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As engine shop visit turn times increased amid strong passenger demand and various availability issues with current-generation models, FTAI’s maintenance, repair and exchange (MRE) model increasingly made sense.
Instead of waiting for a slot, paying for a full overhaul and backfilling for the unavailable engine with a spare, FTAI takes what you have and either exchanges, sells or leases you an airworthy replacement. You may not get a full-life engine, but you minimize downtime and avoid a lot of hassle in the process—and the burden of keeping the engine on-wing shifts to FTAI.
But what happens if the macro environment sees a dip in demand that reduces wing-to-wing turn times, grounds a few aircraft, and bolsters the spare-engine pool?
The Middle East conflict and related fuel-price spike is the model’s first true test. And while MRO demand remains strong and spare engines are still scarce, some airlines are starting to trim flights, with the oldest, least efficient aircraft hit first.
Many of these are legacy narrowbodies powered by CFM56s and V2500s—FTAI’s specialty. Will extra spare aircraft weaken one of the MRE model’s key selling points—getting a replacement engine with minimal downtime?
It might. But FTAI executives suggest another key MRE benefit would then take center stage.
“When you get in these environments, liquidity becomes number one, two, and three for airlines to focus on,” FTAI CEO Joe Adams said on the company’s April 30 earnings call. “Anytime that happens, you start having inquiries on sale-leaseback opportunities, asset sales, avoiding engine shop visits.”
As FTAI was pivoting to the MRE approach and ramping up its MRO capabilities in recent years, many in the industry were skeptical. Sure, it could attract desperate customers—smaller operators with little sway with major engine overhaul shops and perhaps cash-flow challenges. But what about larger airlines that become the foundation of any major aftermarket provider’s customer base?
“If I was talking to some of the big airlines 12 months or 18 months ago, they would’ve been somewhat [dismissive],” Adams said. “Now we talk to airlines, virtually everyone in the world is a potential customer, if not an actual customer today.”
The evolution is a familiar one in the maintenance, repair, and overhaul world. Used serviceable material (USM) and parts manufacturing approval (PMA) parts were once seen as desperate options for fringe carriers. Now, airlines are fiscally foolish if they don’t weigh USM’s or PMA’s cost and availability advantages.
For its part, FTAI is betting big on MRE and its growing sale-leaseback business. Its four overhaul facilities, Montreal, Miami, Lisbon, and Rome, are ramping up, with Montreal handling the heavier workscopes.
Despite nearly doubling first-quarter module overhaul output year-over-year to 270 units and having room to grow in its European facilities, the company is eyeing a larger footprint.
“It’s notable today that when you look at the map, we have no major maintenance facilities east of Rome, Italy. I’d expect this to look different when we are on next year’s [first quarter] call,” Adams said.
“We do have some candidates,” he added. “We’re working on that.”
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