FTAIアビエーション2026年第3四半期決算説明会：航空宇宙部門のEBITDAは57%増加、パワー部門の受注は100件を突破

要点

• FTAIアビエーションの2026年第3四半期調整後EBITDAは3億4,830万ドルとなり、前年同期比17%増、前四半期比15%増となりました。株主に帰属する純利益は1億4,910万ドル、1株当たり1.45ドルでした。
• エアロスペース・プロダクツ部門は、売上高が前年同期比76%増の9億1,000万ドルと過去最高を記録し、調整後EBITDAは57%増の2億8,240万ドルに増加しました。調整後EBITDAマージンは31%でした。
• 同社は当四半期中に過去最高となる311基のCFM56モジュールを製造し、年初からの累計製造数は877基に達しました。経営陣は2026年に1,200基、2027年に1,700基とする目標を維持しました。
• ストラテジック・キャピタルは、アビエーション・リーシング部門の調整後EBITDAの過半数を占めました。SCI Iは301機で全額投資コミットが完了しており、9月に投資を開始したSCI IIは109機のコミットメントを獲得しました。
• FTAIパワーは、ピーク出力25メガワット、連続出力23.1メガワットで重要なMod-1の試験を完了しました。2027年から2028年にかけての納入分として100ユニット以上が契約済みであり、その大半が2027年に割り当てられています。
• FTAIは5億ドル規模の自社株買い加速プログラムを開始し、自社株買いの総授権額を10億ドルに引き上げました。経営陣は、ランレート調整後EBITDAに対する純有利子負債の倍率（レバレッジ）が3.0倍未満にとどまると見込んでいます。

主要財務データ

事業および業績の状況

エアロスペース・プロダクツ

エアロスペース・プロダクツ部門が収益の主な牽引役となりました。過去最高のモジュール生産量、製品ミックス、および営業レバレッジが貢献し、同部門の調整後EBITDAは前年同期比57%増となりました。

FTAIは第3四半期に311基のCFM56モジュールを製造し、その市場シェアは約15%と推計しています。経営陣によると、新型機（737 MAXおよびA320neo）の供給制約、LEAPおよびGTFエンジンの整備期間の長期化、ならびに737 NGおよびA320ceoフリートの運用継続を求める航空会社の需要が引き続き追い風となっています。

経営陣は、調整後EBITDAマージン約30%という水準が今後数年間にわたり妥当な前提であり続けると見込んでいます。大手および中小の航空会社の現在の顧客構成に加え、大規模整備と軽整備のバランスがこのマージン水準を支えていると説明しました。

アビエーション・リーシングおよびストラテジック・キャピタル

アビエーション・リーシング部門は1億400万ドルの調整後EBITDAを計上しました。バランスシート上のリース事業が5,000万ドル、ストラテジック・キャピタルが5,400万ドルを寄与し、後者は現在、同部門のEBITDAの過半数を占めています。

SCI Iは301機で全額コミットが完了しました。経営陣は、これらの航空機のほぼすべてが12月31日までに案件完了（クローズ）し、配分された資金は約60億ドルに達すると見込んでいます。四半期末以降、FTAIは約10億ドル規模の30機に関する取引を完了させました。

SCI IIは9月に投資を開始し、109機のコミットメントを獲得しました。航空会社が手元流動性の確保を一層重視したため、ソーシングにおけるセール・アンド・リースバックの割合は、SCI Iの約20%に対し、SCI IIでは約40%となりました。

ウエストジェットとの取引はFTAIのビジネスモデルを象徴するものです。ボーイング737-700型機17機がセール・アンド・リースバックを通じてSCI IIに組み入れられた一方、10機はエンジンモジュールの取り出しおよびその後の再構築のためエアロスペース・プロダクツ部門に回されました。

FTAIパワー

Mod-1は天然ガスおよび液体燃料を使用した重要な試験を完了しました。同ユニットはピーク出力25メガワット、連続ベースロード出力23.1メガワットを達成しました。

FTAIは、2028年までに米国およびカナダの顧客向けに100ユニット以上のMod-1契約を締結しています。同社は第3四半期中に2億3,400万ドルの顧客手付金を受領し、2027年生産に向けた在庫投資の一部を相殺しました。

経営陣は、初期生産量を月産0〜5基とし、2027年末までに月産10〜15基に引き上げることを予想しています。同社は2027年に100基の生産を目指しています。

FTAIはまた、トレーラー移動式のコンバインドサイクルシステムに関する合弁事業を立ち上げました。経営陣によると、この拡張装置は燃料、排出ガス、水をさらに増やすことなく、9メガワットの追加出力を供給するように設計されており、効率を50%以上に引き上げます。初号機の試験は2027年後半に開始される予定です。

経営陣の業績見通し（ガイダンス）

• 2026年エアロスペース・プロダクツ部門調整後EBITDA：10億5,000万ドル。
• 2026年アビエーション・リーシング部門調整後EBITDA：4億7,500万ドル。
• 2027年エアロスペース・プロダクツ部門調整後EBITDA：14億ドル。
• 2027年FTAIパワー調整後EBITDA：4億5,000万ドル〜7億5,000万ドル（この幅は初年度の生産および納入拡大を巡る不確実性を反映）。
• 2027年アビエーション・リーシング部門調整後EBITDA：4億5,000万ドル。
• 2027年全体の調整後EBITDAの枠組み：下限で23億ドル。開示されたセグメントのレンジからは、26億ドルへの上振れの可能性が示唆される。
• 成長投資前の2026年調整後フリーキャッシュフロー：11億ドル（機動的なエンジン買収により6,100万ドル下方修正）。
• 2026年の成長投資：4億6,300万ドル（主にFTAIパワーの研究開発および設備投資により、当初目標の2億9,000万ドルから1億7,300万ドル増加）。
• CFM56モジュール生産量：2026年に1,200基、2027年に1,700基。

