Carriage House's Will Cleary on $FTAI

Summary

• Will Cleary’s core thesis is that FTAI Aviation’s vertical integration — owning engines and repairing them under one roof — created a “module swap” platform whose value proposition, not merely the industry engine shortage, drives the growth. The proof point he cites: zero module swaps in 2020 became a $1.1B business with 5% share in 2024 and is a $2B business with 10% share today, built on the CFM56 — “maybe the most prolific engine platform that’s ever existed,” with 20,000 units in operation and ~40% yet to see their first shop visit.
• The unit economics are the pitch: a small airline going through a traditional MRO waits four to six months and pays $7M per shop visit; FTAI swaps the needed module overnight, cutting it to 2–3 weeks and ~$4.5M. Only five of the CFM56’s ~600 owners — including Delta, Lufthansa and American — had internal MRO to do this themselves. “For the first time, this module swap model was available to everybody,” and FTAI has begun working with larger carriers, including a first big deal with a major carrier.
• The Strategic Capital Initiative takes the model asset-light by using “other people’s balance sheets”: an initial $3B private-debt raise was upsized to $6B, is nearly deployed, and buys aircraft on lease whose maintenance is contractually captive to FTAI’s high-margin aerospace products segment. A potential $6B SCI 2 deployment would mean ~350 aircraft and 700 engines of guaranteed feedstock — Cleary calculates that alone locks in roughly another 25% module growth in 2027 on top of guided 39–40% growth in 2026.
• Cleary dismisses the January 2025 Muddy Waters report as “a little bit intellectually lazy”: the depreciation-games claim was countered by E&Y, KPMG, and a company-commissioned forensic accounting investigation that “came back with nothing,” and the full-engines-vs-modules claim gets a flat “who cares.” His inversion: the short report inadvertently described the moat — buying near-fully-depreciated runout engines nobody wants at rock-bottom input cost is the vertically integrated advantage, not an accounting trick.
• On valuation, Walker cites roughly $30B EV, $1.5B EBITDA, and $7 of 2026 EPS against a $275 stock. Cleary argues quality justifies more: FTAI’s returns on capital are twice HEICO’s, growth, he estimates, is more than double, and EBITDA margins are at least 30% higher — yet HEICO trades at 30x forward EBITDA. His math: ~$2B of core EBITDA by end-2026, a 20x multiple, $3B of debt, and 103M shares gets a “$385 stock price”; he argues a 25x multiple could be justified, with margins going from consensus high-30s toward “45%, maybe 50%” on PMA parts, Palantir-driven inventory optimization, and USM agreements.
• The new aeroderivatives business (FTAI Power) converts part-out engines — “basically trash” — into 25MW stackable gas turbines for data centers at roughly $1M/MW, targeting ~100 units by 2027 at aerospace-products-level EBITDA margins, while GE Vernova’s backlog can’t deliver until “at least 2030.” Cleary flags he’s “still getting smart on it myself,” but the input-cost logic mirrors the core business exactly.
• Alignment and catalysts round out the case: CEO Joe Adams owns ~$150M of stock and (per Cleary, “don’t quote me”) used his $14M lifetime gift exemption to put FTAI shares, and no shares of anything else, into a dynasty trust; a GICS reclassification is expected in March and S&P 500 inclusion is “a distinct possibility.” Walker’s supporting observation from the insider tape: the CEO bought $5M at $82 in 2024; C-suite buying continued in May 2025 and in November 2025 with the stock at $150 — “there’s basically no red. It’s all green or nothing.”

Deep dive

1. Vertical integration turned a run-of-the-mill lessor into an aftermarket power platform

• Cleary’s one-paragraph frame: FTAI is “a leading provider of aftermarket jet engine power for the commercial aviation industry” with a differentiated model that “saves its customers time and money and also generates outsized profitability” — all stemming from a decision a couple of years ago to vertically integrate a plain-vanilla engine lessor into engine maintenance and repair. The platform sources runout engines, repairs them in-house, and offers them for sale, lease, or exchange — the exchange, the “module swap,” being the differentiator.
• Against the backdrop of the GTF powder-metal issue and resulting engine shortage, Walker asks how much of FTAI’s performance is company brilliance versus industry factors. What happens when the shortage neutralizes and “this company that looked brilliant — turns out it was more industry wave”?
• Cleary calls that fair but points to adoption data over cycle: zero module swaps in 2020, a $1.1B business with 5% share by 2024, $2B and 10% today. The model can also extend its own runway: engine maintenance is an airline’s third-largest expense behind fuel and labor, so potentially cutting shop-visit costs 30–40% elongates the CFM56’s life — “it’s not technological disruption that puts these things on the sidelines. It’s the economics of running them.”

