Q3 2022 Fortress Transportation and Infrastructure Investors LLC Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
[music].
Okay.
Good day, ladies and gentlemen, and thank you for standing by walking to the fortress transportation and infrastructure investors LLC third quarter 2022 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask a question during the session you will need to press star one one on your telephone keypad at this time I would like to turn the conference over to your host Mr. Allen and dreamy Sir please begin.
Thank you Howard I would like to welcome you all to the fortress transportation and infrastructure third quarter 2022 earnings call. Joining me here today are Joe Adams, the CEO of <unk> and Angela.
We have posted an investor presentation, and our press release on our website, which we encourage you to download if you have not already done. So also 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 EBITDA.
Reconciliation of those measures the most directly comparable GAAP measures can be found in the earnings supplement.
Before I turn the call over to Joe I would like to point out that 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.
Here's 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.
Thanks Alan.
Pleased to announce our 30th dividend as a public company and our 45th consecutive dividend since inception.
The dividend of <unk> 30 per share will be paid on November 28 based on a shareholder record date of November 14th.
Also please note <unk> successfully completed the spinoff of its infrastructure business on the first of August of this year.
<unk> financial condition and the results.
Of operations related to the infrastructure business prior to this spin off date had been disclosed under discontinued operations within the consolidated financial statements.
Now, let's turn to the numbers.
The key metric for us is adjusted EBITDA and adjusted.
Adjusted EBITDA was $108 9 million down 24% compared to $143 7 million in Q2, 2022, and up 25% compared to $87 2 million in Q3 2021.
The above numbers are for consolidated <unk>, which includes both leasing and aerospace products.
Starting this quarter, we will we will be presenting leasing and aerospace products as separate segments going forward.
Let's start with leasing.
Leasing had a good quarter posted posting approximately $96 million of EBITDA.
The pure leasing component of the 96 million of EBITDA came in at $75 million for Q3 down from $87 million in Q2 as expected.
The principal reason for the decline was due to the sale of approximately $145 million of book value of assets in Q2, and Q3 attributed to our cargo campaign sales in which we sold five aircraft and 30 engines.
With very strong demand for assets.
And the addition of some new acquisitions, which we will talk about later, we expect Q4 will rebound and next year 2023, we're very confident in leasing EBITDA of $350 million to $400 million for the year, excluding gains on asset sales.
Okay.
Part of the $96 million in EBITDA for our leasing came from gains on asset sales.
Which also performed as expected.
We sold $64 9 million book value of assets for a gain of $20 6 million.
We have more asset sales coming in Q4 to recycle capital invested in summer 2021, its larger acquisitions.
In addition, we'll continue to make freighter sales to capitalize on the continuing robust freighter market.
We're very comfortable assuming gains on asset sales continuing at approximately 25 million per quarter or 100 million for all of 2023.
Yes.
Aerospace products had another solid quarter with $19 million of EBITDA.
We started these activities only a little over a year ago.
The last four quarters have booked approximately $70 million in EBITDA without any contribution from PMA.
We see tremendous potential and feel good about generating $20 million to $30 million in quarterly EBITDA and think 100 million plus in 2023 EBITDA to be very doable.
We feel confident about this number because we are seeing a rapidly expanding backlog of aerospace products business with other leasing companies MRO is our maintenance repair organizations and airlines.
With respect to Q4.
We have begun closing the sale of $200 million in assets and have signed letters of intent to purchase $300 million in new assets also in Q4.
The net pick up in leasing EBITDA.
From the new investments minus the give up from the sales we estimate to be 40 million per annum were $10 million per quarter.
Importantly, two.
Two of these asset sales involved F tie retaining the engine services contract on behalf of the buyer, which should generate $1 million per annum per aircraft.
Or $10 billion.
Total per annum of aerospace EBITDA over the remaining lease term of approximately eight years.
After three years of macro trade headwinds, we now have macro factors that are greatly helping us.
