roof—created this powerful platform.

That platform sources and acquires run-out engines. It then repairs those engines in-house, and then it offers those engines to airline customers either for an outright sale, for lease, or for exchange for a customer's run-out engine.

That exchange, which the company calls a module swap, is really what differentiates FTAI's platform. That platform is growing rapidly, and it's getting more powerful as it scales. It's continuing to vertically integrate, so it's getting more profitable, and it's also pursuing an asset-light transition such that returns on capital are inflecting in the right direction.

That's perfect. Now, let me ask—there's a lot to dive into and a lot to talk about here. I know a little bit about the aircraft space and jets and all that, and it's not lost on me that over the past 2 to 3 years, there's been this huge engine shortage, right? Largely caused by—I can't remember which engine was having the tainted powder-metal issues, but—

The GTF.

Yes, yes. It's not lost on me: This goes on this parabolic run, and returns are great, and the company says—and probably rightly so—that it made a great decision to vertically integrate. But I do have to wonder: How much of what they're experiencing is company brilliance versus how much is industry factors?

I've always worried in the back of my head, like, hey, at some point the powder-metal issues probably get resolved, and do you all of a sudden switch from, “Oh my God, we're super short engines,” to—I don't think we'd be in a glut, but all of a sudden it neutralizes, and then this company that looked brilliant—it turns out, “Oh, it was more industry wave than actual brilliance”? If that makes sense.

Look, I think that's all very fair, and I'll touch on some of the dynamics around the supply-demand imbalance. But at its core, I think it's the value proposition that this module-swap offering of FTAI brings compared to the traditional MRO model, right? That's what's really driving the growth here.

You can see it in the numbers. This company went from doing 0 module swaps in 2020 to that business being a $1.1 billion business for them in 2024, with 5% market share. Today, it's a $2 billion business. They have 10% market share. It's really the cost and time savings for the airline customers that are driving the adoption of this model.

There is no question that a component of their core leasing business is propped up by demand for these midlife assets. I think there have been a lot of things that have been pretty well publicized about problems with the next generation of aircraft that are coming through. We have the issues with the 737 MAX, right? That's been impacting the LEAP engine that's on that aircraft. We've got the GTF issues.

But I think there's a really long runway for this CFM56, which is the core engine that FTAI is focused on, to continue to be in circulation for quite some time. This is a prolific engine. There are 20,000 of these things out there, and although it's not a brand-new platform, most of these engines haven't even gone through their first shop visit yet. About 40% of them haven't.

The interesting thing is, as FTAI continues to iterate on its model and lower the cost of ownership for this asset itself, it actually elongates the life cycle of the CFM56 in utilization. If you can save 30% or 40% of the cost of a shop visit by doing this work with FTAI as opposed to doing it through a traditional MRO—and engine maintenance is the third-largest expense for an airline behind fuel and labor—you can own those engines for a longer period of time.

It's not technological disruption that puts these things on the sidelines.

It’s the economics of running them. The economics of doing this engine maintenance and repair work through FTAI makes owning that very efficient and reliable engine all the more compelling.

Why does working with FTAI lower the cost of engine maintenance? I think it’s best to give you the textbook example that brings this together.

Yeah, so imagine—well, maybe I’ll go on a quick tangent because I think it’s important to understand the engineering behind this specific engine that FTAI’s focused on: the CFM56.

What planes is this on, by the way? Just so people know, what types of planes is the CFM56 on?

The CFM56 powers all of the 737 NGs in the entire world. It powers probably 60% of the A320ceos in the world. These are narrow-body aircraft. It’s a very prolific, ubiquitous engine platform—maybe the most prolific one that’s ever existed in commercial aviation history. There are 20,000 of these things in operation, with 600 different owners.

What’s most important about the CFM engine is that it’s a modular engine. What I mean by that is there are 3 distinct modules—the core, the fan, and the turbine—that combine to create the engine itself. Each one of those things has life-limited parts in it, with only a certain number of cycles.

If you own this engine and one of those modules runs out of cycle time, or green time, it needs to go in for a shop visit. So imagine you’re a smaller, midsized airline, Andrew. That’s the core customer for FTAI’s module swap. You own this engine, and one of those modules runs out of green time and needs to go in for a shop visit. You cannot do this work yourself.

