FTAI Aviation Ltd. (FTAI): A Bull Case Theory
Engineers examining stress tests of an aircraft engine, working to make sure its ready for flight.
FTAI Aviation (FTAI) began as an aircraft and engine leasing business, but it is now undergoing a strategic transformation into a high-margin, capital-efficient maintenance, repair, and overhaul (MRO) company. Its MRO operations primarily focus on CFM56 and V2500 engines, which power a significant portion of Boeing and Airbus narrow-body aircraft and are expected to remain in wide use for decades. Despite only holding approximately 5% share of the fragmented MRO market for these engine types, FTAI is growing rapidly and has a long runway for further expansion. What sets FTAI apart is its unique approach to engine servicing — rather than performing full overhauls, the company repairs or swaps out individual engine modules using a proprietary inventory. This significantly reduces customer downtime and repair costs, enabling FTAI to achieve superior margins compared to traditional MRO providers.
The company's legacy leasing business plays a synergistic role in fueling the growth of its MRO segment by supplying used modules and generating consistent demand for swaps, effectively accelerating the MRO flywheel. Earlier this year, the company faced pressure following the release of short-seller reports, which triggered a stock price decline. However, at the same time, FTAI announced a transformative multi-billion-dollar capital transaction, shifting a significant portion of its leasing assets into a new partnership structure. This move not only reduced capital intensity but also unlocked further growth opportunities for the leasing side while freeing FTAI to focus more aggressively on its higher-return MRO operations. The combination of the stock pullback and this capital realignment created a compelling entry point for investors.
FTAI now trades at roughly 10x next-twelve-month EV/EBITDA, an attractive multiple given its strong growth outlook. Even without any multiple expansion, organic growth toward a 10–12% MRO market share, bolstered by its capital-light leasing structure, points to a high-teens IRR potential. If the stock re-rates to a 20x multiple—inline with top-tier MRO peers—and as the company rolls out higher-margin PMA parts and scales its operations, the return profile becomes even more compelling. With the possibility of exceeding 10% market share and capturing significant per-unit EBITDA growth, FTAI offers a rare opportunity to earn 20%+ IRRs over the long term, making it one of the most attractively positioned aerospace aftermarket plays in the public markets today.
FTAI Aviation Ltd. (FTAI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held FTAI at the end of the fourth quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of FTAI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FTAI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
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