First Oems have instituted mostly double digit percentage price increases for parts effective this quarter.
And parts price increases creates more opportunity for our cost saving products to increase market share for us.
And since service shop visits.
Costs are predominantly parts the replacement value of our engines goes up correspondingly.
Second many airlines are trying to reduce expensive full engine restorations and instead increased module swaps and light shop visits that do not require disassembly, which plays right to our strengths and into our products.
Okay.
Thirdly delays of new aircraft deliveries are creating scarcity of 737, Mgs and <unk> hundred 20 <unk>.
<unk>, which will drive strong demand for 737, Mgs <unk> hundred 20 <unk>.
And importantly, CFM 56 engines for many years to come.
And fourth industry demand for travel has returned to almost pre COVID-19 levels.
Regarding PMA or parts manufacturer authorization. There is no change in our planning, which includes a full complement of airfoil parts, becoming available throughout next year.
In summary, it feels like we are finally operating in an environment with strong tailwind.
We managed through the Covid disruptions, followed by Russia, Ukraine.
And we will have our portfolio optimized by this year end.
With demand for air travel surging globally combined with proprietary cost savings aerospace products 2023 is shaping up to be an outstanding year.
With that let me turn the call back to Allen.
Thank you Joe.
You May now open the call to Q&A.
Ladies and gentlemen, if you have a question or comment.
Please press star one one on your telephone keypad.
If you have a question or comment at this time. Please press star one one on your telephone keypad.
Please standby, while we compile the Q&A roster.
Our first question or comment comes from the line of Guiliano Valonia from Compass point Mr. <unk>. Your line is open.
Good morning, Congrats on another.
Great great quarter.
I'd be curious.
When im looking at the numbers that you.
Can you just knocked out around asset sales.
Redeployment of capital into new assets.
They are having during <unk>.
Yes, you are selling a fair amount more things over the last few quarters and you've been able to recognize.
Pretty impressive gains on sale.
Above the range of one of those quarters of the 20 to $39 range.
Fair to assume that the combination of the large asset sales.
Move you towards the higher end of that $20 million to $30 million range and <unk> and then kind of as an add on to that with the EBITDA. Thanks, Robyn probably some some lease up demand in the portfolio.
Also fair to assume that you can get back within the call it $90 million to $100 million run rate third porchia for correlation.
Yes, I would say on the gains yes.
Yes, it's fair to assume that.
Some of them some of the asset sales we were.
Targeting for Q2 got delayed and that have been pushed into <unk> or <unk>.
Targeted for Q3 got delayed and pushed into Q4, so I do think there is upside.
The sort of guided range, we have in Q4, just because of that.
The sequencing and the timing so.
It's shaping up to be a pretty good quarter from asset sales point of view.
On the leasing side as I indicated we're very comfortable next year hitting the sort of 90 to 100 million per quarter. The Q4 will really be a function of the timing of closings and windows occur. So I think it's possible that we can get there but.
In today's world It seems like Theres more delays than acceleration and sort of.
Every time, you charter and there is something about our part not available or.
Or maintenance shop can't get something delivered and so I'm a little hesitant to two.
Two comments on that just because.
Mario World.
Okay.
Thanks, Joe.
Okay.
Okay.
The comment that I hopefully it wasn't on my side.
The other.
You guys are still there and so.
So working.
I'd be curious.
Rather than perfect science, but with the devote coming up on the merger that would effectively that would convert.
Alright, and remove the K one.
Moreover, the toxic confidence I am discussing index inclusion somehow if I could.
Impact shareholder risk I'm curious, if you've done any analysis around kind of the low end and the high end of the range.
Thanks, Brian .
Mainly two might need to happen.
On the back of a converting into okay.
Alright, Joe are you there.
Hi, It's Joe can you hear me.
Yes, we can hear you now sorry, yes did.
Giuliano it's question.
I did yes.
I gave a long answer which unfortunately inside of that we inherit.
But all of them.
So.
In terms of asset sales we have.
