What Happened?
Shares of aircraft leasing company FTAI Aviation (NASDAQ:FTAI) jumped 15.2% in the morning session after the company provided encouraging financial guidance for fiscal 2025, with the midpoint of its EBITDA outlook roughly 5% ahead of Wall Street's Consensus estimates (midpoint of $1.125bn vs. expectations of $1.075bn).
Separately, the firm announced a 'Strategic Capital Initiative'. The first partnership under the initiative will focus on acquiring 737NG and A320ceo aircraft, which could be an opportunity for FTAI to deploy $3+ billion of capital annually. The second part introduces an "asset-lite" initiative in partnership with third-party institutional investors, who will acquire on-lease narrowbody aircraft from FTAI. As part of this strategy, FTAI has already agreed to sell 46 on-lease narrowbody aircraft for $549 million to the first partnership. Despite the aircraft changing hands, FTAI will continue to maintain and repair the engines, ensuring a steady flow of business and additional revenue streams.
Finally, South Korea's plan to inspect all Boeing 737-800 jets operated by its airlines—after a devastating crash on December 29, 2024—opens the door for potential recalls or mandatory modifications. Such measures could be a tailwind to FTAI's business. For example, regulatory actions against Boeing or required modifications of aircraft could slow production of new aircraft, thereby extending the operational life of older planes that need more maintenance and repair work.
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What The Market Is Telling Us
FTAI Aviation’s shares are quite volatile and have had 19 moves greater than 5% over the last year. But moves this big are rare even for FTAI Aviation and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 19 days ago when the stock dropped 8.2% after Reuters reported that Boeing is planning to increase the production of its 787 Dreamliner Jets to 10 planes per month by 2026, which likely means fewer engagements for parts suppliers, including FTAI. The older the fleet of commercial aircraft is, the more FTAI tends to benefit due to its maintenance, repair, and overhaul services. Improvements in new deliveries from Boeing and Airbus mean the average age of the fleet falls.
Additionally, these Boeing 787 Dreamliners typically are equipped with Rolls-Royce Trent 1000 or General Electric GEnx-1B engines. FTAI mainly makes money from leasing out its fleet of CFM56 engines, which are found in the Boeing 737 and other military aircraft. This announcement is a double negative for FTAI.
FTAI Aviation is up 225% since the beginning of the year, but at $147.49 per share, it is still trading 15.7% below its 52-week high of $174.96 from November 2024. Investors who bought $1,000 worth of FTAI Aviation’s shares 5 years ago would now be looking at an investment worth $7,548.
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