FTAI Aviation - Q3 2024

Transcript

Operator (participant)

Good day and thank you for standing by. Welcome to the Q3 2024 FTAI Aviation Earnings Conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Andreini, Investor Relations. Please go ahead.

Alan Andreini (Head of Investor Relations)

Thank you, Liz. I would like to welcome you all to the FTAI Aviation third quarter 2024 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer, Angela Nam, our Chief Financial Officer, and David Marino, our Chief Operating Officer. We have posted an investor presentation and our press release on our website which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in a listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including EBITDA. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the Earnings Supplement.

Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding non-GAAP financial measures and forward-looking statements and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Joe Adams (CEO)

Thank you, Alan. To start today, I'm pleased to announce our 38th dividend as a public company and our 53rd consecutive dividend since inception. The dividend of $0.30 per share will be paid on November 25th based on a shareholder record date of November 14th. Now let's turn to the numbers. The key metric for us is adjusted EBITDA. We continued our strong performance with adjusted EBITDA of $232 million in Q3 2024, which is up 8% compared to $213.9 million in Q2 of this year and up 50% compared to $154 million in Q3 of 2023. During the third quarter, the $232 million EBITDA number was comprised of $136.4 million from our leasing segment, $101.8 million from our aerospace products segment, and negative $6.2 million from Corporate and Other. Turning now to leasing. Leasing had another great quarter, posting approximately $136 million of EBITDA.

The Pure Leasing component of that number came in at $122 million for Q3 versus $112 million in Q2 of 2024 and $102 million in Q3 2023. Additionally, we sold $20.7 million book value of assets for a gain of $14.3 million and have more sales coming in the final quarter of this year. With continuing high demand for assets, we remain confident in generating $500 million in leasing EBITDA in 2024, including $50 million in gains on asset sales. Aerospace Products had yet another excellent quarter with $101.8 million of EBITDA and an overall EBITDA margin of 34%, which is up 12% compared to $91.2 million in Q2 of this year and up 135% compared to $43.3 million in Q3 2023.

We're seeing tremendous growth in adoption and usage of our aerospace products and are increasing our 2024 estimated EBITDA to $360 million-$375 million, up from our previous estimate of $325 million-$350 million. Overall, we now expect annual aviation EBITDA for 2024 to be between $860 million to $875 million, not including Corporate and Other up from $825 million-$850 million that we guided to last quarter. With that, let me turn the call back over to Alan.

Alan Andreini (Head of Investor Relations)

Thank you Joe. You may now open the call to Q and A.

Operator (participant)

Thank you. At this time we will conduct the question and answer session as a reminder. To ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q and A roster. Our first question comes from Sheila Kahyaoglu with Jefferies. Your line is now open.

Hi team, thank you and congrats on a great quarter. Maybe if we could just level set the playing field here. We often hear from investors the idea that FTAI is only capitalizing on the short term bottlenecks in the aftermarket. Take the slower growth we've seen reported from some of the larger OEMs on their shop visits as an example, this quarter or their aftermarket when we get to a more normalized world in hopefully a few years time. What does FTAI's business model look like and what's your vision and how do you think about the duration of the CFM56 platform?

Joe?

Joe Adams (CEO)

Sure. Great. We think about that all the time. Also, we are happy that we're in an environment that's so supportive of our business model. And we think it really enhances or it increases the rate at which we can convert customers to adopting a new way of doing things. And so as we have worked with many airlines and we're increasing every quarter the number of new customers, we have seen no evidence that once people use our products or change the way they think about engine maintenance, which is letting us do it instead of them doing it. We've seen no evidence of anybody wanting to go back to the old way of doing it once the situation normalizes. The reason is we're providing a tangible cost savings and time savings benefit to the customers.

And it's not like they would three years from now wake up and say, let's go back to the old way of spending more money on engine maintenance. So we don't see any evidence that people will revert. And so this quarter we'll have the highest number of new customers that will convert to using our products. And David will talk more about that. And so we see the universe expanding as word of mouth spreads and more customers tell other people, hey, this is great, you should try it. But more often now, today, the question we get is not. The original question we got was, is this a good product and can I save money? It's if I go with you, how can I be sure that you'll be able to supply me the engines I need?