Of the 600 airlines and lessors that own this engine, there are 5 that actually have internal MRO capabilities. It’s Delta, Lufthansa, American—the big guys, the big operators.

Yeah.

So, you’re a small or midsized airline on this network of third-party MRO shops. You send that engine out to the shop, and it’ll take 1.5 or 2 months just for that engine to get inducted into the shop in the first place. Then it makes its way to the shop floor.

The typical MRO model is to instruct that technician to tear the entire engine down to the piece-part level. Remember, only 1 of my modules had to be repaired on it. The typical MRO model will tear the entire engine down to the nuts and bolts, looking for ways to expand the scope of work. That’s how these guys make their margin.

So, I get my engine inducted—2 months. Turnaround time is another 2 months. It’s 4 to 6 months for me, as that small or medium-sized airline, to get my engine back. It’s going to cost me $7 million per shop visit.

Compare that to the FTAI model. FTAI has engines that have already been refurbished and modules that have already been refurbished sitting in its inventory. It can send that smaller, midsized airline the module it needs overnight. It collapses the turnaround time to basically zero. I send you the new module, you take the old one off, put the new one on, and you’re back up and running in the course of a couple of weeks versus months.

Most importantly, it cuts down the cost of this maintenance materially because, first, we’re addressing the problem—the module that needs repair—as opposed to allowing the scope of work to creep. But secondly, because FTAI is able to repair these modules in-house, it can allow that smaller, midsized airline, as part of the consideration paid to it for the new module it’s sending, to send it its old runout module, which it’ll then repair and remarket to somebody else.

So, 4 to 6 months goes to 2 to 3 weeks, and $7 million goes to $4.5 million. The last point I want to make here, Andrew, is that this was not a novel concept. This module-swap business that FTAI established—the larger operators with their own internal MRO capabilities have been doing this themselves for a long time.

But for the first time, this module-swap model was available to everybody. Cheaper and quicker is a pretty compelling value proposition, hence the explosive growth they’ve seen.

That was a— I want to push on this. Would I be right in thinking that you do get a network-effect business here? My first question was going to be, why can’t everybody do the same MRO module replacement? You and I could start it up, but we don’t have people working with us to swap the modules quickly, and that’s probably important. We also don’t have the inventory.

Once you’ve got everybody in there, if we came along and said, “Hey, we’ve got 100 modules. Come trade with us,” I’m sure people would be interested, but our inventory would move a lot slower. Am I thinking about it correctly that there’s probably a little bit of a network-effect dynamic going on now that they’ve kind of got it and sucked up all the smaller players, or is that incorrect?

No, I think it’s absolutely the case. By the way, these guys have been at this a long time now, and so they have this commanding control over the CFM ecosystem. I think it would be very difficult for somebody else to come in and do this.

But you’re hitting on something very important. Think about all the different advantages this company has. If you were a traditional aircraft lessor—I like to think of these companies, and you know this business very well, as asset-management businesses. They’re leasing, but they’re also buying, selling, swapping, and trading.

What value am I going to have from a runout, singular engine module? I don’t know what to do with the other 2. FTAI does, because it can pick up a turbine from one person, a core from another person, and a fan from another person. It can combine those into an engine and then market that into the ecosystem.

They really—I mean, I guess they had the turbine, so, yeah. I was going to say, it would be a little weird to me if they were just kind of like Star Wars-style, “Hey, we’re the Tusken Raiders. We’ve got a bunch of things, and now we’ve got a whole new airplane or something.”

No, I hear exactly what you’re saying. Look, they did spend a lot of money at the onset to make sure they had the feedstock to be able to do this. That’s a big competitive barrier here. Somebody wants to come into this market? They’re going to have to spend the $2 billion of capital FTAI has already spent on setting up this module ecosystem and buying that feedstock.

If you’re a lessor and you want to come into this business, you also have to buy an MRO. You have to go and find a shop that’s going to be able to do this. It’s hard to find labor. You’re adding this operational complexity to, in essence, a financing business.

If you’re a traditional MRO, to adopt this model FTAI has established, where they don’t allow work-scope creep, you’ve got to throw your old model out—this work-scope-creep model. Then you’ve got to figure out how to set up an asset-management arm. You’ve got to go and buy all this feedstock.

