spk01: Ladies and gentlemen, thank you for standing by and welcome to the Q2 2021 Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Alan Andrini.
spk07: Thank you, April. I would like to welcome you to the Fortress Transportation Infrastructure Second Quarter 2021 Earnings Call. Joining me here today are Joe Adams, our Chief Executive Officer, and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation in our press release on our website, which we encourage you to download if you have not already done so. And please note that this call is open to the public in listen-only mode and is being webcast. In addition, we will be discussing some non-GAAP financial measures during the call today, including FAD. The reconciliations of those measures to the most directly comparable GAAP measures can be found in the earnings supplements. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements 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. Thank you.
spk09: Thank you, Alan. To start today, I'm pleased to announce our 25th dividend as a public company and our 40th consecutive dividend since inception. The dividend of 33 cents per share will be paid on August 30th, based on a sharehold record date of August 16th. Now let's start with the numbers. The key metrics for us are adjusted EBITDA and FAD, or funds available for distribution. Adjusted EBITDA for Q2 2021 was $68 million compared to Q1 2021 of $47.2 million and Q2 of 2020 of $66.5 million. FAT was $68.3 million in Q2 2021 versus $14.4 million in Q1 2021 and $47.3 million in Q2 2020. On a normalized basis, excluding sale proceeds and non-recurring items, Q2 2021 FAD was 15.7 million compared to 9.8 million in Q1 2021 and 38.2 million in Q2 2020. During the second quarter, the 68.3 million FAD number was comprised of 116.2 million from our aviation leasing portfolio, negative 2.5 million from our infrastructure business, and negative 45.4 million from corporate and other. Now, starting with aviation. Aviation experienced a meaningful increase in activity in passenger markets in Q2, and our portfolio of engine products and services is picking up momentum. While we achieved our goal of 80 million of EBITDA in Q2, up from 60 million in Q1, We are seeing a slightly slower ramp due to continuing COVID travel restrictions related to the Delta variant, particularly in Europe. As a result, we're now projecting 2021 EBITDA of 400 million as compared to our previous projection of 450 million for the full year. The engine leasing market is particularly strong as airlines look to ramp up flying while continuing to minimize maintenance capital spending. Q2 was our second most active quarter for engine leasing with 23 new leases delivered, bringing engine utilization to 65%, excluding new engine acquisitions. We recently started new programs with two to five engines each with major airlines in the Americas that we could see growing to over 20 engines each over the next year. While a little bit behind the Americas, we expect the same phenomenon to occur in Europe later this year. Also, new investment opportunities are increasing as illustrated by our agreement to purchase 12 A319s on four-year lease to one of the U.S. majors. Our three CFM56 maintenance product programs are all gaining momentum and broad market acceptance. The USM or Used Serviceable Material Program in Q2 with AAR is very active with approximately 15 million orders booked or closed. This strong and growing demand gives us confidence in hitting our targeted 20 engine teardowns this year with 1 million per engine profit or 20 million total profit for 2021. Our module factory has also been busy with 125 active users on the website and a handful of sales or exchanges consummated. We have big aspirations for growth in the module factory in the next 12 to 18 months with several sizable active campaigns now being negotiated. Thirdly, PMA with Chromaloy has made big strides with the second part in production preparing for final submission to the FAA in September. All in all, the market is shaping up better than we had hoped for our unique and proprietary approach to the commercial jet engine market. Now let's turn to infrastructure. Starting with Rapano, at Rapano the high levels of activity this quarter are bringing the long-term vision into sharp focus. We started in 2016 with a vacant property of 1,600 acres on the Delaware River with Conrail rail service and a small underground unused storage cavern. By 2024, we expect to have completed a fully capable world-class natural gas liquids hub comprising three-plus million barrels of highly efficient underground storage capable of handling butane, propane, ethane, condensate, propylene, and other refined products for export via all-size ships, including VLGCs, and for import opportunities as market dictates. Product movements will be available by rail, both inbound and outbound, be it Norfolk Southern or CSX, by water across multiple new high-capacity deepwater docks, by pipe from all major North American producing regions, and by truck via our new state-funded highway access road. And all of this in one of the most desirable East Coast locations. In addition, we have 250-plus developable acres which are ideally suited and will likely be utilized for staging and manufacturing of offshore wind farm components and new plastics recycling facilities. And the reason we are highly confident that this vision will become reality is we are doing much of this today. In Q2, we brought in 1.1 million barrels of LPG by rail and safely and efficiently loaded 17 marine vessels at our docks. We moved butane to local markets by truck and have expanded our capabilities to handle propane. And importantly, we are on the map with global LPG players throughout the value chain. Turning to Longridge, I'm pleased to report that the two-and-a-half-year, $600 million-plus power plant construction