That's what we hear more now from the customer, which is a great, it's a great development. It's like, I get it, I buy that you have a great product. Now can you make sure that I will always have engines available? And so to that end, you know, the acquisition we made of the Montreal facility, which we now call FTAI Canada, really plays nicely into that because if you look back at 2023, for example, we were producing about 30 modules per quarter during that period. We increased that in the first half of 2024 to about 50 modules per quarter. Since we took ownership in the third quarter, we've now increased that production rate to about 75 modules per quarter. And we expect in 2025 that we will be up to about 100 modules per quarter at that facility.

We're well on our way to doing that. We obviously invite customers to go visit, come see what we do, we've changed a lot of the things that a typical MRO would do, and we've made it much more of a manufacturing production line. We've specialized employees, we've ordered a lot of parts, so we don't, you know, not at the risk of any supply chain disruptions. We can take people through the facility and say, this is where your engines are going to come from. We've got a lot of them and we have a lot of activity. That's a point of resistance. We love to be able to try to sell through because you've got people almost on the finish line. We believe very strongly that the conversion makes sense for people.

We believe that it's very sticky once you do get people converted. And then the only question left is, how long do you think people will fly CFM56 engines? And we've obviously made a bet that we think it's a long time, but anybody can have a view on that. But we think that's the easiest of the points to get comfortable with.

I have a lot more questions, but I'll just stick to one more if it's okay. Joe, you mentioned you onboarded, I think, the most customers you've ever onboarded this quarter, and they're continuing to want more. So how do you think about how that discussion goes when they do convert or how many customers did you have join and when they do first start with you? What are the number of modules they start with and how do you see them ramping?

David Moreno (COO)

Hey, Sheila, this is David. I'll take that question. So this quarter was a record quarter for new customers. We onboarded 19 new customers. Typically, a new customer places an order between one to two modules. And as you can imagine, the first sale is usually the toughest sale with a new customer because once you kind of go through the process, they understand the time saving, cost savings, and as Joe mentioned, it's a very sticky product. At the same time, we also are starting to see strong repeat customers come in and request about five to 10 modules at a time. That's typically what a repeat customer will do. And what actually happens in practice is they open up and they provide a full schedule of shop visits for the next five years.

Our product demand on that product is event driven, meaning we want to know the shop visits, we want to match the modules with the shop visits, and once they convert to a repeat customer, we kind of have those discussions of understanding the fleet, the fleet plans, and how to maximize their cost savings and timing. An additional thing that we've done also is we're getting a lot of demand for field service, so what we've been doing in the past is we've been distributing modules in the field with a lot of third party field service team. We're getting customers who want us to do everything, the full white glove service, so at QuickTurn, which is now FTAI USA, we built a field service team that now is being deployed worldwide to actually do the installation and to offer the complete service.

So we're very excited about offering that service and we think that's going to improve the overall experience even further and drive further repeat business.

Operator (participant)

Great.

Thank you so much.

Joe Adams (CEO)

Thanks.

Operator (participant)

Thank you. Our next question comes from Jason Holcomb with Morgan Stanley. Jason, your line is now open.

Good morning, Joe. Joe, on the V2500, in the past you've mentioned you had inducted around 40 engines this year. Can you provide an update on how that is progressing?

David Moreno (COO)

Are any engines beginning to come out?

Joe Adams (CEO)

of the shop yet? And then maybe if you could touch.

David Moreno (COO)

On the customer demand you've been seeing for the V2500. You've called out LATAM Airlines in the.

Joe Adams (CEO)

Past, but are there any other large.

Customer agreements we should be thinking about?

Thank you. Thanks.

David Moreno (COO)

Thank you, Jason.

I can take this. This is David. On the MRE, we're very excited with the progress so far on the V2500 on the production side, as we mentioned, the engines are in the shop. We're experiencing turnaround times that are on target, so 90-120 days. And those engines now have provided a strong pipeline that are 100% committed to customers. So those engines are coming out of shop. The LATAM program has now officially started, so we've started exchanging engines today. Additionally, we've secured two large North American airlines on MRE for about 20 plus engines in the next few years. So we're very excited about that and further growing that business. Those should be strong contributors starting next quarter or Q4, 2024 and more. Even in 2025, I think we're seeing tremendous opportunity worldwide in many different regions.

We're hoping to expand into Asia sometime very soon on a new deal as well.

Thank you very much for the color.

David, if I can maybe just ask.

A quick follow up, are you guys able to share with us kind of the number of CFM56 models you've sold during the quarter and just sort of provide an update on that side?