Pushed some of the deals we expected to close in Q3.
It got delayed and will end up closing in Q4 so.
So we think there is upside to those sort of typical run rate of where we've been expecting an on gain on sale. So I think that youre right.
We should be at the high end of that number potentially even above it.
Given the sequencing and closing deals.
Is taking a little bit longer than we expect.
In terms of.
The leasing.
EBITDA I said, we're very comfortable with next year.
<unk> $200 million per quarter.
A range, but it's really a function of the timing of the closing of some of these.
New acquisitions and.
In today's world everything seems to take a little bit along longer than expected, it's either a delay and a part or a delay in our maintenance shop.
Which sounds a little hesitant to be.
To be able to predict Q4, yet given given that item now ultimately these supply chain disruptions.
Are good for us because we have available equipment and engines the tape adult but but it is a reality of todays world that everything seems to be taking a little bit longer.
To get done so.
So I feel good about.
The total.
Run rate once we get all the all the assets deployed Q4 is a little bit variable definitely will be up.
Western is whether we get to the $90 million or not.
For the quarter.
Jody.
The second question relating to the indexes it Giuliano Joe didn't hear that can you repeat it please.
I think I don't think it was one when we last year's August .
We ask the questions real quick.
One of the questions that I was curious about was with the.
Vote approaching on November 9th Kurt.
The reverse merger that will effectively change the corporate structure and remove the K one.
I realize it's imperfect science, but wanted to talk to to come out.
And that conclusion on what that could mean just from.
From a current index ownership perspective over time and I'm curious if you've done any analysis or do you have any sense of what kind of a low end of island ranges for <unk>.
The impact of translating back and that's fine.
I need to buy perspective, as a percentage of.
Yes sure.
Yes.
<unk> done some analysis that we have a list of some potential buyers.
We.
We might get included and I take the.
Historically I was involved with Aircastle, which aircastle was very successful at getting included in is a very similar corporate structure than what were the one word adopting so.
So that would bode well, but it is there is a qualitative element in all of these applications. So we're not totally sure, but I would say the range is probably between.
10% and 30% of our.
Total stock market capitalization should end up in the.
Passive funds.
That's great. Thank you and I'll jump back in queue.
Thank you. Our next question or comment comes from the line of Hillary pack in motto from Deutsche Bank.
Okay.
For taking my question.
So for the India.
In terms of the sure Anthony Humphrey you have mentioned that you are expecting previously you had mentioned that you're right.
Great.
From your insurance claim with you I just wanted to understand like how much of that is that still the case and if so how much of the recovery of your data assets in Ukraine.
We may have been joined versus how much of the recovery will be.
Depot claims that are still operational and cooperating in Russia.
Yes, <unk> talked about insurance.
Just to recap we have about $290 million of insurance claims on.
125 made a book value of assets that we filed it really as I mentioned before we've broken it into three buckets.
Are there different strategies with each one.
First one sort of.
I think that would be the most.
The first to pay is the contingent insurance coverage that we have and that's about $90 million.
It's covered mostly engines the.
The second is Ukraine, which is about $75 million and the third is Russian assets airplanes, mostly airplanes that are.
Lost in Russia about $125 million.
I would say we've made progress on two of those three categories, namely the contingent coverage and the Ukraine assets.
<unk>.
And progress means that we've had a good dialogue and we have a framework of the plan.
But we don't have a sort of definitive loss.
The definition of a plan to for me to give you a definitive timeline, although I am optimistic that.
Okay.
<unk>.
Those two buckets could resolve in the next three to six months is my hope.
The Ukrainian assets.
We were.
Thinking were destroyed may not be and there may be in good shape as far as we can tell we now have people on the ground in.
So we're working on.
Various strategies with respect to.
Those assets is.
Either with insurance or without insurance that we can monetize but clearly those are.
That's a priority for us.
Focus and work on those.
And then the rush of assets.
It's a bit frustrating, it's frustrating for the whole industry in that.