When you’re buying that feedstock in the market, guess who’s bidding against you for that feedstock? It’s FTAI. They already have this structural cost advantage to outbid you and make a whole lot more money on that engine component.

You mentioned that the larger players—the Delta Air Lines and American Airlines—already have their own internal repair capabilities, so they don’t use FTAI.

You know what’s really funny? Early in the life cycle of the story, people thought this was just something for the small and midsized airlines. But as FTAI has gotten bigger—and, by the way, they are very scaled now—they’re doing 750 of these module swaps a year.

As we’re talking, they’re going to power the data centers now.

I think we’re going to get to that, too. Yeah, I mean, they’re actually starting to do a lot more work with some of the larger airlines now. They’re becoming a better counterparty, a much more reputable counterparty, for the large airlines.

They’ve talked about this, I think, on the 2Q earnings call this year. They announced, for the first time, “Hey, we just did a big deal with one of the major carriers.” So, I think that cost and time savings is a pretty universally compelling value proposition. If it fits in with the plans of the larger operators, FTAI’s there as a significant counterparty.

I think we’ve done a nice job framing the core business at this point. I have a lot of questions I want to follow up on and build off that framing, but I just want to pause here to make sure: Is there anything on the core business that you want listeners to know about before I dive into different aspects of the story?

Well, I don’t know if you’re going to touch on this. I think we may touch on it, but maybe this Strategic Capital Initiative.

That would be a great one. I think they launched it at the beginning of 2025, and that’s what’s really taking them asset-light.

So, why don't you start there, and we can build off that? As I sort of talked about, it's this explosive growth. But to get more modules, what do you need to do? You need to go and buy more modules using your balance sheet and debt capacity to do that.

FTAI then made this very important strategic decision to begin to utilize, in essence, other people's balance sheets to fuel the growth of this high-margin aerospace products module-swap business. What they did initially was go out with the expectation of raising $3 billion of private debt, and then they were going to acquire aircraft on lease.

Those aircraft would be owned off-balance sheet, non-recourse to the company, but contractually they would have all their services done by the module factory, by the module-swap business, saving those investors a lot of time on the maintenance of those assets. That's a compelling offering there.

Then, combining this capability that these guys had to purpose-fit these engines—5,000 cycles here if you need 10,000 cycles over there—it actually de-risked this game of aircraft financing. You know this from your experience in the aircraft-leasing business: a lot of your equity returns are embedded in monetizing the residual value.

Not just aircraft. Every rental, every leasing business: you look at them, and they're like, “We're so good at rent. We're so good at renting. We've got such great customers.” It's like, “Hey guys, I think all of the embedded gains and losses are in how you can sell this thing.”

So, it's a big assumption. These guys do not have easy jobs when it comes to this.

No, it's super hard. You have no idea what the market's going to look like when you go out to market and try and sell these things, right?

So, if you think about this, imagine there's an airplane with a 5-year lease term, and 2.5 years into it, there's a major engine event. What would typically happen is that airline would be responsible for putting 5 years of cycles on that engine. At the end of it, you're left with a 2.5-year engine.

What FTAI can do is basically say, “Okay, instead of putting 5 years of cycles on that engine, so at the end of it you're left with a 2.5-year engine, we'll module-swap and give you a 2.5-year purpose-built engine.” That's less money that you need to put up, which obviously increases your returns. By the time that engine runs out of cycles at the end of that lease, the residual value will be part-out value.

So, you're in essence making a lower capital contribution, which maximizes returns, and then taking on lower risk. I think the company always says, “Look, if you're a private-debt investor, that's the quadrant you want to get into.”

As a result of that, they started marketing this. They upsized it from $3 billion to $6 billion, and they've almost deployed all of that capital. They just announced SCI 2 partnerships.

What's happening here is that the leasing component of this business is getting super asset-light. This is captive business for the high-margin aerospace products segment. They don't have to go and try and win this market share in the marketplace. They are buying it and guaranteeing it.

Then the thing begins to grow. You have $6 billion of assets under management, then $12 billion. Three hundred and fifty airline airplanes becomes seven hundred. You're one of the largest owners of narrow-body airplanes in the world. A lot of other benefits accrue to you.

I think one worry—and this will nicely dive into some of the other things I'm talking about—is that it sounds wonderful. To some extent, the proof is in the returns, right? If fund one is $6 billion and then fund two is $9 billion or $12 billion, and all the people from fund one are desperate to get into fund two, that says a lot.