project is nearly complete two months early and on budget, thanks to the more than 500 skilled and hardworking men and women involved involved in designing and building this state-of-the-art, highly efficient power plant. We expect full-scale 24-7 operations to start in early September. As a reminder, we've entered into 7- to 10-year fixed-price power sale contracts that start in early 2022 with investment-grade counterparties for 94% of the plant's output, and we have secured 100% of the natural gas requirements at an effective low-cost fixed price through our ownership of local gas wells, thus locking in the spread for eight and a half years. Importantly, we are on track by the end of this year to become one of the first hydrogen fuel power plants in North America and the first worldwide in a GE H-class turbine. Having multiple pathways to generating carbon-free energy is a high priority and, we believe, extremely valuable. Like Rapano, we're fortunate to also have 200-plus acres of attractive, well-connected, developable industrial property to add to the site's upside value. We're in active negotiations with three different crypto mining companies to host their operations and provide low-cost, 24-7 power with the option to convert to carbon-neutral power as well. With lots of interest in different approaches available, we've been focusing on minimizing our investment in crypto specific assets while maximizing the upside through fixed price power contracts and profit sharing. We believe an investment of 20 million or less in transformers, which have multiple uses for us, will have a one year payback. We're also in the final stages of negotiations to host the facility but uses a new technology to make biodegradable plastics using natural gas and electricity as the primary inputs. Finally, our frac sand and road salt transloading operation achieved record volume in Q2 of nearly 300,000 tons, up from 230,000 tons last year. Now Jefferson, the big development of Jefferson is obviously the new 10-year contract with ExxonMobil. The new operation will utilize the recently built pipelines connecting Jefferson with the ExxonMobil Beaumont refinery, which is undergoing a major expansion, and Jefferson's marine docks. Jefferson will construct 1.9 million barrels of new storage to be utilized by ExxonMobil for refined product storage and export beginning in January 2023. In addition to the significant ExxonMobil base volumes, this infrastructure will enable us to attract additional customers to further optimize this new domestic and international refined products hub. Combined with the existing growing refined products rail to Mexico business, this new strategic Jefferson ExxonMobil tie-in further enhances the logistics capability of the Beaumont refinery complex. Our crude business with Motiva is also poised to grow again following reduced refinery throughput due to the COVID-related demand destruction. But with volumes picking up, we're seeing Motiva utilizing the existing storage and pipeline connectivity for pipes barrels from Cushing via our payline connection, imported fuel oil by water, wax crude railed from Utah, and renewed focus on Canadian heavy crude by rail. So with our growing array of connectivity options and prime location next to the two largest refineries in North America, we're extremely excited about the list of commercial opportunities ahead that will leverage and optimize our investment in Jefferson's infrastructure. Turning now to Transtar, we're pleased to report that the acquisition of Transtar from USCO closed yesterday, so next quarter we will be discussing financial results for this new segment. We're excited to add a significant rail business which performs critical functions at two major North American integrated steel complexes under exclusive long-term contracts. And while we're just getting started, we have identified several opportunities for near-term operating improvements and long-term growth, including developing the four additional railroads included in the deal. Transstar has a strong management team in place who are all very excited to grow and expand the business, and we are very much looking forward to getting at it. Turning now to a couple of corporate items. First, we launched this week a $425 million municipal bond offering at Jefferson. The proceeds will finance expansion CapEx, including assets related to the 10-year Exxon deal. and approximately $175 million to be upstream to FTIE and available for general corporate purposes. Rates and terms for these long-term non-recourse financings continue to be extremely attractive. And this cash infusion of $175 million at the current level, along with approximately $150 million in revolver capacity, puts FTIE in a very strong liquidity position. Second, with the two infrastructure enhancements now done, we will be progressing the plan and accelerating the timeline to split aerospace and infrastructure into two companies and eliminate K1s for shareholders. We hope to have the timeline defined in Q3 with a goal of executing the spin before year end. To sum up, both infrastructure and aerospace are in great shape. In infrastructure, with the addition of Transtar, which has a 15-year initial term, and the new 10-year contract with ExxonMobil at Jefferson, we have substantially increased the amount and tenor of contracted revenue and EBITDA, as was always our plan. Having Longridge, which is already over 90% contracted, and having strong indications at Rapano from suppliers and off-takers in executing long-term contracts, infrastructure is more than ready to become a standalone company. With aviation, the transition to a vertically integrated aerospace company targeting the largest engine market in the world is well underway. And the recovery, while not in a straight line, is definitely happening. With that, I will turn the call back to Alan.