Insurance companies just refused to engage.
And I think you saw Aercap NDA filed lawsuits.
Ultimately the good news is <unk>.
None of the.
None of the placements are talking again about while we canceled the policy and we don't have coverage or it's not a loss its all about sanctions.
<unk> that I think ultimately will.
They will run out of excuses of Wilmington litigation forced the issue. So I think that will pay as I've said from very beginning but I think it may take the August three.
Okay.
Okay.
And then my second question is obviously were seeing all the supply chain issue for President Neil Yes. Thank you.
Also mentioned.
The increase in price.
Cost escalation that was wondering if you could talk a little bit about the cost escalation that youre seeing on the engine side and if we could actually see an impact maybe like a benefit from the maintenance.
Side of the business.
Thank you could actually break points in time in terms of quantifying the benefit.
Yes, so all of our engine maintenance reserves payloads that are indexed.
To shop visit cost and shop visits costs are 90% parts and so if the parts prices just went up 10% effectively youre getting a 10% increase in our maintenance reserve pay.
Payments and so that that for the CFM.
Okay, Safra and fleet that goes into effect November one.
We had a feeling that was coming so we've been looking to acquire more engines. This summer and add as much as we can so so we're I think we're well positioned for that and then that should translate that will translate into additional.
EBITDA for us.
Starting that starting November .
Got it okay, great. Thank you so much thank you.
Thank you our next question or comment comes from the line of <unk>.
Josh Sullivan from Benchmark company Mr. Sullivan Your line is open.
Hi, Joe Angela Allen.
Just kind of following up on that question.
As far as the process where F&I.
<unk> the maintenance streams and some of these aircraft sales.
Which aircrafts or customer types or most drawn to that arrangement or where should we see.
<unk>.
That process really gain some traction.
Yes, it's all older CFM 56 engines.
The way we were positioning ourselves in the market is.
Our view is for CFM 56 engines. The first 10 to 12 year is covered by the OEM under power by the hour maintenance agreements for the most part.
And so the.
We're not going after that business is not really available, but once that the engine is past maybe the second shoppers that are looking at the second shop visit about <unk> 14, a lot of those.
Maintenance contracts are up for.
Up for bid and us to acquire and so what we wanted to do is use our products and our services to be effectively the OEM for the second half of the life of that engine.
And so that's the way, we positioned ourselves with airlines and MRO shops, as we can we can take over year maintenance activity much like GE does in the front end we.
We can save you money.
We can totally derisked victory, because you won't have any negative.
Surprise events, you won't have any.
You won't have any.
Overruns or.
Or surprise.
Expenses to deal with and in the case of airlines that are looking to phase out the fleet, we can buy the suite.
And then.
Provide you a new engine whenever you want it so we'll provide you liquidity flexibility and cost savings.
So we're finding a very broad.
Appeal for that purchase it resonates with people, particularly.
Accelerated by the fact that the prices just went up are going up 10%.
And airlines are experience a lot of cost inflation or they are looking for every potential way to do it. So I think it is resonating and I think all of that.
We're able to do before any.
Incremental savings they might come from PMA, which we expect next year, we will.
Got it.
Sure.
And then maybe Chuck could you just give us some general thoughts on the current leasing environment.
Maybe by geography.
What are you seeing as far as duration or some of the other features on leases that might be might be changing in this environment.
Yes, so a lot of the airlines are now coming and saying that they have new orders they built their fleet plan around receiving.
<unk>.
And <unk>.
Max aircrafts over the next couple of years.
They're seeing those delayed.
So we're seeing airlines come saying show me anything you have that in the <unk> range.
A range, where I could add capacity in a meaningful number so it's a very very strong environment and they're willing to typically those leases are five to six years in duration you do from one <unk> to another so the terms.
The determining agreement is attractive in the quantity that people are looking to get us.
Very broad based I'd say, obviously the OE.
OE market is still relatively close they're constrained as China, but that's an.
An outlier either every other region of the world is very robust.