同社はまた、四半期配当を1株当たり0.50ドルに維持しました。これは11月10日時点の株主名簿に記載された株主に対し、11月23日に支払われます。

リスクと今後の注視点

• 原油高が航空会社の資金繰りを圧迫しており、顧客の財務状況に影響を与える可能性があります。経営陣によると、これまでのところ航空会社は需要を維持し、運賃を引き上げ、リースの延長を続けているとのことです。
• FTAIパワーの2027年調整後EBITDAのレンジは依然として幅広くなっています。これは、生産が依然拡大段階にあり、納入スケジュールが各顧客の要求に依存しているためです。
• FTAIパワーへの投資により、2027年の納入を前にして在庫と成長支出が増加しており、生産の実施と運転資本の回収効率（コンバージョン）が重要な変動要因となっています。
• 経営陣は、中国製の発電設備に関する潜在的な規制面での懸念について議論しました。FTAIは、Mod-1がビハインド・ザ・メーター（需要家側）用途に注力しており、パートナー企業が中国国外に施設と調達の選択肢を有していると述べましたが、引き続き本件を注視していくとしています。
• 第4四半期の収益拡大を達成できるかどうかは、SCI IおよびSCI IIの航空機取引の完了に大きく依存しています。経営陣によると、SCI Iの投資実行額は51億ドルに達しており、年末の目標額である約60億ドルに向けて、残り55機のクローズが控えています。

アナリスト質疑応答の要点

• エアロスペース・プロダクツ部門の需要：経営陣は、航空会社の財務的圧迫により、エンジン交換、整備費用ファイナンス、およびセール・アンド・リースバックへの関心が高まっていると述べました。また、CFM56やナローボディ機のリース料率に低下傾向は見られないと報告しました。
• FTAIパワーの受注残高：契約済みの100ユニット以上のMod-1の大半は2027年に予定されています。経営陣は、注文パイプラインが目標とする月産10〜15基の最終生産レートを維持できると考えています。
• コンバインドサイクルへのアップグレード：2027年に設置されるMod-1ユニットは、後日コンバインドサイクルへのアップグレード対象となる見込みであり、システムが利用可能になり次第、顧客は出力を追加できます。
• 生産能力の拡大：経営陣は、年間3,000基のモジュール生産量を上限とはみなしていません。FTAIは、修理能力やエンジン部品製造における整備施設や垂直統合の機会を引き続き検討しています。
• 資本配分：成長が引き続き同社の最優先事項です。経営陣は、ランレート調整後EBITDAに対する純有利子負債倍率を3.0倍未満に維持し、買収の余地を残しつつ、自社株買いの資金を調達できると述べました。
• フリーキャッシュフロー：2027年の正式なフリーキャッシュフローのガイダンスはまだ提示されていませんが、売上高が固定費を上回るスピードで成長し、エアロスペース・プロダクツ部門がFTAIパワーとインフラを共有することにより、現金の創出効率が向上すると経営陣は予想しています。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2026 FTAI Aviation Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Charlie Arestia Principal Investor Relations. Please go ahead.

Charles Arestia

Thank you, Michelle. I'd like to welcome you all to the FTAI Aviation Third Quarter 2026 Earnings Call, which is open to the public in listen-only mode and is being webcast. Joining me here today are Joe Adams, our Chief Executive Officer; David Moreno, our President; Nicholas McAleese, our Chief Financial Officer; and Stacy Kuperus, our Chief Operating Officer. We posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so.

We will be discussing some non-GAAP financial measures during the call today, including adjusted EBITDA. The reconciliation of these measures to the most directly comparable GAAP measures can be found in the earnings supplement. In addition, 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.

Joseph Adams

Thank you, Charlie. We have built FTAI around solving the problems our customers face. Our solutions combine engineering and asset ownership to innovate around the turbine. In both Aviation and Power, customers want a partner that is flexible and thinks differently and creatively now more than ever. We are very well-positioned to be the go-to partner in both of these markets. Every business we've built at FTAI began with a challenge our customer face. We built our MRE business originally to help airlines avoid costly engine maintenance and streamline their operations. Today, with the challenges facing new generation engines and new aircraft sold out until 2032, we are helping our customers fly their 737 NGs and A320ceo fleets longer by providing efficient ways to support their engine maintenance needs. In addition, with higher oil prices pressuring airline liquidity, predictable engine maintenance costs is more important than ever.

FTAI was built for exactly this environment. We keep midlife fleets flying at lower costs through our Aerospace Products division and we turn these fleets into liquidity for the airline through strategic capital, and we've started to offer flexible financing solutions for engines in partnership with institutional investors. I'll touch on the high-level impacts and David will walk you through how that is benefiting each of our businesses.

Aerospace Products had a strongest quarter yet. Adjusted EBITDA was $282.4 million, up 57% year-over-year at an EBITDA margin of 31% in line with our guidance of 30%. We produced a record 311 CFM56 modules and our market share reached approximately 15% this quarter. The strategic capital ramp is accelerating with 410 aircraft closed or under LOI, across SCI I and SCI II. And importantly, the second vehicle, SCI II, started investing in September of this year and is off to a great start.

For Power, we reached two important milestones this quarter. First, we now have over 100 Mod-1 units under contract for 2027 and 2028 with a significant pipeline of customer demand behind that. And second, we have completed all critical testing milestones and the Mod-1 unit has produced 25 megawatts at peak output and 23 megawatts at ISO continuous output.

Finally, capital allocation. This morning, we announced a $500 million accelerated share repurchase program that will be complete by the end of this year, and was accompanied by an increase in overall authorization from $500 million to $1 billion. In addition, we've completed $80 million of share repurchases since our initial announcement in September, and this will leave us with $420 million of authorization available for 1 year after the ASR or accelerated share repurchase program has been completed.

I'll now hand it over to David.

David Moreno

Thanks, Joe. Expanding on Joe's comments, three things are shaping the market today. First, midlife aircraft and engines remain supply constrained. New 737 MAX and A320neo orders are unavailable until 2032 and beyond, and the LEAP and GTF still spend far more time in the shop than the CFM56 and the V2500. Airlines continue to extend leases and add midlife aircraft as a result. Second, airlines are prioritizing liquidity. Higher oil prices have made cash a top priority and sale-leaseback interest has grown meaningfully. At FTAI, sale-leaseback come with engine maintenance attached. So it's both a liquidity lever and a cost control tool, which makes these transactions even more attractive. Third, Financing Solutions make our engine products more compelling. Whether an airline buys the engine outright or takes an operating or finance lease through our capital partners, FTAI builds the engine, sells it and keeps the customer relationship.

