6. FTAI Aviation Ltd. (NASDAQ:FTAI)
Share Price Upside: 23%
Number of Hedge Fund Investors In Q2 2024: 33
FTAI Aviation Ltd. (NASDAQ:FTAI) is a New York based firm that leases aircraft and makes and sells aircraft engines. This exposes it to the highly growing commercial travel industry which is expected to benefit as a wider percentage of global populations experience a rise in their living standards and start relying on air travel. A key differentiator for FTAI Aviation Ltd. (NASDAQ:FTAI), which could serve it well in the future is its Module Factory. Given that 2024 has been marked by Boeing’s troubles in the commercial aviation industry that has reduced the supply of jets worldwide, FTAI Aviation Ltd. (NASDAQ:FTAI) could benefit from this as airlines are forced to stretch their existing fleet for longer than they had originally planned. The firm can expand its support for additional engines in the future to further widen its moat and add more engine manufacturers to its list of supported firms to gain global market share. Moving forward, FTAI Aviation Ltd. (NASDAQ:FTAI) will have to ensure it develops strong industrial relationships and innovative factory processes to ensure it doesn’t bleed market share to competitors.
FTAI Aviation Ltd. (NASDAQ:FTAI)’s management commented on its refurbishment market during the Q2 2024 earnings call:
“Turn times at maintenance shops are getting longer. So that means it puts a premium on having a pre-built engine or module available. So we can actually get higher — slightly higher prices and still generate significant savings for the customers. At the same time, by controlling costs through our own facilities, we do that with controlling the labor cost and that we have more specialization in the facilities.
We’re basically running on engine and we’re teaching people to do it in a high volume manner. So it’s a learning curve process where you get better and better at it is you do it more and more frequently, so that’s part of it. And we’re also getting smarter about used serviceable material, forecasting the demand. Where is it going to be needed, when are we going to need it, getting our repairs done in advance. So we’re using — we’re smarter and more efficient about using used materials. So it’s really on both sides of the equation, revenue is up, expenses down that we see growing margins. We will also see increased savings when we close on Lockheed Martin. And so we do see the margins trending towards 40%, and we think that, that will continue to grow as we get better and more experience with that facility as well, and we generate more volume.
So a pretty positive outlook for today and also for the near future for the coming years. I would say on your other question on Pratt versus CFM, we have said that the Pratt & Whitney V2500 deal will not be dilutive to margins, and I would continue to say that. We’re seeing very good demand for those engines, extremely high. And we’re also seeing good turnaround times on getting engines through the shop. So we continue to expect that, that will be the same or as good as or better than the CFM side.”