But I do think there's a worry. When you start saying, “Hey, we're going to raise third-party, off-balance-sheet money to buy these assets that are going to be dedicated, that are going to have guaranteed service and business from our high-margin products,” I think you start running into—this is what short sellers do. Anytime you see a company that does this, there's going to be a short seller here.

That's why I was saying we'd probably talk about short sellers in a second. But with off-balance-sheet captive arrangements, you start asking, “How are you managing those conflicts of interest?” You start saying, “At some point, do you start having the urge to pull returns into one bucket or another?”

Maybe we sell these at a little bit lower of a margin so that we can raise some more money over here. Or those private-debt investors seem happy with the returns, so maybe we shift a little more there. Then you start saying, going from zero to seven hundred, as you said, all of a sudden they're one of the biggest aircraft-leasing firms and aircraft owners in the world. That seems to have some interesting knock-on effects.

I just want to ask: how do you think about the risks and the murkiness associated with that?

Look, it's hard for me. First, I trust the management team. I think they're above board, more broadly.

The second thing is that they are obviously an investor in the equity of these vehicles, too. Their interests are sort of aligned with the success of those vehicles. Then I think it's just, okay, if the returns are commensurate with what they've been marketing and they're able to continue to upsize it, it sort of speaks to what's really going on beneath the surface here.

Could they move assets or monetize assets too quickly? I don't really see that being much different from what a traditional aircraft-leasing vehicle might be doing on the books of AerCap or Air Lease, for example. I think if everybody's aligned and we're trying to maximize returns, we're making the best decisions for the collective whole.

Completely fair. Speaking of that, one of the first questions I always like to ask is: what is the market missing that you're seeing? I think we've already addressed a lot of that, but I do want to ask about a high-profile short report from Muddy Waters in January 2025, which I think sent the stock down, from memory, from around $100 to $70.

A lot of my friends are pretty thankful for that report because I think they thought it was quite the opportunity. Hindsight has perhaps revealed that it was quite the opportunity, given the stock price today.

But I want to ask: Muddy Waters is probably the name in shorting. They released a detailed report with a lot of concerns, and it mentions hiring a forensic accounting firm to do a lot of work on this. What did you think about the Muddy Waters short report? I guess there is still short interest in general in FTAI, so what do you think the shorts are looking at here?

Yeah. Look, I wish you hadn't even thrown the name out because I think you're giving them free press. I'm just kidding.

No, I mean, when I first saw the short report, it was a very pretty presentation. But when you actually get underneath the surface, I think it was a little bit intellectually lazy when you break the analysis down to its core.

What were the 2 core claims that Muddy Waters was making? The first claim was, “Okay, the margins in the aerospace products business are fake. Typical MRO businesses make 15% margins. FTAI makes 35% margins in its aerospace products business right now. Why? Well, it's because they're playing games with depreciation.”

What they're doing is taking these assets that they're purchasing through their leasing business, hyper-depreciating them, and then transferring those assets over to the aerospace products business to inflate the margins of the aerospace products business, which is a higher-multiple business than the leasing business.

Okay, fine. For everybody out there, if you believe this claim even after Ernst & Young signed off on the company's 10-K in 2024, KPMG signed off on the company's 10-K in 2025, and the company, on its own accord and at the risk of delaying its own 10-K filing, hired a forensic accounting firm to do a full investigation of these claims and came back with nothing—if you still believe these claims, more power to you.

I think it gives me a lot of comfort that those things happened. But, in essence, the short report was kind of talking up the competitive advantage of FTAI itself.

FTAI can go with its leasing arm and buy these run-out engines that nobody wants, which are in essence fully depreciated. What's the depreciable life of a 15- to 17-year-old engine that needs to go through a $7 million shop visit before it can be attached to the wing of an airplane? It's pretty low, right?

This is the strength of this vertically integrated model. You can take this asset-management arm, go and buy those very low-input-cost components that nobody else wants in the market, and then turn them around and sell them for a tidy profit through the MRO business.

That's the crux of it. Plus, from a depreciation perspective, the lease terms are a whole lot shorter at FTAI than they are at someplace like AerCap—4, 5, 6 years versus what we're talking about at AerCap, like 8, 9, 10, 12 years.