WestJet shows what happens when these come together. The airline sold 27 Boeing 737-700, 17 on-lease aircraft went to SCI II via sale-leaseback, so WestJet keeps operating them. And 10 of leased aircraft went to Aerospace Products where the engines become modules for the MRE network. WestJet extends the life of the 737 NG fleet and created liquidity for its balance sheet.

Now to the quarter. Starting with Aerospace Products, which delivered a record on every measure, $910 million of revenue, up 76% year-over-year and $282.4 million of adjusted EBITDA, up 57% at a 31% margin in line with guidance. We produced a record of 311 CFM56 modules in the quarter, bringing year-to-date production to 877, and we remain on track for 1,200 units in 2026 and 1,700 units in 2027.

Moving to Aviation Leasing. Strategic Capital is now more than half of the segment's EBITDA, exactly the asset-light transition we planned and both SCI vehicles will continue to scale into year-end. SCI I is fully committed at 301 aircraft. Since quarter end, we closed a landmark $1 billion deal for 30 aircraft and we expect to close substantially all 301 by December 31 for approximately $6 billion of total capital deployed. The vehicle is returning capital as well. We have distributed 17.5% of commitment this year and plan another 5% at the year end supported by strong realizations on airframe and engine [indiscernible] delivery. SCI II started investing in September and is deploying quickly with 109 aircraft committed and the first closings coming from WestJet. Across both vehicles, we have raised $5.5 billion of warehouse financing from 13 lenders in under 2 years and with sale leaseback activity rising, the pipeline is robust. What remains on our balance sheet is a simpler business. 150 to 200 spare engines, with a net book value of approximately $1 billion, earning $30 million to $50 million of EBITDA per quarter with minimal aircraft. These engines are how we keep customers flying. When an airline needs an engine immediately, they come to us and that short-term lease often becomes an engine sale once we have built a replacement. Growth in this segment from here comes from our Strategic Capital.

Lastly, Power, where we hit two milestones this quarter. The Mod-1 critical testing is complete, meeting its target of 25 megawatts for peak power and 23.1 megawatts for continuous baseload power. Testing completed on both natural gas and liquid fuels. And now we have more than 100 Mod-1 units under contracts across customer types in the U.S. and Canada extending into 2028. We've also received $234 million of customer deposits during the quarter ahead of our future deliveries, partially offsetting our inventory investment for 2027 production. Production is ramping now and at an expected full run rate of 10 to 15 units per month by year-end 2027, we are well positioned in our 100 unit guidance for 2027.

Let me spend a moment on why customers are choosing the Mod-1. It comes down to three things to care about most, speed, scale and cost. On speed and scale, that is where the market is heading. Data centers are taking longer build and require more capital, and the market needs power that installs quickly and be delivered anywhere in the world. Many GPU providers are moving to containerized compute with the goal being operational on-site in under 2 weeks. The Mod-1 is a modular unit that ships, installs and stacks in the same time line, modular power for modular compute. On costs, for behind-the-meter customer, equipment is the most important piece of the equation and the best way to save on equipment is to need less of it. A smaller stackable unit means less capital tied up in redundancy because incremental -- the increment you are protecting is 25 megawatts not 300 megawatts. It also means less downtime. Taking one unit offline takes a fraction of [indiscernible] down rather than all of it and a turbine exchange from our engine pull returns the unit into service in 2 days not months.

Combined cycle is the next lever on costs. The joint venture we launched this quarter as a fully mobile trailer-mounted unit that will convert excess heat into 9 megawatts of additional output with no additional fuel emissions or water taking efficiency to over 50% and lowering fuel cost per megawatt hour over the life of the asset. First units begin testing in the second half of 2027.

I will now hand it to Nicholas.

Nicholas McAleese

Thanks, David. The key metric for us is adjusted EBITDA. Adjusted EBITDA was $348.3 million for the quarter, up 15% from $303.5 million in the second quarter and up 17% from $297.4 million in the third quarter of 2025. The $348.3 million EBITDA number was comprised of $282.4 million from our Aerospace Products segment $104 million from our Aviation Leasing segment, a negative $38.1 million from Corporate and Other, including intersegment eliminations negative $5.1 million and $4.6 million of FTAI Power startup expenses associated with the Mod-1 [indiscernible]. Aerospace Products delivered a record quarter with $282.4 million of EBITDA at an overall EBITDA margin of 31%. This was up 13% sequentially from $249.7 million in Q2 of 2026 and up 57% year-over-year compared to $180.4 million in Q3 of 2025, reflecting production growth, mix and operating leverage. The segment revenue of $910 million was up 76% year-over-year.

Turning to Aviation Leasing. The segment generated $104 million of adjusted EBITDA in the third quarter, up 18% from $88.2 million in the second quarter, which included $50 million of balance sheet leasing EBITDA, in line with the $30 million to $50 million quarterly run rate David described. Strategic Capital contributed $54 million comprised of $7.4 million of servicing fees and $46.2 million of returns on our 19% co-investment in the 2025 SPV. Net income attributable to shareholders was $149.1 million or $1.45 per share compared to $117.6 million in the second quarter.

Turning to the balance sheet. We ended the quarter with total debt of approximately $3.5 billion, cash of $386 million and net debt of approximately $3.1 billion. Net debt to run rate adjusted EBITDA was 2.2x, down from 2.6x at the end of the second quarter, below our target range of 2.5x to 3.0x. Total liquidity was approximately $2.4 billion, including our undrawn revolver of approximately $2 billion. Our senior notes carry a weighted average cost of 6.5%, and we have no corporate bond maturities until May of 2028. We remain strong BB rated by all three of bond rating agencies.

On the share repurchase and financing, under the $500 million prime authorized on September 15, we have repurchased to-date $80 million of stock, and today, we are launching a new $500 million accelerated share repurchase program which will be completed by year-end. We intend to fund the ASR through a combination of our revolver and opportunistic access to the capital markets, and we expect for net debt to run rate adjusted EBITDA to remain below 3.0x. The remaining $420 million of the increased authorization is available for 1 year, and we expect to use it opportunistically through open market purchases.