spk07: Thank you, Jim. Operator, you may now open the call to Q&A.
spk01: As a reminder, if you would like to ask a question, please press star then the number one on your telephone keypad. Again, that is star then the number one. And your first question is from Josh Sullivan with the Benchmark.
spk03: Hey, good morning.
spk02: Good morning. Just a question on the new 12-plane lease order you have with the major U.S. airline there. Can you give us some color around that contract? Is this a new relationship? What's the total opportunity there? Do you think this is going to attract other U.S. major airlines of similar caliber going forward?
spk09: Yes, I do. We're very excited about it. As I mentioned previously, we've, I think, given the – the pandemic, we've been able to access airlines that previously we would not have had as much access to. Part of it is just the need they have for capital, but also part of it is the focus on the engine side of the business. So we see that as a door opener for more business, but also the ability to integrate our products offering into the mix in terms of the equation. So when we go When their shop visits are due, we can be talking about module swaps, PMA, used serviceable material, and we're already doing it back to some level with this existing airline. So it gives us the opportunity to increase the volume. One of the prohibitions, obviously, people have always had is that if you have an asset that's owned by a leasing company and you want to put PMA in it, usually the leasing companies have been prohibited that. We actually, if we own the asset, we have the ability to give ourselves permission. So, and we can do so at a very, very low cost. So, I think it is a door opener for us to, as I said, vertically integrate, provide a broader range of services than anybody has ever done before and actually save them money. So, and we see very, I think the level of interest in both USM and PMA, is very, very high. So I think as this picks up, it's going to give us additional ways to do business with big carriers.
spk02: And then maybe just more broadly, you know, if you just give us color generally on the leasing market, you know, our durations extending on leases, you know, how is the lease at marking responding to the uptick here and then the Delta variant?
spk09: Yeah, I think the engine leasing market is heading up very nicely. I mean, we're not doing any, I think the era when people were doing power by the hour deals is over. Lease rates are trending up. Terms are extending out. So I think it's the recent deals we've done in the engine side are, you know, virtually as good as what we were doing in 2019, and I think it's going to go higher. It's basically laws of supply and demand. We know that everybody's deferring maintenance as much as they can, and so they're starting to line up assets, and they're lining up engines in particular for longer terms. So we're getting our portfolios now extended out 18 months, and we just signed up deals with a large airline that have a three-year term. So I think rates and terms are going up. And maintenance reserve rates, which is also another sort of very important economic part of the lease, have never really went down. And the manufacturers, you know, the maintenance reserve rates are set by taking the estimated cost of a shop visit and dividing it by the number of hours. And the OEMs keep raising the parts prices, you know, even in this pandemic period. So maintenance reserve rates are still very strong. So all in all, I think the engine lease market is – is trending up very nicely and then if i could just sneak one last one in here can you just talk a little bit about the you know the market for ge56 assets on the secondary market just what you're seeing at this point yes uh most of what we've been trying to do is buy older a318 a319s uh 77 700s and and then get rid of the airframe so we're buying engines by buying a whole plane and then scrapping the airframe. And the acquisition that way makes the most sense. We've been acquiring assets at probably the lowest prices we've ever bought them at, sometimes lower than a million dollars for an engine. So that's been very fruitful. We added 27 new engines in the second quarter, which is one of the reasons our utilization looks a little bit lower because we found some really good investments to put on the books and And that reflected about 10 points of utilization, so really it was more like 65. But that's the best way to create an engine today because there are very few buyers for off-lease older assets. If you don't have a revenue stream attached and it's an older asset, we might be the only bid. So we like that dynamic.
