FTAI Aviation Ltd. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; it does not provide a standalone fourth-quarter income statement. FTAI owns and leases aircraft and engines, sells aviation assets, and operates an aerospace products business. It also holds offshore energy assets within Corporate and Other. Amounts below are in U.S. dollars.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $1,170.9 million | $708.4 million |
| Income (loss) from continuing operations | $243.8 million | $(110.6) million |
| Net income (loss) attributable to shareholders | $212.0 million | $(220.4) million |
| Diluted EPS from continuing operations | $2.11 | $(1.39) |
| Adjusted EBITDA (non-GAAP) | $597.3 million | $428.1 million |
| Net cash provided by (used in) operating activities | $129.0 million | $(20.7) million |
| Net cash used in investing activities | $(373.3) million | $(411.3) million |
| Net cash provided by financing activities | $282.2 million | $44.9 million |
| Cash and cash equivalents at year-end | $90.8 million | $33.6 million |
| Debt, net | $2,517.3 million | $2,175.7 million |
| Total equity | $175.9 million | $19.4 million |
Revenue increased 65%, and Adjusted EBITDA increased 40%. The calculated net income margin was approximately 20.8% of revenue, but results included a $59.8 million income tax benefit, chiefly from a $72.2 million deferred tax asset recorded after Bermuda enacted a 15% corporate tax regime effective for relevant subsidiaries in 2025. Adjusted EBITDA is a non-GAAP measure and should not be treated as a substitute for GAAP earnings or cash flow.
At year-end, reported assets totaled $3.0 billion. Gross debt principal was approximately $2.55 billion; the balance sheet reports debt net of issuance costs. Contractual debt principal and interest obligations through maturity were $2.6 billion and $728.6 million, respectively; $177.4 million of interest was due within 12 months. The company reported $0.15 million of restricted cash and said it had sufficient liquidity, while noting it may use cash, borrowing capacity, or future financings. Cash used for investments was $861.5 million, and distributions to shareholders were $151.6 million in 2023.
Business performance and changes versus 2022
- Aviation Leasing: Segment revenue was $681.6 million, up $178.7 million. Growth reflected $119.6 million more asset sales revenue, higher maintenance revenue, and higher lease income. Segment Adjusted EBITDA rose to $467.4 million from $380.1 million.
- Aerospace Products: Revenue rose to $455.0 million from $178.5 million as sales of CFM56 and V2500 engines, modules, parts, and used serviceable material increased. Segment Adjusted EBITDA was $160.0 million, versus $74.3 million.
- Corporate and Other: Segment Adjusted EBITDA was negative $30.1 million. This segment includes corporate debt and expenses, as well as offshore energy assets.
- FTAI changed its strategy in 2022 so aircraft and engine sales became recurring ordinary activities, recording sale proceeds as revenue and the associated carrying amounts as cost of sales. This gross presentation increases reported revenue and cost of sales and limits comparability with periods when sales were reported as gains.
- The 2022 comparison included a $137.2 million impairment charge, largely related to aircraft and engines in Russia and Ukraine. The 2023 impairment charge was $2.1 million.
- The 2023 cash-flow comparison also reflects a $500.6 million net dividend from the 2022 FTAI Infrastructure spin-off, which did not recur.
Capital, operations, outlook, and risks
- In November 2023, FTAI issued $500 million of 7.875% senior unsecured notes due 2030 and used $250 million to repay revolving-credit borrowings. Year-end debt also included notes due 2025, 2027, and 2028. The company reported covenant compliance at year-end.
- Aviation Leasing owned or managed 363 assets at year-end: 96 aircraft and 267 engines. It reported approximately 77% utilization for the fourth quarter, 47 months’ weighted-average remaining lease term on aircraft currently on lease, and 16 months on engines currently on lease. Contracted minimum future operating-lease revenue was $626.9 million.
- Eight aircraft and 17 engines remained in Russia. Their insured value was approximately $210.7 million, but the timing and amount of insurance recoveries are uncertain; FTAI said it intends to pursue claims.
- FTAI acquired the remaining interest in QuickTurn in December 2023 for $30.3 million in cash, obtaining full ownership of a CFM56 maintenance and testing facility. Purchase accounting was preliminary, and QuickTurn was excluded from management’s and the auditor’s internal-control assessment for 2023.
- Management said it expects operating subsidiaries to generate cash to cover operating expenses and debt service, and described potential financings and transactions as under evaluation—not definitive or included in planned liquidity needs. The filing provides no specific earnings or revenue guidance.
- Key risks include leverage and refinancing needs, asset values and lease rates, customer defaults, aviation-market competition and obsolescence, Russia-related asset access and sanctions, interest rates, and the company’s dependence on its external Manager. The filing highlights conflicts of interest and incentive-based compensation arrangements with Fortress affiliates.
- FTAI declared a $0.30-per-share ordinary dividend for the quarter ended December 31, 2023, payable in March 2024. The company cautions that future dividends are discretionary; operating cash flow has historically been less than distributions.
- Contingencies include an offshore lessee matter with a stated potential loss range of $0 to $3.3 million and aircraft-engine guarantees valued at $6.8 million, with maximum undiscounted future payments of $34.7 million that management said are not reasonably expected.
- The auditor issued unqualified opinions on the financial statements and internal control over financial reporting. Management also concluded disclosure controls were effective; QuickTurn was excluded from the 2023 internal-control assessment.
Important facts for investors to verify
- Whether operating cash generation can support substantial investment spending, debt service, and shareholder distributions; note that reported operating cash flow was $129.0 million.
- The maturity and refinancing plan for $650 million of notes due in 2025, followed by $400 million due in 2027 and $1.0 billion due in 2028.
- How much reported earnings growth reflects recurring leasing and product activity versus asset sales, maintenance-deposit recognition, the Bermuda deferred-tax benefit, and other unusual items.
- The collectability and timing of insurance claims for Russia-located aircraft and engines, and any resulting asset or cash-flow effects.
- Whether aircraft utilization, lease renewals, and aerospace product margins remain resilient as acquired assets and QuickTurn are integrated.
- The assumptions behind maintenance revenue estimates, a critical audit matter involving projections of future maintenance events and mean time between removals.