Next, free cash flow. In the first 9 months of the year, we generated $724 million of adjusted free cash flow before $285 million of growth initiatives, much of which is driven by our Power business. For the full year, we expect to generate $1.1 billion free cash flow before growth initiatives, revised down by $61 million due to opportunistic engine acquisitions to support our Aerospace Products business. For the year, we expect to be up $463 million of growth initiatives, up $173 million from our original target of $290 million, predominantly driven by Power R&D and [indiscernible] in our FTAI facilities. These investments will allow us to scale at a faster pace [indiscernible] we produce Mod-1 turbines going into 2027. We are also reaffirming our segment guidance for both 2026 and 2027 as the business continue to execute on plan.

As a reminder, 2026 Aerospace Products adjusted EBITDA guidance is $1.050 billion and 2026 Aviation Leasing guidance of $475 million. 2027 adjusted EBITDA guidance of $2.3 billion comprised of $1.4 billion from Aerospace Products, $450 million to $750 million from FTAI Power and $450 million from Aviation Leasing.

With that, I'll hand it back over to Joe for final remarks.

Joseph Adams

Thank you, Nicolas. To sum it up, airlines today need solutions providers that help them maintain their fleets at lower cost and provide liquidity through sale-leaseback or leasing. And FTAI is built around being able to deliver all three of these products. The FTAI model produced a record quarter in Aerospace Products and an accelerating ramp in Strategic Capital. For Power, we're helping to fulfill the extraordinary demand for behind-the-meter solutions. And this unique combination is producing the excess capital that allowed us to raise our repurchase authorization to $1 billion while keeping leverage within our range. We're also maintaining our quarterly dividend of $0.50 per share. The dividend will be paid on November 23 to shareholders of record as of November 10. This marks our 45th dividend as a public company and our 61st consecutive dividend since inception.

We remain confident in both our 2026 and 2027 outlook, including our free cash flow expectations, and as we close out 2026, our focus remains on building durable, scalable and differentiated platforms that start with the customer and deliver value over the long term. The investments we're making across Aerospace Products, Strategic Capital and Power will continue to strengthen our competitive position, expand our addressable markets and support sustainable growth for many, many years to come. As a final reminder, we'll be hosting an investor meeting in New York City on December 10, and we're very excited and look forward to seeing many of you there.

With that, let me turn the call back over to Charlie.

Charles Arestia

Thank you, Joe. Michelle, you may now open the call to Q&A.

Operator

[Operator Instructions] And the first question will come from Sheila Kahyaoglu with Jefferies.

質疑応答

Sheila Kahyaoglu

Great execution during the quarter. Perhaps my first question would be on Aerospace Products. Just really great solid progress with margins at the 31% mark in the quarter. Production is up 50% year-on-year and your run rating at about 15% market share. Can you maybe update us on momentum you're seeing within Aerospace Products? And just given what's happening on a macro level, whether you're seeing any changes to customer behaviors, work scopes or fleet [indiscernible] and maybe how that's showing up in lease rates as well?

Joseph Adams

Sure. Thanks, Sheila. First on margins, as we indicated previously, we think 30% margin is a good assumption for the next couple of years. And it's a nice target. And it also is a representative mix, I think, across the entire industry. And our -- our ultimate goal is to provide engine [indiscernible] for narrow-body engines to the entire industry such that hopefully, in many years to come, no one ever thinks about doing their own shopping, and they just come to us because we give them an immediate availability at a cost that's as good as they're better than they could do on their own. And so when we think about that, why wouldn't everyone want to do that. And so nothing that we've seen in the current environment has changed our view about the ultimate customer acceptance.

As a matter of fact, as we see stress put on airlines, airlines are always looking for ways to raise liquidity, but especially now and shop visit costs for engines are one of the biggest users. So we can provide financing for shoppers that we can change the lease structure so that we can swap engines immediately and not have cash outflows. And we can do sale leasebacks to generate immediate cash. So I would say, in general, we're seeing probably an acceleration of our expectations about how we continue to pick up market share and nothing is shaking that view.

Sheila Kahyaoglu

Okay. No, that's great to hear. And maybe one on Power, David, if you want to take this one. You mentioned we have 100-plus power units under contract, and the slides suggest that the '27 guide is $450 million to $750 million, which I think is some nuance from last quarter. I guess, how do you think about the production schedule from the [indiscernible] super helpful. Maybe if you could just talk through the investment going on in Power and how it translated to your '27 assumptions?

David Moreno

Yes. So we're very focused on the ramping of this business. So we provided guidance on initial production, which we expect to be roughly 0 to 5 turbines per month. But being able to scale quite quickly to 10 to 15 turbines, where we expect to exit the year at. Now as a reminder, we're using our existing infrastructure that we have today. We're starting off with Montreal, but we're planning to use our other facility as well to floor Power remanufacturing. So we have the ability to scale that business. Really entirely the range -- we came into this quarter, obviously, accomplishing two really large milestones, right? And they kind of go hand in hand.

The first is obviously on the testing side. We've completed all the testing on the liquid and natural gas side. And on the customer side, we've achieved over 100 units under contract. But really, when you think about the range, it comes out to really the ramp and our ability to execute on that ramp, which we feel good. We have visibility, and we feel good about 100 units for 2027. But of course, we're working through each of the customers' requirement, and that's why you have that wide range. As we progress, we will continue to update you, and that range should tighten up as we progress throughout quarter-over-quarter.

Operator

And our next question will come from Giuliano Bologna with Compass Point.

Giuliano Anderes-Bologna

Congrats on a very solid quarter across the board. As the first question, obviously, it's very helpful to have that production ramp outlook for the Mod-1 units. What I'd be curious about is when you start looking at the end of '27, you're obviously planning on ramping production capacity up to 10 to 15 units a month, which comes down to 120 to 180 units annualized. I'm assuming that you wouldn't be planning for that production ramp unless you expected there to be the potential for orders and demand to fill that type of production requirement. Is that the way to think about it?