Thank you.

We stopped providing that level of detail. We think it's commercially not a great idea. And so we think we give enough information without that.

Okay, thank you.

Operator (participant)

Thank you. Comes from Josh Sullivan with the Benchmark Company. Josh.

Hey, good morning.

Joe Adams (CEO)

Good morning.

With Chromalloy announcing it's now received.

FAA approval for a V2500 blade recently. What do you think the implications for the industry and then for FTAI are going.

To.

I would take it as a positive when you think about the most complex part in the entire engine; it's the high-pressure turbine blades. The fact that that got approved is evidence that the FAA is confident. They have an extremely rigorous process, as we all know. It has a great track record of success in the U.S. and worldwide. Getting that approved, you know, is a great sign for future parts, including, you know, the CFM56 parts that we're working on. I take it as, you know, a great step. The process is working as it did before COVID, and it's working now post-COVID. Do you think lessors will be.

Willing to use the product?

We're a lessor. I can't speak for everyone else, but, you know, I think it's, you know, look, we use data when we make decisions, and our data, you know, is we have evidence that, you know, many of the parts are, you know, perform extremely well and they cost less, so, you know, we kind of just think about that when we make, you know, decisions about what we do.

Good.

Thanks for the time.

Thanks.

Alan Andreini (Head of Investor Relations)

Liz, are you there?

Joe Adams (CEO)

It seems the operator lost connection, so we're waiting for reconnection. Sorry about that. Liz?

Alan Andreini (Head of Investor Relations)

Liz, are you there?

Operator (participant)

Yeah, okay.

Alan Andreini (Head of Investor Relations)

Sorry, can you continue Q and A, please?

Operator (participant)

Yeah, can you hear me?

Joe Adams (CEO)

Yes, yes. It's Hillary from Deutsche Bank, ready to ask a question.

Oh, yes, sorry, I couldn't hear you. Okay.

Alan Andreini (Head of Investor Relations)

Yes, thanks for joining.

Joe Adams (CEO)

We can't hear the operator. So sorry.

Oh, okay.

Okay.

Thanks for taking my questions and congrats on a great quarter. So, Joe, in the aerospace segment, the EBITDA margin was 34% versus 37% last quarter. So I was wondering if you could just provide a little more details around that?

Yes, this is the first quarter that we incorporated FTAI Canada in the numbers, and there are some legacy contracts for third parties that we inherited when we acquired the company, and that had a negative effect because there are low or no margin contracts that are running off, and so if you adjust for that, that would have normalized the margin at 200-300 basis points higher than the number we reported, and those contracts have a very short life, so we expect there'll be some impact in Q4 and then we'll be finished with that by the end of the year, so it was just an impact from the acquisition that we had to assume those obligations, but they're running off.

Oh, that's great. So then I guess as a follow up, when those contracts roll off at the end of the year, will you be expanding your capacity? I guess when those roll off. And then when you said earlier that you could do 100 modules per quarter in 2025, are you including potential additional capacity available when those contracts roll off or would that be additional 400 modules that you referred to earlier?

Yes, it is. We're gaining on our productivity for the CFM56 by taking employees who are doing other things at the facility that we need them to do and repurposing or giving them CFM56 oriented jobs. So we're able to increase the productivity that I mentioned, the 30 to 50 to 75 to 100 with essentially the same workforce. So you're tripling, more or less tripling our productivity with a very similar headcount. So it's as I mentioned earlier, I mean it was a massively underutilized facility from our point of view and we're able to take the highest return anywhere in the company that we could get is focusing on increasing the productivity there, which we're doing and it's well underway even though we're only a month into it.

Got it.

So you are assuming. So within that 100 modules number, you are assuming that you'll be using the employees that were working on those contracts and repurposing them to your module to work on your module. Okay, great. Thank you so much.

Thanks.

Operator (participant)

Thank you, and everyone, I do apologize for the interruption earlier and we will proceed with our Q and A, and we'll take our next question from Giuliano Bologna from Compass Point. Your line is open.

Congratulations on another incredible quarter of outperformance.

Something I was curious about was you've obviously done an incredible job on the product segment, continuing to scale and grow the platform. I'm curious where you see a lot of the growth coming from at this point, and if there's been any kind of.

Distribution between new customer growth or volume growth and how those trends have continued to evolve.