spk02: Appreciate the time. Thank you. Yeah.
spk01: Your next question is from Juliano Bologna with Compass Point.
spk03: Good morning. I guess following on a similar topic, you were talking about some lease rates moving higher, and there's been some industry discussion around that point. I'd be curious, not necessarily specific dollar-wise, but I'd be curious from a magnitude perspective how much lease rates have moved, at least on a percentage basis, from kind of where they were Are they up 5%, 10%, 20%? I'm just curious from a magnitude perspective, how much these rates have been moving for specifically CFM6 engines?
spk09: Yeah, I would say that probably from the pre-pandemic to the bottom of the pandemic, they probably declined 25%, 25%, 30% to the worst. And I think most of that 25% and 30% now is gone. It's It's back very close to pre-pandemic.
spk03: That's great. And then think about the aviation business a little bit more holistically. You obviously have the module factory, which seems to be kicking off and seeing some early success. I'd be curious if there's a sense of kind of the magnitude of the, you know, or how big you could grow the module factory from kind of a throughput perspective. because you obviously have to have some engines and inventory and kind of what that opportunity could look like over time.
spk09: Yes, you do have to have some engines and inventory, and we currently, I think, own over 200 GFM-56 engines. So a lot of the airlines we're talking to right now are looking at starting with programs that could be 10 or 20 a year, so talk about 10 or 20 modules. but they have fleets that could be hundreds of hundreds of engines. So they're looking at that as really a starter kit. So we think that basically we can grow. If we get people started doing it, then it has a flywheel effect and you can just grow with them. So our 200 engine fleet, you know, might grow to 300, 400. Just remember there's 22,000 engines in the world of this type. So, So going from 200 to 400 to 600 doesn't really move the needle. And so I think we can scale our inventory along with the needs of the customer. But the upside of, you know, how many could people do is really very significant. Once they integrate this into the way they operate on the maintenance side, it's quite significant. And then if you put on top of that, you add PMA into it, which will start to happen, you know, next year, you know, it could become, you know, even much bigger.
spk03: That's great. And then just thinking about the split of the business, you know, you obviously have a few different, you know, components that, you know, should be, you know, decent contributors starting next year. You've got TrendStar. I think the numbers you guys have put out so far is about $80 million. You have about $70 to $80 million is kind of the discussed run rate for Jefferson, which I'm assuming should be scaling up now that all the pipelines are complete there. And you have another, call it $60 million from the power plant, $10 or $15 million from Rapano. That puts you in the $200s. Obviously, there's probably some overhead that would get allocated to that segment, so it's a decent business. Kind of looking beyond that, you have the Exxon deal. But then you were making some comments about Rapano and expanding to 3 million barrels of storage, which kind of sounds like the old Phase 2 that had been discussed. I'm curious if there's been any change to kind of the Phase 2 project or outlet, because it used to be called 500 million of CapEx ballpark, and then the expectation was 150 million of EBITDA. Are you still pursuing a similar strategy, and is that what you're referring to in 24th?
spk09: Yeah, that was really the description of the completed phase two. And it hasn't changed. We've zeroed in on more, I think, more specifically on exactly what we need to build and when we need to build it. And the capital expectation, I think, is less than $500 million at this point, partially because we've invested, you know, already some of the infrastructure that's going to be used. So I would think it's more of a $400 million. And the other thing that's changed is I've listed, you know, about eight different products. When we first started this, we were thinking, you know, propane, butane, but we've had lots of different ideas from people coming to us actually suggesting, you know, propylene as an example or some of the natural gas liquids, condensate, some refined products. And then we've had further discussions fairly recently about pipeline connectivity. which would also expand both the capabilities as well as the product offering. So I think it's only gotten better in terms of the upside, and the capital is probably a little bit less than what we had forecast. So I didn't sound enthusiastic saying it. I am extremely enthusiastic because it's all happening, and the conversations are live and real.