David Moreno

That's correct, Giuliano. I think our value prop is [indiscernible] with the market, really tailored around behind the meter, right? And you're seeing that today where folks are really focused on speed and scale, right? Data center building is taking a very long time. There's a lot of capital invested. And then there's a long period before we start generating returns on that, right? So you're kind of seeing this right now happening with industry where a lot of these GPU providers are offering containerized solutions. And we think on the Power side, our solutions containerized as well, and we can install it in less than 2 weeks. So that's really resonating well.

On the cost side, we understand -- I mean, that's really the heart of our Aviation business is lowering costs for our customers. We talk about redundancy and how we can be value-add there by the size and the stackability of our units as well as the uptime with our exchange model on the turbines. We also introduced again our combined cycle, which we think that's a big value add and helps reduce cost for our customer as well. So that's really [indiscernible] obviously, completing the testing and having that all come to place is a great accomplishment, and we expect to be able to add into backlog into the future.

Giuliano Anderes-Bologna

That's very helpful. And maybe as a follow-up, I'd be curious when you look at the 100 units that you have under contract, [indiscernible] to assume that, that's really heavily weighted towards '27 versus '28? And then on a similar topic, obviously, having the combined cycle probably has a great impact on future demand. But I'd be curious how things are shaping up in terms of discussions and things are still very active and if there's still a large pipeline of opportunities out there that you are negotiating?

David Moreno

Yes. It's mostly '27, so that is correct on your first question. And the way we're thinking about our product is just add-ons, right? So you'll see that theme in the modular add-on. So effectively, today, you get the simple cycle version and then you get the add-on with the combined cycle. And that's really important when you think about how we can continue to deploy enhancements. There's going to be -- we're always thinking about product enhancements and product development. Obviously, on the Power side, you have the ability to, let's say, create more quickly because you're obviously on the Aviation side, there is the regulatory piece. So we're continuously focused on adding value, and that's resonated very well and that should come across into increasing backlog.

Joseph Adams

But also any unit that's installed in 2027 could be upgraded with the combined cycle unit retroactively. So you are not giving anything up. It's just a delay until that unit is available. So the people -- the customers are looking at that as a very, very positive long-term development for this product in that you get another 9 megawatts out of that 4 megawatts, essentially no additional fuel costs.

Operator

And our next question is going to come from Kristine Liwag with Morgan Stanley.

Kristine Liwag

Maybe starting off on Aerospace Products. Joe, you mentioned that 30% EBITDA margin seems to be the right place for the next few years for that business. I was wondering, when you look at the scale here, you want to do 1,700 modules next year and the mix of customers, does that 30% assume you're going to maintain getting market share from Tier 1 airlines and doing more of those full-service restorations? Or is that potentially if you get more of those kinds of businesses, could you see pressure in that 30%? And also, you talked about financing engine shop visits? How do we think about that economically for FTAI?

Joseph Adams

Sure. We think that 30% is representative of the entire market and the mix that we're seeing now, is large airlines, small airlines, heavy shops visits and light shop visits, and we don't see that mix changing. So we feel very good about the 30% for the next couple of years. Given that our goal is to do business with the entire industry, and we're doing that now across the board. So we feel very good about the stability of that and the outlook.

In terms of financing shop visits, I mean, we always -- when we described the product [indiscernible], we said we go to the customer and said, we'll rebuild the engine for you and you can either buy it outright, you can exchange it for a runout engine, or you could lease it and the lease is really a financing option for the customer. And we're seeing probably an increase in leasing activity as we indicated, airlines are looking for every source of liquidity today. So if we see increased leasing activity, what we've been able to do is to sell those leased assets to financial partners. So in effect, from FTAI's point of view, it's the same as a sale. But from the customer's point of view, they're getting an additional value add in that in -- that we arranged the financing for that whole engine purchase for them. So it's a complete product offering that the airlines are very, very receptive and happy with it that really as far as we can tell, no one else can offer that product in the market.

Kristine Liwag

Super helpful. And you guys talked about the test results for Mod-1 for Power. I was wondering, when you look at the results for that turbine as it got converted to an aero-derivative. How does it perform versus regarding other thermal efficiency -- you talk thermal efficiency, start time, all that stuff, versus existing aero-derivatives? And also, I thought it was interesting that you've called out that you only need 1 spare out of 12 in service, 1 spare versus if you're doing a large turbine, you have a 1:1 on a spare to turbine ratio. This seems pretty attractive. So are customers paying you the appropriate price that you don't have to have much capital equipment in place to have that kind of coverage. And also, when you look at the the combined cycle that you plan to take on, how does that change your pricing power for this business per megawatt?

David Moreno

Yes. So on the first question and how testing is compared to other aero-derivatives, I would say it's in line, right? So obviously, the CFM56, where we expect a lot of let's say, value creation is that the CFM56 is the most durable engine ever produced for aviation. So we're expecting that to actually play out on the ground as well. But as far as what you mentioned, start time efficiency, it's in line with other aero-derivatives. The next question as far as what the redundancy looks like, right? So we did put a Page 17 now, where it's an illustrative example of what a customer would need if they have N+1 depending on the customer and their contract with the hyperscaler, right, they may have different -- they may have N+2, N+3. The whole point here is to say that smaller units that are stackable are going to be a lot more cost efficient because you're going to tie up less capital costs and redundancy versus large units that in order to back those up, you need to have very large units backing them up, right?

And of course, you don't have access to the grid. So the only way to be able to do that is to have backup and be islanded. So that's an important piece, and that's a big selling point as we can effectively get you a lower capital cost upfront, and then combine cycle when you that obviously creates more value, right? The more value we can create, ultimately, that should translate to a higher price. Obviously, you're creating additional megawatts. Typically, these things sell on a cost per megawatt. So you could expect that to obviously increase. I would say it's too early to talk about the exact numbers. So we're still guiding 7% to 8%, and I would think about the potential of combined cycle being upside.