2. The module swap math: four to six months and $7M becomes $4.5M and three weeks

• The engineering matters: the CFM56 — powering all 737 NGs and ~60% of A320ceos, 20,000 in operation, ~600 owners — is a modular engine with three life-limited modules: core, fan and turbine. When one module runs out of “green time,” the whole engine traditionally goes to a third-party MRO shop.
• Cleary’s textbook example, as told: a small or mid-size airline waits a month and a half to two months just for induction, then the MRO tears the entire engine “down to the nuts and bolts… looking for ways to expand the scope of work — that’s how these guys make their margin.” Result: four to six months and $7M per shop visit. FTAI ships a refurbished module overnight, takes the runout module back as consideration, repairs and remarkets it — “four to six months goes to 2 to 3 weeks and $7 million goes to 4.5 million bucks.”
• The concept wasn’t novel — big operators with internal MRO, including Delta, Lufthansa and American, had done this for themselves for years — “but for the first time, this module swap model was available to everybody.” And the addressable market widened: Cleary says FTAI discussed its first big deal with a major carrier on, he thinks, the 2Q call; at 750 swaps a year, it is “a much more reputable counterparty.”

3. Why nobody can copy it: feedstock, mixing-and-matching, and $2B of sunk moat

• Walker tests the network-effect logic: a new entrant would lack both the labor to swap modules quickly and the inventory, and its inventory would turn far slower. Cleary agrees “absolutely” — FTAI has “commanding control over the CFM ecosystem,” and an entrant must replicate the ~$2B of capital FTAI already spent on feedstock.
• The asset-management angle: a traditional lessor holding one runout module has limited value from it and does not know what to do with the other two; FTAI picks up a turbine from one counterparty, a core from another, a fan from a third, and combines them into a marketable engine. A lessor entering must buy MRO capacity and scarce labor; a traditional MRO entering must abandon its work-scope-creep margin model, build an asset-management arm — and bid for feedstock directly against FTAI’s structural cost advantage.

4. The SCI: captive growth on other people’s balance sheets — and Walker’s conflict-of-interest worry

• Launched at the start of 2025, the Strategic Capital Initiative raises private debt — initially expected at $3B, then upsized to $6B — to own on-lease aircraft off-balance-sheet and non-recourse, with all servicing contractually done by the module factory. Cleary says the initiative is nearly fully deployed and that SCI 2 has been announced. “This is captive business for the high-margin aerospace products segment… they are buying it and guaranteeing it.”
• The investor pitch inside the vehicle: FTAI can purpose-fit engines — installing a 2.5-year engine mid-lease rather than putting five years of cycles on a longer-lived engine — lowering capital contribution and residual-value risk. “If you’re a private debt investor, that’s the quadrant you want to get into.” Scale compounds: $6B of AUM becomes $12B, 350 airplanes become 700, “you’re one of the largest owners of narrowbody airplanes in the world.”
• Walker’s pushback: off-balance-sheet captive vehicles are exactly “what short sellers” hunt — do you get the urge to shift returns between buckets, sell to the vehicle at soft margins to raise the next fund? Cleary’s answer leans on trust: “First, I trust the management team,” they co-invest in the vehicles’ equity, and ultimately “the proof is in the returns” — if vintages keep upsizing, that speaks for itself. He sees no more monetization risk than in a traditional AerCap-style leasing book.