So all of these things explain that depreciation difference.

The second thing that they were claiming was, okay, they’re not really selling modules; they’re selling full engines.

Yes.

I’m flipping through that exact piece right now. Yeah.

It’s like, okay, who cares, right? You want 1 module, 2 modules, or 3 modules. It’s dependent upon the airline.

The other explanation for that is, when you get a fully cycled engine back to you, it’s fully refurbished. There are 20,000 cycles on the core, 25,000 cycles on the turbine, and 30,000 cycles on the fan. The core is the most expensive thing to repair, and obviously you have to repair that more frequently because it only has 20,000 cycles on it.

That’s super interesting. When those engines come in with no core life on them, most of the time the airlines are like, “All right, fine. Do the rest of the work,” right? If FTAI, if one of the customers wants FTAI to sell them a core, they’ll sell them a core, but most people decide, “No, we’re going to do a full restoration.” So FTAI will just give them a full engine and then take those 3 modules in, right?

The other angle, too—this is just a 1-off—is that FTAI also does work on the V2500, which is an engine model that is, again, a Pratt & Whitney. It’s the predecessor to the GTF. That’s not a modular engine, so anytime you swap that engine with FTAI, it is a full-engine swap as opposed to a module swap. But the point is, okay, you want 1 module, 2 modules, or 3 modules—who cares?

So, that was the Muddy Waters short report. Perhaps I am biased by the results, and I’ve got a lot of respect for Muddy Waters. Perhaps I’m hindsight-biased by the stock price, but the thing that jumps out to me is they say, “Hey, we have a consultant, a former FTAI executive,” and the consultant basically says, “Hey, yeah, we did the MRO thing because we thought we would get a better multiple if we switched to MRO versus engine leasing.”

And that’s it. The FTAI executive doesn’t really, at any point, question any of the business model. Most of the time when I see a short-seller report, they’re like, “We have a former executive. He was there for 4 months. He left to be a whistleblower,” right? Red flags. There’s no cash on the balance sheet. The executives have go-bags packed and houses in non-extradition countries. Here it was just like, “Hey, we thought we could improve our multiple.” And I was just—again, it might be hindsight bias—but I was surprised by that.

Yeah.

Let me ask you the second thing that I think would be interesting. You’re talking and describing FTAI as a great business at this point, right? And I think the market kind of agrees with you. If I’m just looking at Bloomberg—I don’t have my full model built out or anything here—but Bloomberg says EV right now is $30 billion and EBITDA is $1.5 billion. Yes, they are switching to much more asset-light, but there is still a real D&A component here.

EPS in 2026 is $7, and the stock price right now is $275. So I might say, hey, this is great, but how much greater is the market already seeing this as a great business? How much greater can the business be for this to be a risk-adjusted alpha opportunity?

Look, unequivocally, I would have loved to have been here a year or 2 ago pitching the stock, or back when Jake—Jacob—was here pitching the stock. But I still think that there’s a ton of upside in this business.

The quality of this business—if you compare it, a lot of people will say, okay, and they’ll use this as a comp. It’s a different business; you know this business very well, but HEICO, right? These high-quality aerospace businesses can trade at very lofty multiples. HEICO is a business that trades at 30 times forward EBITDA today, even though it’s come off a little bit over the past couple of months.

Compared with what FTAI is doing from a growth, margin, and return-on-capital perspective, today the returns on capital are twice those of HEICO. The growth is, I don’t know, more than double that of HEICO on a forward basis. EBITDA margins are at least 30% higher than HEICO’s, and returns on capital are poised to improve very significantly.

There’s a ton of runway for continued growth here when we think about what 2027 looks like versus 2026, even setting aside the contribution that this new aero-derivatives business is going to make. This is a company that in 2026 is going to grow the number of modules it produces by 39% or 40%, based on its current guidance. Call it 1,000-plus modules in 2026.

Let’s think about this SCI. This is captive growth that they are going to be able to deploy. If they raise $6 billion in SCI 2, they can then go and buy 350 aircraft that are dedicated to the modular business. Three hundred fifty aircraft—that’s 700 engines. An engine comes in for a heavy shop visit once every 5 years. There are probably 1 to 2 modules that get swapped out every time that happens. You’re basically guaranteeing, just with the SCI 2 deployment, another 25% growth in 2027 off of what they’re going to do in 2026. That sets aside any contribution from organic growth outside of the SCI.