Joseph Adams

I would also just say, our maintenance model for the Mod-1 is to be able to do turbine exchanges in the field, in a 48-hour turn on time. So that's something that no one else can offer on aero-derivative side that we've been able to do replicate from our Aviation model, which is basically an engine exchange in the field. So that quick turnaround time on turbines will also facilitate less downtime and less redundancy because you'll be back in service. You don't take that unit out of service for months while the engine -- while the turbine is being overhauled.

Operator

And our next question will come from Andre Madrid with U.S. Bancorp.

Unknown Analyst

I want to start off first on the point of sale leaseback. You guys are referencing frequently as a nice alternative option, providing flexibility to your customers. Just to provide us with a reference point, can you maybe talk about how the mix of this sale-leaseback work has kind of increased across both SCI and AL?

David Moreno

Yes. We're seeing a lot more activity, as you would expect, on sale leaseback because airlines are looking for liquidity. As a reminder, it's really two value adds. It's the liquidity day 1, but it's also saving costs for the airlines and the shop visits. And we're really the only party out there that can do both. So I would say on the first vehicle, on SCI I, we're sourcing about 80% of our aircraft from [indiscernible], 20% via sale-leaseback. But SCI, on the second vehicle, we're starting to see a significant uptake in sale leaseback. So today, that's more like 40% from sale leaseback, 60% from [indiscernible]. And I would expect that continue to rise. Obviously, it's early and we have over 100 aircraft in SCI II. So that's still to play out. But we're obviously going to see a lot of activity and we're in active discussions with many airlines.

Unknown Analyst

That's really helpful, David. Maybe pivoting to maybe a broad question. I feel like it's been a couple of quarters since you announced any acquisitions. Obviously, a lot of organic investments have been made across the business, both on the Power and for feedstock. But I'm trying to understand, I mean, how are you prioritizing the two, are there still attractive opportunities out there, especially in light of kind of the recent decline in valuations, broadly speaking?

Joseph Adams

Yes. The M&A opportunity market is set, I think, continues to grow. And as we've said previously, for the last couple of years, our focus has been on really on two areas. One is additional maintenance facilities to increase production and modules and two, on more vertical integration in terms of repair capability or piece part manufacturing for engines. And both of those areas, I would say, are pretty active today. We did add additional investments. We've added -- we now have 6 facilities on the CFM56 overhaul side, and we continue to look at adding to that. But we're also investing in those locations.

And we called out some $50 million, $60 million of investments to increase production for facilities that we bought that needed more tooling and additional -- and in the case of [indiscernible]. So it's both adding facilities as well as building out what we have. And -- and there are more M&A opportunities out there, so we'll continue to look at those. And we've always said our priority in terms of capital allocation, number one is growth, and that remains the same today. We're able to do the buyback and still keep our debt to total to EBITDA under 3x, which is very -- gives us a lot of firepower and a lot of capability to take advantage of market dislocation.

Operator

And our next question comes from Ken Herbert with RBC Capital Markets.

Kenneth Herbert

Joe and David, appreciate the time. Maybe just to look at a higher level, Joe, there's just a lot of concern in the marketplace about the impact on airline financials from the higher crude prices and their ability to continue to pass on higher fares and ultimately, what it might do in the marketplace to travel. Obviously, you're sounding very confident on '27, and I think I don't want to put words in your mouth, but I think a lot of the marketplace today plays into, obviously, what FTAI offers. But can you talk about what you're seeing from your customers, say. How they're able to manage the elevated crude environment? And are there any risks we should be thinking about in '27 just from a broader macro perspective as a result of what we're seeing today?

Joseph Adams

Sure, I'll start. I mean obviously, we're watching that carefully and talking to the customers all the time. I would say the -- on the positive side, the airline industry has seen ability to raise fares that they probably were surprised that they had that much pricing power, and the demand has stayed very strong in many parts of the world, all around the world, there's still -- they're filling the planes and they've raised fares and they're seeing those fair stick. And ultimately, that is the best answer to how do you manage your business as you -- if your costs go up, you raise your revenues and you continue to grow. So when you think about that, that's the best answer from the customer's point of view. There's still very, very strong growth. I mean if you think about most of the concern around traffic growth has been focused on either U.S. or more mature markets, which don't grow as fast, but there's many parts of the world in Southeast Asia, Middle East, Africa, India that have very, very high traffic demand that's unsatisfied.

And if you think about -- you haven't been able to get a lot of new aircraft in those markets, they're undersupplied for the last 3 to 4 years because of the manufacturing and delivery delays. So from the customer's point of view, they look at it -- or from the airline point of view, they look at it and say, well, I can't get new aircraft quickly, I can raise my fares. There's tremendous demand out there. And I don't really want to give back aircraft too fast because I'm going to need those if I want to continue to grow. So across the board, we don't really see customers saying I'm going to flip my fleet mix because of the pressure on fuel, we see those airlines continuing to look to add capacity. We see extensions from airlines that we have leases to in the SCI vehicles, which is the most concrete form of confidence is when an airline says I'll extend my lease. So we're not seeing and we hope fuel prices do come down, which would alleviate some of the stress on the airline industry, but we're planning for -- for whatever the customer is going to need, we're able to provide a solution.

Kenneth Herbert

Have you seen any downward movement on CFM56 or more broadly narrow-body lease rates this year that you would call out or you point to?

David Moreno

No, Ken, we're not seeing that. The CFM56 is a very durable engine. It's the most durable engine ever. And we're seeing tremendous demand for -- as Joe mentioned, extensions, engine leasing. So we're not seeing that.

Operator

And our next question will come from Brandon of Oglenski with Barclays.

Brandon Oglenski

Joe, maybe we can follow up off that last question there because I think you guys recently put out an enhanced agreement with United. And I guess my question is, historically, we've thought about this business is really benefiting smaller airlines with economies of scale in the maintenance, but maybe you can talk to why you're seeing some of the larger airlines be core customers here as well?