Latin America as I mentioned previously we've done a lot of business in Latin America, it's above average growth rates middle East.
Southeast Asia very strong.
And then Western Europe is.
Probably the latest to recover because of.
OMA con, but its capacity is coming back and being added there now again as well. So so I think I said it is a very very strong market environment obviously.
<unk> gone forever.
Which is about 5% of markets, that's not that material but.
Very good.
Very good global dynamic.
Great I appreciate the time thank you.
Thank you our next question or comment comes from the line of Bruce.
Glinski from Barclays. Mr. <unk> Your line is open.
Hey, good morning, Joe Angela and Alan Thanks for taking the question.
Joe.
I appreciate the outlook here could you just run us through the expected asset sales and net additions to the portfolio closing out the year.
And then I guess the bigger question, we're having I mean.
The outlook here is pretty good, but your cash balance a little bit low so how do you.
Expect to manage through liquidity here in the next few quarters.
Yes. So we've I think we had about 70 million of cash at the end of Q3. When you look at the various asset sales asset purchases I think we should end up year.
Potentially with sort of 50 ish million.
Drawn on the revolver and so we have a.
We have a $225 million revolver that is.
Undrawn at the moment, it's fully available. So that's that's how we're going to manage liquidity as we have done in the past. So so very mostly the plus.
Pluses and minuses with adding three animated assets effectively.
Effectively the cash flows will receive.
From the operations as well as the.
Asset sales, it's pretty much pretty close to a wash. So we expect to end the year with very little with lowest of the revolver if not all of it available.
Going into next year.
And I guess longer term, where do you want to see leverage on the portfolio, especially.
Has that changed at all with higher interest rates as well.
Yes.
Not so much to the higher interest rates, what we've communicated to the rating agencies.
<unk>.
A we want to be double D and D. We want to manage debt to EBITDA under five times.
And if you look at our pro forma if we do 550 to 600 million of EBITDA next year will be under four times and I think both agencies Moody's S&P and Fitch have all indicated if we do that we would be.
Either upgraded or sort of we'd be in the double b range and that's that's kind of consistent with where we want to be.
So I don't think its necessarily interest rate driven we do do we do have some opportunities now.
And I think next year, we would look to as a priority to repay some debt with excess cash flows so bring that.
Net debt balance down and get even lower.
In terms of the.
Debt to EBITDA.
Higher in terms of ratings. So so I think that's that's where we're leaning at the moment and I think part of the <unk>.
Program, selling assets and buying assets as to the latter.
And that said, we're not we're not necessarily adding a lot of capital at this point, we're recycling and picking up EBITDA.
Okay I appreciate that and then on.
The greater than 5 billion and EBITDA targets for next year, which I think you've reiterated here.
What type of portfolio utilization levels do you think you need to achieve to get there.
Uh huh.
Well the aircrafts I think generally we.
Been over 90%, which I think we will be we've had we still have some assets that we've repositioned from Russia, Ukraine letter.
To be sold or to be leased.
We added some aircraft like 700 or 700 800, this summer, which we bought at a very attractive price off lease.
All of those are going on lease this month in October two in October one in November so those types of.
What I would say the portfolio will be optimized by the end of the year everything we're doing.
As to get assets redeployed from Russia, Ukraine or cargo assets that we were targeting for sale give those sold so I think by the end of the year utilization should be for aircrafts should be 90% plus.
Engines as always we've always targeted 50% to 75%.
Affectively utilization isn't really what drives that it's the number of hours flown and the.
And the total amount of the portfolio. So we have been for instance, this last two quarters.
We've acquired quite a lot of CFM 56 engines that are off lease so utilization.
Hasn't really gone up in spite of a strong market environment.
We've been adding to the denominator and we will keep doing that because.
We can see there is a price increase coming and we also.
I think the economics of those engines are extraordinary attractive. So we would add as many of those as we can so I think that targeted range is still the same 50% to 75% on engine utilization.