spk03: That's great. I appreciate all the insight, and I'll turn it back in to you. Thank you. Yeah.
spk01: Your next question is from Chris Weatherby with Citi.
spk07: Hey, thanks so much, guys. Maybe just touching on Jefferson here, obviously getting the Exxon deal done was a great step in the right direction. It seems like there's probably a decent amount of storage opportunity or space to fill up the facility, and I guess it's probably building interest in coming to you guys. I don't know, Joe, if you can just maybe deal with a little bit of color in terms of what sort of the deal prospect pipeline looks like at Jefferson right now. I'm guessing there's probably a couple of deals in the hopper that maybe could be coming to fruition, and then maybe if you could talk about what the timing of that might look like. I don't, I don't want you to trump around what you have here, but I'm just kind of trying to get a sense of what the ramp up might look like.
spk09: Yeah, I think we've, um, you know, we continually, every time we do a deal or we have a meeting, we end up with a longer list than when we started. So it's, that's the fun part. And so we've got multiple projects, sort of a handful of projects with each of, um, Exxon and Motiva that are, that are real. Um, I would say that with these large entities, they always take longer than we would like, but we do get there. We seem to have staying power in these negotiations. The number of opportunities are significant, and it's on both refined products and crude. you know, from a macro point of view, these are the two... In 2023, Exxon will be the largest refinery in North America. So it's 600,000 barrels a day in and 600,000 barrels a day out. And the same for Motiva. So you're talking over a million barrels a day right in our backyard. So we have... lots of things that happen and they, you know, things that we don't even anticipate like importing fuel oil, for example. You know, we would never have guessed that that's something on the radar, but that becomes a topic or storing an intermediate. So a lot of these things come about because you just have regular conversations, but there are many, many different projects once you get connected and once you're in a regular dialogue. Timing-wise, you know, the building of new storage takes about a year, so we have probably a lead time on a lot of these projects to do that. Now that we have the pipes, though, it's a lot easier because you can go and say, you know, we have a connection already, so we don't have to worry about that part of it. And so it's mostly these discussions, you know, I would say that the typical lead time would be nine months to a year.
spk07: Okay, that's helpful. I appreciate that. And then just making sure I understand here, I'm going to go back to the aviation guide. The $50 million there, what are sort of the variables that sort of could drive that to $400 that maybe leave that a little bit higher than $400 or maybe create some risk to it? I just want to make sure I understand what are the most important dynamics of that guide are as we think about hitting that for the rest of the year.
spk09: Yeah, the two biggest movers would be the number of flying hours. So, you know, as airlines ramp up flying, you know, our revenues increase on the maintenance reserve side. And so if you look back to, I think it was third quarter of 2019, you know, was our best quarter because it was 85%, you know, utilization, and every airline was flying 300 to 400 hours a month, or every aircraft. So it that's probably the biggest one, and that's where, you know, the ramp-up of services, particularly the U.S. we've seen a lot, South America we've seen a lot, Europe has just lagged. It's just been slower with all the cross-border. I mean, the United States is great because 50 states you can always travel, or not always, I should say, but historically you could travel between one state and another without showing a passport, but in Europe it's different. So I think that is... it's slower, but Europe, Europe will follow. And I indicated that, you know, I think that'll happen later this year where you'll start to see more flying, but, but the activity flying activity is number one. And then the second is acquisitions. And so we've got, um, the one deal I mentioned is closing, uh, this week or next week. And then, uh, uh, we, we have one other large deal with the European Carolina carrier that, uh, should close by the fourth quarter. So those, I think are the two, utilization of flying hours and acquisitions.
spk07: Okay, got it. That's super helpful. I appreciate the time this morning, guys. Thank you. Thanks.
spk01: Your next question is from Justin Long with Stevens Inc.
spk04: Hey, good morning. This is George Sellers on for Justin. I guess to start, could you talk about the EBITDA you expect to be generated from the maintenance and parts pieces within aviation? And any update you could provide around the ramp of that number into the second half of this year and into 2022 would be great.
spk09: I assume you're talking about the three, JV, the USM, and the, what's the third? The module factory. So those three. Exactly. We believe that 50 million for the year is still a good number for those three. That the decrease from 450 to 400 was largely on leasing revenues. So those three will produce about 50 this year. We haven't forecast yet for next year what we think those will be, but safe to assume it's going to be higher.
