10-QPeriod: Q3 FY2022

FTAI Aviation Ltd. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 17, 2022For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) reported a significant increase in total revenues for the nine months ended September 30, 2022, reaching $412.2 million compared to $228.5 million in the prior year period. This growth was primarily driven by a substantial rise in asset sales revenue and aerospace products revenue, reflecting a strategic shift to recognize asset sales as a recurring part of ordinary activities. Despite revenue growth, net income attributable to shareholders decreased significantly to $25.3 million for the nine months ended September 30, 2022, from $89.0 million in the comparable period of 2021. The decrease in net income is largely attributable to a substantial increase in asset impairment charges, which were $128.2 million for the nine months ended September 30, 2022, compared to $3.0 million in the prior year. This impairment charge is primarily related to aircraft and engines located in Ukraine and Russia that are unlikely to be recovered due to the ongoing conflict and sanctions. Additionally, cost of sales and operating expenses also saw significant increases, impacting profitability. The company's balance sheet shows total assets of $2.02 billion and total equity of $1.79 billion as of September 30, 2022.

Key Highlights

  • 1Total revenues increased by 80.5% to $412.2 million for the nine months ended September 30, 2022, driven by asset sales and aerospace products revenue.
  • 2Significant asset impairment charges of $128.2 million were recorded for the nine months ended September 30, 2022, primarily due to assets in Russia and Ukraine.
  • 3Net income attributable to shareholders decreased by 71.6% to $25.3 million for the nine months ended September 30, 2022, largely impacted by asset impairments.
  • 4The company's Aviation Leasing segment owns 96 commercial aircraft and 229 engines as of September 30, 2022, with 73 aircraft and 124 engines on lease.
  • 5Cost of sales increased by $111.6 million for the nine months ended September 30, 2022, due to increased asset sales and the gross presentation of revenues.
  • 6Operating cash flow improved to $151.3 million for the nine months ended September 30, 2022, compared to $131.8 million in the prior year period.
  • 7FTAI completed a merger transaction on November 10, 2022, where the Parent became a wholly-owned subsidiary of FTAI Aviation Ltd., and the Company replaced the Parent as the publicly traded entity.

Frequently Asked Questions

The primary driver of FTAI Aviation's revenue growth for the nine months ended September 30, 2022, was a significant increase in asset sales revenue, coupled with a rise in aerospace products revenue. This was partly due to a strategic change in accounting to recognize asset sales as a recurring part of ordinary activities.

The substantial decrease in net income was primarily due to a significant increase in asset impairment charges, totaling $128.2 million, predominantly related to aircraft and engines located in Russia and Ukraine that are considered unrecoverable. Increased cost of sales and operating expenses also contributed to the decline.

The conflict and sanctions have led to a significant impact, including the termination of lease agreements with Russian airlines, resulting in approximately $47.1 million in provision for credit losses for the nine months ended September 30, 2022. Furthermore, $120.0 million in impairment charges were recognized for aircraft and engines located in Ukraine and Russia that are unlikely to be recovered.

As of September 30, 2022, FTAI Aviation had cash and cash equivalents of $15.6 million. For the nine months ended September 30, 2022, net cash provided by operating activities was $151.3 million, indicating positive operational cash generation. The company believes it has sufficient liquidity to meet its cash needs.