So, there’s a long runway here for growth. What people aren’t understanding is that the margins are poised to increase materially from here. If you look at consensus estimates, they’re building in, call it, high-30% EBITDA margins. These guys have PMA coming in that’s going to take millions of dollars in cost savings and just pump it to the bottom line.

They have all of these initiatives they’re doing with Palantir in terms of inventory optimization and maintenance scheduling. They also have a bunch of agreements for used serviceable materials, constantly taking down the cost of maintaining these engines. I can envision this company in a couple of years not doing 35% margins, but 45% margins—maybe 50% margins.

So you combine all these things: explosive growth, margin expansion, and, by the way, their balance sheet is starting to get really clean. So there’s going to be return on capital to shareholders, right?

Returns on invested capital

are going to go through the roof over the next couple of years. They’re beginning to do these SCI transactions, and they’re going to do 1 of these every year: $6 billion of capital, growing this asset base on somebody else’s balance sheet and using that as feedstock for their high-margin aerospace products business.

It’s a pretty amazing thing that I think deserves to trade at a much higher multiple than, call it, 20 times forward. That’s all on the core business, and I know we’re going to talk about aeroderivatives.

What do you think a fair value would be?

Look, I want to tackle the valuation component here because I think a lot of people do this thing where it’s like, okay, let’s sum the parts of this business. We’ve got this aerospace products business, which deserves a high multiple—an aerospace multiple, like HEICO, or Hexcel, or Woodward, any of these types of businesses that trade at high-20s, and some of them in the low-30s, types of forward multiples.

Then they look at the leasing business. Let’s set the aeroderivatives business aside for a second. Then they look at the leasing business and apply a leasing multiple to it.

We’re going to go there in 1 second. I wanted to make 1 comment. One thing I’m struck by is—I was reading some old notes on ValueInvestorsClub.com. I’m sure most listeners have heard of it. The most recent write-up, I believe, was from late 2024. The stock was $169.

Somebody added the tag again, but the person said, “Look, this has been written up twice previously. Once at $20, and the analyst had a $94 stock-price target; once at $37, and I had an $80 stock price. It’s blown through both of our targets. It looks expensive on the surface, but it always looks expensive on the surface. The stock’s a tremendous value. This thing’s growing like crazy, and I think it’s going to be worth $550 to $700 in about 3 years.”

I just think it’s interesting. Sometimes you find a great business that’s got great tailwinds and a great setup, and the numbers just go higher and higher. Think about NVIDIA. I always think of a friend who told me 5 years ago, “The moment you’ll know AI is here is when NVIDIA has a quarter that’s a massive beat, and all your smartest tech friends are just buying call options on it because GPU demand is going through the roof.” Here, it kind of has a rhyme to me, I guess.

Look, it feels that way to us. The way that we think about valuation, we call it a discounted price, but it’s not necessarily that the stock is trading at an optically low multiple in the marketplace, right? I’m not here to say that it is.

It’s just: if you extrapolate what this business is most likely going to look like in a couple of years’ time and discount that probabilistically back to the present, is that reflected in the price of the stock on a per-share basis? I personally think—we think internally—that the answer to that question is no.

You know, 8 to 10 times forward EV/EBITDA. Two things that you're missing when you do that, right? The first is, look, the leasing business is becoming an asset-management business: a low-asset-intensity, recurring-revenue alternative asset manager. Up until a couple of weeks ago, before we had this private-credit debacle—all of which is, by the way, focused on tech stocks, not on aerospace assets—these businesses traded at 20 to 25 times forward. I can make a very good argument as to why the consolidated core business, this high-quality aerospace business plus this, in essence, alternative asset manager, should collectively trade at a high multiple of forward earnings, to the tune of 20 to 25 times.

I don't think FTAI has any private credit exposure, so they probably still deserve that multiple. Yeah.

They don't. So, look, then you can start putting numbers on that. I kind of talked about why I think people are valuing this business off of 2027, because what we're going to talk about is this aeroderivatives business. Look, 2027 is going to be another explosive year of growth, and most of that growth is—if they're able to raise what they're expected to raise from this new vehicle—captive and guaranteed.

Right?