spk04: Got it. Okay. That's helpful. And then turning to Jefferson. Could you walk through your latest thoughts on how you expect EBITDA to ramp at Jefferson through this year and then into 2022 as well? And as you think about that expectation, maybe you could also speak to the level of visibility you have around that based on contracts that you already have in hand.
spk09: So we believe that the run rate for the fourth quarter, the end of 2021 for Jefferson will be $70 to $80 million. so that next year, again, we haven't really put an official forecast out there, but I would assume 100 million or north.
spk04: Okay, great. Thank you so much. I'll leave it there. Thanks.
spk01: Your next question is from Rob Salmon with Wolf Research.
spk08: Hey, good morning, guys, and thanks for taking the question. I guess, Joe, to start off with just a bigger picture question, question, could you discuss how you expect the two companies to look following the split from a capital structure perspective, you know, as we look forward?
spk09: Sure. I mean, we're targeting to maintain the level of debt on each company and maintain a double D rating for each one. So part of the next few months, the process of going through that with our own financial modeling and then also rating agencies to work through the details. But that's our objective. But it will be the infrastructure business would be in a U.S. domestic C corp. And we'll have mostly project finance debt, like the Jefferson bonds we talked about, our Longridge, are all financed at the entity level. And then the corporate debt would be at Aviation, which would be a non-U.S. corporation. And we would be targeting that to maintain the double B rating.
spk08: That's helpful. And I mean, historically, the Aftai company more broadly has kind of targeted both growth as well as kind of a return of capital to shareholders. How do you see kind of the dividend playing out across the two companies? Have you guys kind of thought through those dynamics at this point, or is that still a work in progress?
spk09: We don't anticipate a change in that. I think it's still going to be the investment objective is going to be income plus growth. So I don't expect that to change.
spk08: Got it. And that would be true for both of the companies looking forward?
spk00: Yes.
spk08: Perfect. And then a couple... Historically...
spk09: Historically, I think you would see higher dividends on aviation than you would see on infrastructure.
spk08: Yeah, that makes sense given the investments. And then just a couple of quick follow-ups with the aviation segment. Can you give us a sense of the capital investments that you guys are planning in the back half of the year that's underpinned in the $400 million of EBITDA you're expecting that company to generate?
spk09: Right now, we're looking at about $300 million of additional investments that are all under LOI. So we haven't added anything beyond that.
spk08: Perfect. And is that pretty evenly weighted between the two quarters, or is it more fourth quarter? I know you had mentioned there's a big deal you're expecting to close in the fourth quarter. And obviously, you just closed the large one with an American airline. We weren't supposed to say that, but... Yes, I would say evenly weighted. Yes, yeah. Got it. Helpful. And then that's really, and if we look at the June, just at June in terms of the utilization rate, can you give us a sense how that exited the quarter relative to the 65% utilization X, the adjustments that you had noted with the transaction that you, the transactions you guys completed during the quarter?
spk09: It was, you know, I think when you, the exit rate was up from the beginning of the quarter about 10 percentage points. Okay, helpful. Appreciate the time, guys. I think we put 23 engines on lease as I think were added during the quarter, which is a pretty big quarter. And we expect probably to, you know, potentially put 30 on in Q3.
spk08: Appreciate it. Thanks for the call. Thanks.
spk01: Your next question is from Frank Galante with Stiefel.
spk06: Great. Thank you for taking my question. I wanted to follow up on the I guess the three horsemen or whatever you want to call it, the JV, the module factory, the USM. You said $50 million was your expectation for this year. Can you kind of talk about how I guess what does that assume has been done already, specifically in the second quarter?
spk09: It's probably about five of the 50.
spk06: Okay. That's helpful. And kind of staying on the aviation side, can you talk about the second PMA part? I guess the PMA parts generally, how has the first one been – Kind of give us an update on how that penetration has been from an interest level from third parties. And then how the, if there's an update on the timeline for the second and three, four, five parts.