Joe Adams (CEO)

I mean it is more organic growth. As we've said, we're focusing on the two largest engine markets in the world. Virtually every airline in the world operates a V2500 or CFM56 engine and we're still under 5% market share. So our focus is organic growth. And as I mentioned as an example, with using the facility FTAI Canada, we're able to triple the productivity with the same number of people. So the organic growth opportunity for us is right in front of us and it's extraordinary. And so we're not really focusing on anything other than that. That's very helpful. I appreciate it and I'll jump back in with you.

David Moreno (COO)

Thanks.

Operator (participant)

Thank you. Our next question will come from Ken Herbert from RBC Capital Markets. Your line is open.

Yeah. Hi. Good morning, everybody. Maybe Joe, just to start off or David, obviously you called out. You know, you're not seeing any supply chain issues in terms of executing some of the business today. On the parts side seems to be a major issue for the industry. Can you talk a little bit about how you've effectively managed to de-risk? It sounds like your CFM56 and now V2500 availability to parts and the extended lead times there that a lot of other MRO shops continue to talk about.

Joe Adams (CEO)

Yes, and you probably noticed our working capital number increased by roughly about $120 million from Q2 to Q3. And there's two reasons for that. One is we picked up about $50 million of inventory with the FTAI Canada acquisition. But secondly we are purchasing a lot of parts to be able to enable our ramp up in productivity. As I mentioned the 30 to 50 to 75 to 100. The best way to avoid supply chain disruptions is to pre-order and have a lot of inventory. There might be other ways, but that is the route we've chosen. We think it has a very high return on capital. Customers are very focused on. The question, as I mentioned earlier, we get the most often is can you actually get me the engines that I need and how can I be sure of that?

And so we're buying, we're buying more parts as an insurance policy effectively, and we think it's low cost insurance and high payoff. So. So that's part of the thought process, and I think we're well prepared going into 2025 to be able to really execute the best we can.

Okay, that's very helpful. And then on just since the LATAM deal, which I think obviously was playing out very well for you, what's the pipeline look like of other potential opportunities of that size? Or should we be thinking maybe smaller opportunities or are there still some perhaps chunkier opportunities out there as we think about exiting this year in 2025?

David Moreno (COO)

Hey, Ken, this is David. I'll take that question. So we're seeing many similar opportunities of that size, let's say 20 to 30 airplanes. That again, the real thesis around is not that the airline wants to raise capital through a sale-leaseback. Is they don't want to do maintenance.

Right.

So that's really the thesis. And so we're actively working those programs and we expect to have some advancement probably this quarter in Q4 of this year.

Great. Thanks, David.

Operator (participant)

Thank you. Our next question will come from Brandon Oglenski from Barclays. Your line is open.

Hey, good morning everyone and thanks for taking the question and congrats on a good quarter. Joe, I think you mentioned pipeline or backlog in the release last night. So can you maybe give us some idea of how much contractual business you are attracting in the products segment and then maybe longer term as well? How sustainable is your margin profile in the business? Because if we just simply look at other MRO providers, obviously a totally different profit profile.

David Moreno (COO)

Hey, Brandon, this is David. I can take that question. So as far as backlog, the way that we think about that is that's heavily correlated with the repeat customers. Today, on average about 66% of our volume is on repeat customers. And the more that you engage customers, by nature you're going to have a higher volume. So we expect that to continue to grow. And as I mentioned earlier, what we're working with is airline scheduling. So we're working on trying to understand when events are coming in, which gives us extreme visibility into future quarters and future years as far as engines and module matches.

So we feel very good about.

The business grows, we're going to get more and more visibility long-term on backlog. The second question, as far as margin, right, again, we expect margins to continue to increase inherently as the business grows. The reason for that is the same dynamic is that the manufacturer is going to be increasing pricing year-over-year, so inherently that is the pricing umbrella that we operate under, and then the second piece is we're focused on driving costs down every year or every quarter more and more, so we're rolling in new repairs. We're thinking about creative ways to use assets to drive further value, so our entire business is focused on driving costs down and that's why we feel very good about our margin expansion.

Joe Adams (CEO)

When you think about the difference between our business and an MRO business, one of the big differences is that we own the engine and we own and work on our own engines. We don't do work on other people's engines. So the typical traditional MRO model is to get a customer to put their engine in your shop and then you mark up labor and parts and supply that engine back to them, and, you know, in many cases, you might expand the work scope so you get a little bit more money, but that's, you know, a very different business, and what we've done is said we don't want to do any third party business. We only want to work on our own engines. We want to streamline that. We want to have the single work scope.