And so you can start to extrapolate. I can see at least potentially $2 billion worth of core EBITDA from this business. And then what type of a multiple do you want to ascribe to that? I'd prefer to do it not in the sum-of-the-parts way. I think those never work, by the way, Andrew. That's my take on the sum of the parts—

Oh, yeah. I've kind of come around to that point of view as well. I've had my head beaten one too many times.

So put it—put a 20-times multiple on it. There's $3 billion worth of debt on the balance sheet, right? They're going to generate $1 billion of free cash flow, which I hope doesn't accrue to the balance sheet, but theoretically it could. There's 103 million shares outstanding. That's a $385 stock price. Slap a 25-times multiple on that, right? And this is, by the end of 2026, what we're going to be looking at: a company that has the potential—the core of the business—to earn close to $2 billion worth of EBITDA.

We're going to have to end by—I mean, we've alluded to it a few times, but we have to end by talking about how Christmas came a little late for FTAI shareholders. Right at the end of 2025, they announced FTAI Power, where they're going to—I'll let you describe what they're going to do and what you think about the upside, because I think it's really fascinating. You go from one area of shortage—engines—to what is an even bigger and more important shortage. But I'll let you describe it and stop rambling.

Look, full disclaimer: this is a new thing for me as an investor in this stock, so I'm still getting smart on it myself. In essence, what the company is going to do—we know that there's a massive shortage of power for all these data centers that are coming online, but there's, whatever, $6 trillion of capital that's going to be spent on building these things out in the United States.

And it's very difficult to get these things plugged into the grid.

Plus, there are arguments as to whether or not they should be plugged into the grid in the first place and drive up the cost of energy for all the consumers out there. What FTAI is doing is taking these end-of-life engines, either from its own feedstock—they have owned assets on the balance sheet—or they can go and buy these things. And it's different from runout engines. It's like, it's part-out engines, right? A lot of people talk about, okay, well, if you're taking these engines out of circulation, you're not cannibalizing existing business. FTAI is not typically buying part-out engines. They're buying runout engines. The difference there is this engine is so old that it's not fit for the wing anymore. So we're going to just take it down to the piece-part level, see what we can salvage, and the rest of it's basically scrap.

They're going to take these engines and turn them into gas-powered turbines for data centers. They've been working on this for, call it, a year and a half. The expectation is that by 2027 they'll be able to produce about 100 of these units. These units are 25-megawatt units. They're stackable; they're portable. A typical rule of thumb is, as I've learned over the past couple of months since this announcement, it's like $1 million per megawatt. So purchasing this is like a $25 million purchase price. They expect this new aeroderivatives power business to be able to generate the same type of EBITDA margin that their high-margin aerospace products business does. Why?

So, are they going to be renting it out? They're going to rent it out?

No. They are going to sell the engine to a data center, and then they're going to use the same service model that they currently have—the module-swap model—to service that through the useful life of that turbine, right? But it's high margin again for the same reason that Muddy Waters was missing, right? For the same reason that the aerospace products business margins are so high: you're taking this basically trash—this stuff would be scrapped—and adding 10 to 20 years of useful life to it. And so your input cost—the turbine itself—is about as low as it can get in the industry.

There are people like GE Vernova that offer similar products into the market, but their backlogs are full. You can't get delivery of one of these units until, I mean, at least 2030. The beauty of FTAI having the input—the turbine already on its balance sheet—and being able to procure these things in the market as well is that it can deliver this by 2027.

It's why it's so fascinating, right? You've got this company that owns all these engines and, at the end of their life, as you're saying, they're basically scrap. And all of a sudden it's like, oh, they don't need to be in the air; we can just go put them into some data center in probably Northern Virginia. Put them in some data center. I bet they're going to make a pretty penny on selling them because, as you said, I think $1 million a megawatt is about right. I have no idea, but their cost of goods there has to be extremely low. I have no clue.

And then they've got a natural ability to service these things. So it's just like, as I was saying earlier, sometimes you've got these great companies and they just keep stumbling and stumbling and stumbling into these great businesses. Somebody had a quote: “I find buying great businesses easy because they just keep finding great opportunities.”