spk09: Yeah. So on the first part, the interest level is very high. We have a couple of airlines that have ordered it and getting a lot of feedback from it. Frank, your feedback on the phone. We have a lot of interest. A couple of big airlines have ordered it, and one airline is actually flying it and installed it. And I think the further penetration is A bit delayed because there's not a lot of shop visits going on. So it is most airlines, as I mentioned, are burning off green time. So they're not doing a lot of major overhauls. So a lot of airlines are waiting until that builds up. And they're also waiting to be able to pair it with the second part, which we expect, as I said, to have that final submission of the FAA in September, which would hopefully imply a year-end approval. And that's the first two. The second batch of parts is expected for late 2022, early 2023, those additional three parts.
spk06: Okay. That is helpful. And then I think for my last question, I wanted to walk through kind of CapEx needs. In your prepared remarks, you'd mentioned part of that, Financing at Jefferson, $175 million. It's going to be upstream to the parent. You've got $150 million left in the undrawn revolver. But you'd mentioned about $300 million CapEx needed for the aviation. And I could be off on this, but the Transtar purchase was closed. But I guess just wanted to walk through what... level of equity contribution is needed from FTI kind of across the various businesses. And then to add on to that, the $100-plus million that Jefferson needed for the expansion, what are the CapEx needs in the next few quarters?
spk09: So the Jefferson CapEx needs will all be financed by this bond offering. So there's zero need for Jefferson zero needed for Longridge, zero needed for Rapano. So those are easy. Transtar is fully financed, which closed yesterday. And then, as you mentioned, if we do $300 million of acquisitions, we've got $175 million plus the under-run revolver to fund that. So there are no additional unfunded capital requirements for this year. Everything's funded.
spk06: Okay, great. That's very helpful. Thanks very much. Thanks.
spk01: Again, if you would like to ask a question, please press star, then the number one on your telephone keypad. And your next question is from Robert Dodd with Raymond James.
spk05: Hi, guys. A question on the dividend. This feels like a flashback. Previously, Joe, you've said when FAD covers the dividend by a factor of two, you'd consider taking up the dividend. Obviously, by my math, certainly by the fourth quarter, maybe the third, you'd be in excess of that. Obviously, that'd also be right before the spin or its separation. So, can you give us any thoughts on, you know, is that still a good rule of thumb and does that apply to maybe the separated businesses as well?
spk09: Yes, it is a good rule of thumb and yes, your math is pretty good and we will factor that in. You know, if if and when it's sort of coincident with a spin, we'll build that in.
spk05: Okay, got it. Thank you. One more, if I can, unrelated to that. You talked about that leasing rates are basically back to pre-pandemic levels, but at the same time, the airlines are burning down all their green time. You know, at which point, lack of a better term, Do you think there's meaningful upside to lease rates? I mean, we can see what happened in the rental car market. If you run your portfolio down, eventually pricing moves significantly. Do you think there's a risk in your favor of a material uptick in lease pricing if airlines continue to run green time down while you've got available engines? Yes. Yes.
spk09: We have been saying that all along, and so we think by the fourth quarter of this year, first quarter next year, that demand will outstrip supply. Now, unlike rental car companies, we can't go from charging $80 a day to $800 a day. So we will most likely, what we've done historically is just get better longer terms, and higher maintenance reserves and just better all-around deals. The rent, you know, airlines get very, very sensitive to rent, so you try to find other ways to, you know, make more money because that becomes, you know, quote, a relationship, you know, thing. And you don't want to, if you're going to, you know, do continuing business and you're doing parts on the maintenance side and you're building a program, you don't want to take, you know, full advantage of your position or you'll pay for it later. So it's, rent is a little bit, but there is, you know, you're not going to be flexible on it. You're not going to have rents. If everyone else is paying $60,000 a month, you're not going to go and give them a deal at, you know, 30. So you'll get, you might get 50, but instead of a 12-month deal, you get a three-year deal and you maybe, you know, tweak the maintenance reserves and, make them higher.
spk05: Got it. Got it. Appreciate that. Thank you. Yeah.
spk01: There are no further questions at this time. I will now turn it back to Alan and Dreeny for closing remarks.
spk07: Thank you, April, and thank you all for participating in today's conference call. We look forward to updating you after Q3.
spk01: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

-

-