We want to be able to run it like a manufacturing operation as efficiently as possible and high volume. So it's a different construct. And as I've said many times, the key difference is that it's our engine. We own it, we build it, we put it on the shelf. Everyone comes in and our pitch is like, do you want it or not? Don't tell me what work scope you want to do or how you want to rearrange it. It's there, it's available. They're very fungible. So it's your call.

Appreciate the response, both of you. And then I guess on the capital side, maybe this is one for Angela. But where do you see funding needs?

For the business now that you guys.

Did some transactions here in the third quarter and I think you have some offshore assets as well in the leasing business. Can you maybe give an outlook for them?

So on the offshore, we're, I would say, very close on the sale of those, both those vessels, which it's not 100% done. So I don't want to jinx it, but I would be very surprised if it didn't close in the fourth quarter. And, you know, it's on target with, you know, previous guidance we've given about the amount of the dollar amount. So we expect that to be concluded this year. And then on other capital needs, Angela can. Yeah, on other capital needs, one of.

The redemptions that are coming up is on our Series B preferred, which we set to our floating rate on December 15th. So that's something that we'll be looking to redeem similarly, as we did for.

Our Series A this quarter.

Besides stocking and continuing to finish our plan on the V2500 engine purchases.

Through the end of the year. We don't have any other big purchases that we need capital for yet. And our next maturity is until 2028. That's right.

Thank you.

David Moreno (COO)

Thanks.

Operator (participant)

Thank you. Our next question will come from Miles Walton from Wolfe Research. Your line is open.

Hey, good morning. We've got Lou on for Miles.

Joe Adams (CEO)

Morning, Joe.

Can you give us an idea of the average green time on the engines you've been buying and if it's the same as the last couple of years? Is there also any difference between the CFM56 and the V2500?

David will ask.

David Moreno (COO)

Sure.

The way that we invest in.

On engines, we're looking at value on a cost per cycle basis. So I'd say the composition of engines that we acquire today are a little different than they were two years ago. Right now we're focused on acquiring assets that need shop visits. So assets that are completely run out that we can add value and then we can offer them for exchange or for lease. So we're really targeting value add activity on the engine side. As you can imagine, green time is more expensive today than it was, let's say, two years ago. So that's really the focus. The V2500 is also a very tight engine as well. So same strategy at the moment is we're buying run out engines to refurbish those engines and offer them for programs. So that's really the focus at the moment.

All right, great, thank you.

Maybe just to follow up on that, an earlier question on the V2500, you mentioned sort of the MRE and everything going on there. I'm just curious, are you guys doing the work there sort of through the MRE, sort of the original MRE, or is it really all being done by Pratt at this point with the relationship there?

Joe Adams (CEO)

Yeah. So the way I divide the responsibilities up is three things. First is acquiring the runout engine. Second is doing the performance restoration, and then third is taking it to market for sale, lease or exchange. We do number one and three. And under the Pratt program, Pratt manages number two, and they put all new parts, rebuild the engine to a full 20,000 cycles. There are certain other upgrades of thrust and potential from SelectOne, from PreSelect to SelectOne that are available. So in that Pratt contract, there are things they could do that no one else could do that we, we saw a lot of value in. So at this point, it's really. Number two is managed by Pratt. We have had discussions with Pratt about potentially having Montreal FTAI Canada become a V2500 shop, but we don't have conclusion on that.

We would like to ultimately have that capability in Montreal, but that's something we haven't finalized the discussion on yet.

All right, great.

Operator (participant)

Thank you.

David Moreno (COO)

Just one quick follow up, I guess PMA was originally $15 million-$20 million in this year. Not sure if that's still included or sort of been pushed. Just a way to think about that for 2025 at this point.

Joe Adams (CEO)

We're probably going to come up short on that this year, given that it's, you know, we don't have approvals yet. So I would say that we might have missed on that one.

David Moreno (COO)

Nothing on 25 yet, I guess, to think about.

Joe Adams (CEO)

We have not given real guidance on 2025 at this point. So that's something we'll consider early next year. All right. Thank you very much.

Thanks.

Operator (participant)

Thank you. And our next question will come from Stephen Trent from Citi. Your line is open.