Joseph Adams

Sure. No, it's -- I mean, basically, the pitch to anyone in the industry is that we can deliver the same or lower cost than the airline could do on their own, and we can provide an immediate availability with no downtime. And that removes all the costs of managing a shop visit, having spare engines and the risk of a negative surprise. So as we've said before, if you get airlines to start trying to and use the product, and then they realize, "hey, it really is a better alternative then you can convert anybody. There's nobody out there that doesn't benefit when you say, I'll give you the same or better cost, and I'll reduce a lot of your expenses like what don't you like about that. And as we get people using it, even airlines that have their own maintenance facilities. So and there's also some benefits on the expense side, if you capitalize instead of expense costs. So it's just a really -- it's a pitch that we've never had anybody come back and say, "Well, I don't like this about it. I don't like that about it". It's like there's nothing not to like. And so we really do see over the next coming years, why shouldn't we have every airline in the world who owns CFM56 and V2500 do an engine exchange with us. It's only a question of how much of the fleet do they do with us.

Brandon Oglenski

And then, David, I just want to clarify two things of Power side. So I think, A, you have 2 prototypes up and running. Is that correct because it said you were testing one with natural gas and one with liquid fuels?

But then secondly, maybe more importantly, I think there was some concern around your JV partner, Jereh, obviously, a Chinese company and the recent executive order about on-grid power equipment being non-Chinese source. So maybe you can speak to those concerns on the JV side, too?

David Moreno

Sure, Brandon. So on the testing, we've tested both with liquids, so jet fuel and with natural gas. Obviously, our customers are predominantly wanting this through natural gas. But we've tested on multiple fields, which is very important for us. On the executive order, we do not believe this has a big impact on the Mod-1. Our understanding is that EO is really aimed at bulk power and is not intended to cover behind the meter. The Mod-1, as we mentioned, is really focused on behind the meter and providing electricity where as you know, its very political and you have to bring your own power in order to actually build data centers. But specifically, why we're not concerned is the Mod-1 is at the heart [indiscernible] engine, and we obviously do maintenance in North America.

Packaging is not reliant on exclusively in China, right? So our partner, which is their partner in this program has facilities across the world, UAE, Houston, Canada, and that gives us multiple paths to delivery. And then next is many of the balance of plant equipment are components are interchangeable, which Jereh has the ability to source these parts from a diversified global supplier base rather than a single country. So we think we have the ability to adapt, and that's kind of how we thought about this. Obviously, we thought about the impact of China before getting into this joint venture, and we're very happy to be partnering with Jereh, and their ability to adapt should things change, but we're monitoring that closely.

Operator

And the next question will come from Jeff Kauffman with Citizens Bank.

Jeffrey Kauffman

Congratulations. Just terrific to see all this news. Thank you also for the slide in the presentation showing net working capital you're anticipating in Power for 2026. I was wondering if you could give us an idea of what that might look like based on your current expectations for '27? And kind of where does that peak and when does working capital start to come down a little bit?

Nicholas McAleese

Thanks, Jeff. This is Nicholas, I can take that. So we've always really grown inventory very strategically in line with our financial and production targets, and we've had a strong record on execution on this. So as a reminder, approximately 2 years ago, we had about $0.5 billion of inventory in balance and that preceded $1.9 billion in Aerospace Products revenue last year. Similar to last year, we had about just under $1 billion in inventory balance, and now we're on track in Aerospace Products to generate about $3.5 billion in 2026. So looking ahead, the two benefits are: one is that there is large optionality now between FTAI Power and Aerospace products. The CFM56 is ultimately the same original unit. And then the fact that we also have economies of scale related to our facilities. As parts come off go into our MRE network and a recycled range, we can ultimately drive lower unit cost. So we're looking ahead at approximately about 2x in inventory turnover from a forward-looking basis, but we see upside beyond that.

Operator

And the next question will come from Shannon Doherty with Deutsche Bank.

Shannon Doherty

Congrats on the great results. Just doing the math, the implied ramp in 4Q to about $435 million of consolidated EBITDA is pretty steep. Given the current operating backdrop and strategic capital ramp, what is your level of confidence here? And what will be the biggest driver to hitting the full year target? Is it getting to 320 modules? Is it closing on incremental SA aircraft? Any thoughts here would be great.

Joseph Adams

Yes, Shannon. So the growth right, that is going to take us to those numbers is around the Strategic Capital, right? On the Aerospace Products, you look at that, you can see that we're very well positioned, where there's been some questions around our Leasing business and being able to have that big jump in Q4, right? So as we mentioned, really, the story here is Strategic Capital, right? And as for SCI I, we -- as of 9/30, we had $3.9 billion of invested capital, and we're going to go all the way to $6 billion by year-end. So we have extreme confidence in that. Because as an example, as I talked about earlier, we closed 30 aircraft in October for $1.1 billion. Today, we're sitting at $5.1 billion. So we're executing on closing aircraft, and we have 55 aircraft left to close. So we're -- we have really strong visibility on SCI I and SCI II is starting to close aircraft as well. And you're going to see that ramp come across mainly through SCI.

Shannon Doherty

Great. And maybe, Nicholas, one for you. I think that you mentioned that 2027 adjusted EBITDA guidance includes $450 million to $750 million range for Power. What does that imply that the new adjusted EBITDA target would be $2.3 billion to $2.6 billion. I understand you guys are probably being conservative at Power, but I just want to clarify what EBITDA number we should be modeling for 100 units ramping production in 2027? And what is the timing lag from production to delivery?

Nicholas McAleese

Yes. So I think I'll take the first half of that question. So that's correct. The range is $450 million to $750 million. And then on the total, we're clarifying it on the lower end for conservative purposes, with obviously all related to FTAI Power deliveries.

David Moreno

Yes. And as far as the lag between production and delivery, right, we're meeting customer requirements. We're working hand-in-hand on the customer to deliver it to their site. So that should be rather quick. However, we want to make sure, again, this is the first year of ramping. We want to make sure we have a wide range, so we're able to execute on that.

Operator

And the next question will come from Myles Walton with Wolfe Research.

Louis Raffetto

Louis Raffetto on for Myles. I was hoping you guys could speak a bit more to the WestJet deal and maybe a little bit more broadly on what you're seeing more on the aircraft transaction market as opposed to sort of the other side just given the fuel price and reduced flight hours that we're seeing? And then also, Nicholas, I think you mentioned the $61 million feedstock investment. Is that the 10 aircraft that you guys bought from WestJet? And I don't think that closed in 3Q, but I wanted to confirm.