5. Muddy Waters, dismantled — and Walker’s tell about the “former executive”

• The January 2025 report, Walker recalls, knocked the stock from roughly $100 to $70. Claim one: aerospace products’ 35% margins (vs. typical MRO 15%) are fake, manufactured by hyper-depreciating leased assets before transferring them to the higher-multiple segment. Cleary’s rebuttal chain: Ernst & Young signed the 2024 10-K, KPMG the 2025, and the company — at risk of delaying its own filing — hired a forensic accounting firm that came back with nothing. “If you still believe these claims, more power to you.”
• His sharper point: the report “was kind of talking up the competitive advantage of FTAI itself.” What’s the depreciable life of a 15–17-year-old engine needing a $7M shop visit? “Pretty low.” Buying low-input-cost components nobody wants and turning them for “a tidy profit” is the model, and FTAI’s 4–6-year lease terms vs. AerCap’s 8–12 explain the depreciation gap. Claim two — they sell full engines, not modules — gets “who cares”: cores, with 20,000 cycles and the highest repair cost, often lead customers toward full restorations, and the V2500 is not modular at all.
• Walker, admitting possible hindsight bias, flags the report’s weakest link: its former-FTAI-executive consultant “doesn’t really at any point question the business model” — he merely said they did MRO to improve the multiple. Walker contrasts this with the more dramatic whistleblower scenarios often cited in short reports: “I was just surprised by that.”

6. Not optically cheap — but Cleary gets to $385 without the aeroderivatives

• The setup Walker poses: Bloomberg figures of roughly $30B EV, $1.5B EBITDA and $7 of 2026 EPS against a $275 stock — how much greater can a business the market already loves get? Cleary’s comp: HEICO at 30x forward EBITDA, while FTAI’s returns on capital are twice HEICO’s, forward growth, he estimates, more than double, EBITDA margins at least 30% higher — and 20x forward doesn’t reflect that.
• The growth bridge: current guidance implies 39–40% module growth to 1,000+ in 2026; if FTAI raises $6B for SCI 2, that could buy 350 dedicated aircraft — 700 engines, heavy shop visits every ~5 years, probably one to two modules swapped each — “basically guaranteeing just with the SCI deployment another 25% growth in 2027,” before any organic growth. On margins, consensus models high-30s EBITDA; PMA parts, Palantir-driven inventory optimization and maintenance scheduling, and used-serviceable-material agreements make him envision this company in a couple of years not doing 35% margins but “45%, maybe 50%.”
• On method, both reject sum-of-the-parts — “those never work, by the way, Andrew” — but Cleary notes the leasing arm is becoming “a low-asset-intensity, recurring-revenue alternative asset manager” of the kind that traded 20–25x forward before the private-credit wobble. FTAI has no private-credit exposure. His math: ~$2B core EBITDA, 20x, less $3B debt, ~$1B free cash flow and 103M shares — “that’s a $385 stock price. Slap a 25 times multiple on that” by end-2026.

7. FTAI Power, plus GICS, S&P 500, and a CEO who put only FTAI in his dynasty trust

• The late-2025 announcement, with Cleary’s disclaimer up front — “I’m still getting smart on it myself”: FTAI converts part-out engines, distinct from its usual runout-engine feedstock and otherwise destined for scrap, into 25MW stackable, portable gas turbines for data centers at roughly $1M per megawatt, or ~$25M a unit. It expects to produce ~100 units by 2027 and earn aerospace-products-level EBITDA margins, selling the units outright and then servicing them via the existing module-swap service model. The kicker: GE Vernova’s comparable backlog means no delivery “until at least 2030”; FTAI can use feedstock already on its balance sheet. Walker’s gloss: great companies “just keep stumbling into these great businesses.”
• Closing catalysts and alignment: a GICS reclassification in March, with no specific destination stated in the discussion; S&P 500 inclusion as “a distinct possibility”; CEO Joe Adams with ~$150M of stock who — “don’t quote me on it” — used his $14M lifetime gift exemption to put FTAI shares, and no shares of anything else, into a dynasty trust; and a COO whom Cleary estimated at about 40 years old with ~$80M. Walker’s read of the insider tape: the CEO bought $5M at $82 in 2024; C-suite buying appeared across May 2025 and again in November 2025 with the stock at $150 — “there’s basically no red. It’s all green or nothing.”