Good morning, and thanks very much for taking my questions. Just some quick ones for you. Could you sort of give us an update where you are with respect to insurance settlements? As, you know, some of your competitors seem to be moving ahead in the court. So we'd just love to hear how that's going. Thank you.

Joe Adams (CEO)

Yes. So I divided into three different lawsuits, if you use the word. The first one, we have an agreed deal with the counterparty. That's the smallest one. It's probably about $10 million-$11 million, which we think will close here shortly. The second one is our umbrella contingent policy and we've had some, I would say some overtures of discussing potential settlements on that one.

The third one is the all risk policies that are being run through on the London court cases, which will probably be the last to settle. But there are, you know, individual insurers are, you know, discussing early settlements, and it typically starts to happen around the time when you get in front of the courthouse and, you know, you're facing, you know, potentially a bad outcome. So the insurers, you know, start to, you know, you know, they realize they've run out the clock as far as they can and now it's time to, you know, move on. So we do see that coming and you know, how much of that we'll get in 2025 is, you know, not, you know, hard.

It's hard to forecast at this point, but I do expect ultimately total recoveries in the neighborhood of about $150 million, which is all net income to us since we have written all of that off, so I think we'll ultimately get there and it's starting to move in that direction.

Okay, that's really helpful. Appreciate it, and one more kind of quick one for you. I mean, over the last year in gains, your stock has done so well, and have you given any thought to entertaining the idea of a stock split? and I know the retail shareholder might not be your number one priority, but just thinking about high-level.How you. May reach out to these other elements of the market that may buck at today's price per share. Thank you.

David Moreno (COO)

Yeah, I've had one or two people recently bring that up and it's something I hadn't really looked at for a while, and so I've asked people for any data they might have to support, you know, whether that's something that increases, enhances value, and if it, if I, if we can sort of get something that convinces us that it's a good idea, we'll consider it, but so far I haven't seen. What I've seen is, didn't seem very conclusive, but I'm open to anytime anyone wants to present something which says they can make our stock go up, I'm open to talking about it.

Very helpful, thank you very much.

Thanks.

Operator (participant)

Thank you, and we'll take our last question from Andrew Madrid from BTIG. Your line is open.

Hey everyone, good morning and thanks for the time. Earlier you spoke about the rise in.

Demand for field services.

Could you maybe explain the margin differential there, if any, between field and non field? And is there any read on how much of the broader mix this could become, the AP mix?

David Moreno (COO)

Sure. This is David.

I can take that question. The way to think about field service is it's an additional distribution channel to move velocity on modules. I would think about it less as a margin play, although the margin is.

Quite good because it's just labor in this scenario.

But typically a field service event is about $50,000-$70,000.

They're small dollars.

But what it does do is it enhances the entire module experience where you can line up the module, you can line up the team and you can go execute that immediately, which really helps airlines that are in a pinch and able to bring back an aircraft really back into service very quickly. So I would think about it more as an instrument to increase velocity of modules versus let's say an individual margin play.

Got it. Got it. And then I know you outlined previously about $60 million-$80 million in maintenance CapEx moving forward. But where exactly is this being deployed and what are the priorities there?

Joe Adams (CEO)

That's a number that we would invest, that we invest to keep our engines in our leasing portfolio in service. So when an engine needs a performance restoration or a shop visit in our leasing portfolio, that's what we spend annually to keep those engines flying.

Got it, got it. And one more, if I could squeeze in, I mean, I know we were talking about the V2500 PMA part from Chromalloy that got approved and the read-through from that, but I feel like we kind of danced around it and didn't really necessarily attack the conversation of when you guys are expecting. I know it said through end of 2024, but could you give any color there if it's sooner as opposed to later?

I love the use of the word attack. We don't give guidance on expectations of when parts will be approved. We've only said that we're very pleased with the progress that's been made and we are happy with the product itself, but we don't specifically forecast when approvals will be obtained.

Got it, got it. Had to give a shot, but thank you.

Appreciate it.

Operator (participant)

Thank you. And that does conclude our question and answer session for today's conference. I'd now like to turn the conference back over to Alan Andreini for any closing remarks.

Alan Andreini (Head of Investor Relations)

Thank you, Crystal. And thank you all for participating in today's conference call. We look forward to updating you after Q4.

Operator (participant)

Thank you. This does conclude today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.