David Moreno

Yes. So on WestJet, it was two transactions, right? 17 aircraft went into SCI II via sale leaseback, right? So that allows the airline to continue to operate those aircraft and have flexibility. 10 of those aircraft were acquired by FTAI for Aerospace Products. So really, that shows how we're able to work with airlines and buy equipment outright or work with them through sale leasebacks. As we mentioned earlier, sale leasebacks is really becoming a theme, really raising liquidity and then saving on shop visits, right? Really, as these aircraft mature, the biggest cost is going to be around shop visits, and we provide a solution for these airlines. So we have very strong relationships, and we're expected to execute on a lot of sale leasebacks at SCI II.

Nicholas McAleese

Yes. And just to follow on to David's point, the majority of those aircraft did close in Q3, and that's been reflected in our guidance numbers and cash flow.

Louis Raffetto

Okay. I mean, I guess when I look at the number of aircraft in leasing a number of engines in leasing, those went down even -- they went down sequentially. So we're sort of putting those that into the leasing business, but we're then just taking them right out, I guess.

Nicholas McAleese

No. So these were specifically for Aerospace Products. So those engines are going to be harvested to ultimately be rebuilt and then sold on to customers. And then for the airframes, we plan on recycling capital for those. So this would not be reflective of Leasing.

Louis Raffetto

Okay. So we're doing this a little bit different than we've done in the past, I guess, just from the way it's worked, I guess, realistically.

Nicholas McAleese

Yes. I mean, ultimately, these are unserviceable. We want the initial 10 that David spoke of. We're not planning on sale leasing back directly. These are going to be used for Aerospace Products business.

Joseph Adams

Which is the same as what we've done previously. If it's unserviceable it goes into Aerospace Products, it's never done. We've always treated it that way.

Operator

And the next question will come from Josh Sullivan with JonesTrading.

Joshua Sullivan

An upcoming Investor Day here in December, in the past, you talked about FTAI reports financials may evolve. SCI is now 50% of leasing. How should we think about the evolution of what accurately communicates business to the Street. At one point, your K-1 and obviously, the business evolved pretty substantially. But any previews or perspectives you can provide going into the number [indiscernible] would be great.

Joseph Adams

Well, I think probably there's a couple of unifying themes. One is how we partner with customers and that we provide a comprehensive package of solutions -- and that package of solutions sort of they all feed off and help each other. And so it's a very -- I think it would be that each of our business activities supports and helps the other business in a unifying way in an additive way. So we don't we really -- as I've said for many years, we don't think of ourselves as a sum of the parts where we have businesses that don't interact with each other. We have businesses that -- they're all supporting each other to ultimately provide the customer with a higher value add. And this combination that we've built is unique.

I mean, no one else has really been able to do this, and it's very, very powerful for the customer to be able to get these products together in a way that addresses their needs.

Joshua Sullivan

Got it. And then just on Aerospace Products, the upper limit on the 3,000 module capacity currently. Joe, you've been pretty successful and creative and finding latent capacity globally. What is the gating factor to that 3,000 limit or upwards? Is it the facilities? Or is it related by something else like the ramp SCI parts or engines?

Joseph Adams

Well, Dave has really been putting a lot of the facilities together, but we've we've been surprised on the upside as to how many facilities exist around the world where people built and had a dream of building an engine maintenance facility, and they built a nice building with tooling and and then they couldn't get business to put in it. And so we continue to find more locations like that where we have a very critical component, which is we can provide engines and that solves the biggest problem that many of these locations have. And so we think that there's more out there. We continue to source other new ideas, we don't see 3,000 as a cap in any way. We're going to continue to grow that.

And in some ways, the opportunities get get easier because we have a track record of having done this now 5 times where we've delivered, and we brought engines in, and we've increased employment in Rome, for example, went from 60 employees when we bought it to over 300 today and -- all you have to do is say, call the head of a call the ADR in Rome and ask them about us, and they will say unbelievable. It's amazing what they did, and they actually over-performed. We told them originally, we were going to get to 200 employees and we went to 300 in half the time. So -- so there's a huge value.

And if you go to different parts of the world, where they're looking for higher value high-paying technical jobs, aviation is always very attractive. If you can generate employment of these types of jobs in communities, you also then get an advantage for the local airline. The airlines are going to support their local production. And so that's another competitive advantage you can develop over others. And so it really -- it gets back to your [indiscernible] questions, all of these activities support and feed each other in a very, very positive way. And it's all about helping the customer, help the customer make their job easier, make their costs lower, make it so they have less capital to invest in things they don't want to like engine maintenance, and they love you. And that's our -- that's been our mission and our flywheel.

Operator

And the next question will come from Marni Lysaght with Macquarie Capital.

Marni Lysaght

I just would like a bit more color on the -- like adjusted free cash flow further out. Appreciate at your prior print you called out kind of what your peers have been doing in that 60% to 70% range relative to EBITDA. So again, just some color on as you continue to execute on your growth and make a requisite investment for that? And if you could potentially provide any color of how analysts on The Street to be thinking about it relative to NPAT. And also any timing or seasonality nuances you'd like to call out just to help us with our modeling for periods further out?

Nicholas McAleese

Sure. I can take that, Marni. So we've yet to provide formal 2027 free cash flow guidance but we're very confident in the direction of free cash flow for next year. So our guidance for adjusted EBITDA is a substantial step-up in 2026. And this growth is also supported by a large portion of inventory we have on the balance sheet today. We have power units already committed with deposits in hand, and we have an integrated supply chain build for scale. So this business model has significant operating leverage. So as we continue to grow, revenue will grow faster than our fixed cost base and that ultimately flow next year and beyond into greater margin and cash. So we'll continue to benefit from economies of scale. And then the fact that the sharing infrastructure between power and Aerospace Products ultimately means that we continue -- we'll continue to see free cash flow conversion improve year-over-year.

Operator

I am showing no further questions at this time. I will now turn the call back to Charlie for closing remarks.

Charles Arestia

Thank you all for participating in today's call. We look forward to updating you again after Q4. Have a nice day.

Operator

This concludes today's conference call. Thank you for participating, and you may now disconnect.