One of the great things about owning sports teams is just when you think there's not another thing that they can get sponsored by, it's, oh, it's the Crypto.com Arena now, or, hey, we need a prediction-market sponsor, or, hey, energy drinks are our big sponsors now. There's always something new that wants to be a sponsor, and here it's just like there's always some new demand for power from old-gen engines, I suppose.

Absolutely. Look, this management team is very, very smart, and they're constantly thinking of ways to continue to monetize this platform. I mean, this is just another way. It also extends the longevity of the platform, monetizing, as you said, these end-of-life assets and adding a lot of years to their utility.

Well, look, I think we've done a really nice job covering and breaking down a lot of different aspects of FTAI. I would be remiss if I didn't ask: is there anything else that we should have hit, or anything else that people should be thinking about before we wrap this up?

Look, I think we've hit, Andrew, most of the stuff here. I had a list of notes. It looks like I had 17 different bullet points, and we hit them all. So, yeah.

[Laughter.]

Yeah, hope I didn't go too fast overall.

I say—

The only thing that I can think of is, interestingly, this is becoming very quickly a real aerospace products business, right? And they are changing their GICS classification in March, which I don't know if it ever makes any difference, but sometimes when I screen, I'll screen for industries and all those sorts of things.

Everybody always thinks there are people who are missing this who are screening in the aerospace products business because, when I tell this story to folks, it's a big business, right? A $30 billion market-cap-type business. No one's ever heard of it before.

I will say, people always get really excited for the GICS, and I'm always like, I don't know, man. And I had trouble, believe me. But on the other hand, I would have told you 4 years ago that the European-to-U.S.-market relistings—I would have said, “Hey, investors, if they want, there's plenty of investors over in Europe, and U.S. investors can go buy the stock, or a lot of these had ADRs.” And, man, every single relisting, to my knowledge, basically worked swimmingly, and all of them got huge multiple re-ratings.

So maybe I'm being too cavalier about dismissing, like, “Hey, this matters.” You know what else? FTAI—they’re $30 billion. They’re going to be in the S&P 500 soon.

That was the second thing I was going to mention. Look, I don’t know if it’s going to happen or not, and I’m not that type of a prognosticator. So, just watch out for it, because I think it’s a distinct possibility.

I guess the last thing that I would say is the alignment of the management team here, right? I mean, this guy’s the CEO, Joe Adams, who I think is spectacular and really knows more about aftermarket engine maintenance than pretty much anybody I’ve come across. Look, this guy owns a lot of stock. He owns about $150 million worth of stuff.

When the stock goes up literally 10x, it turns out that all of a sudden you’re like, “Oh, I’m a big equity owner now.”

We were talking about alignment of incentives. I think that’s a pretty good alignment of incentives. The COO is, I don’t know, 40 years old. He owns a good $80 million worth of stock.

Actually, a funny thing about the CEO: I think this was back in May. He was a Fortress Investment Group managing partner for years. I presume he has other assets outside of his ownership in FTAI, but he used his—I think this is true, don’t quote me on it—$14 million lifetime gift exemption in his dynasty trust to put shares of FTAI into it. He didn’t put a single share of anything else into it. So, he believes in the story here, and he’s certainly aligned with investors.

When I was prepping for this, I love insider buying, obviously, and there wasn’t enough where I was screaming, “Here!” But if you go look at the list of insider buying—I mean, again, this is after the stock had a huge run—May 2025, all up and down the C-suite, people are buying. It’s just, quote-unquote, a couple hundred thousand shares, but people are buying. November 2025, all up and down the C-suite, with the stock at $150, people are buying stock. You go back to 2024, the CEO you mentioned buying $5 million of stock at $82.

But I guess, more than the insider buys, it’s actually that generally, when you see a stock going up like this, you’d expect to see a bunch of red—in my thing, sells are red—and there’s basically no red. It’s all green or nothing, you know? So, I think that speaks to the conviction and the insider alignment here, too.

Absolutely. Cool. Well, Will, this has been great. People can find courageouslp.com. There’s nothing on the website, though. The front page is very pretty, and it has the way to reach out to Will. Any other way people should reach out to you if they want to chat or anything?

Yeah, info@courageouslp.com. I don’t have much of a Twitter presence, but maybe you’ll find me out there someplace.

Well, Will obviously does great work, and this has been a lot of fun. So, Will, thank you so much for coming on, and I can’t wait to have you on again.

Thanks again, Andrew. I really appreciate it.