And that's not what we don't really manage to that we managed to sort of having the total EBITDA of the portfolio optimized.
Okay. Appreciate it thank you.
Yes.
Thank you. Our next question or comment comes from the line of Brian Mckenna from JMP Securities. Mr. Mckenna. Your line is now open.
Great. Thanks, Good morning, everyone. So the business is clearly navigated some unexpected headwinds over the past couple of years I am curious, though the backdrop today it seems like it could it be better but with the potential for a recession next year, maybe some pullback in related activity would you think about accelerating asset sales in the near term are slowing the pace of new investment.
In order to Delever the business, even more that way you have more liquidity and excess capital to be or to be more offensive in any slowdown.
Well, we've been doing that this year I mean with the cargo sales. We consciously decided early this year that we felt like the cargo market is maybe as good as it gets.
We decided that it was better to be early than late so I think that was a good decision.
We've sold probably 400 million of cargo assets to do to generate capital.
But on the flip side, just sitting with cash given the attractive environment and the CFM 56 engine and the substantial competitive advantage we have.
That didn't seem like a good idea either.
I think from.
From our point of view it feels like we already had recessions we had two of them.
And the economic potential economic recession.
Have less impact on the CFM 56 demand then.
And then Covid did for example, so we feel that there is even if there is an economic slowdown globally the demand for those assets in the and the travel recovery is sort of bigger driver then.
Then the global economy.
Helpful. Thanks, and then I appreciate the color on the insurance claims, but if you were to see some windfall from these claims over the next couple of quarters I guess, what's what's your number one priority for that capital is it paying down some incremental debt and if so which which maturities would you like to pay down first would you even maybe dividend.
Back to shareholders or would you put some of it into incremental asset purchases just curious how youre thinking about that.
I think probably repayment of debt and we will look at all the various issues and we've debated.
As part of the dividend from the infrastructure, we repay the 2020 fives, which is the next maturity.
Do so we brought that down to 650, we can do more of that.
The other.
Attractive investment would be the more expensive debt when she can also.
Has more it's more accretive when you pay down our highest cost debt.
I think those would be the two choices, but I think our focus would be the.
Repay debt.
Yeah, great. Thanks, Joe.
Thanks.
Thank you our next.
Question or comment comes from the line of Frank Galanti from Stifel standby.
Mr. Stifel. Your line is now Oh, Yes, Hi. This is Frank can you hear me yes.
Great. Thanks for taking my questions.
I wanted to start on the module factory in.
And around the competitive landscape there.
I guess first can you just sort of talk high level, what the business.
<unk> provides from a customer's perspective does it actually is it sort of a two year.
Kicked down the road from a maintenance visit.
And sort of how does that compare to a quick engine change.
So I was trying to think through where people find value in the module factory and then I guess secondarily, who does this.
Who do you see as your big competitors.
That youre going up against.
Obviously with the PMA parts and the youth services materials, there's going to be a cost advantage, but that's only minimal at this point with the PMA approval progress. So far so just sort of wanted to dig in on that business specifically.
Sure so the.
The customers for the module factory I think you would sort of divide them into two different.
Categories.
They see the benefit one would be.
Optimizing so you might have a an LPT that.
Needs a shop visit but the rest of the engine doesn't.
So if you can do a module swap and optimize.
The numbers out.
Hours and cycles and match up that with the other parts of that engine. You can you can significantly reduce your maintenance cost because you don't have to put the whole engine through for a shop visit and that was similar.
There was a cost savings and a benefit for us.
For that and that that was illustrated in the west jet deal that we won with Lufthansa. So that's one one customer would be optimizing the second as is.
Avoiding that shop visit by doing engine.
Module exchanges totally so lots of airlines today, particularly as they look at their CFM 56 screen are saying what can I do to avoid.
Our full restoration, meaning afternoon, Doug the whole engine into an MRO shop disassemble. It and then every part and that engine gets looked at and often that ends up in a significant increase in total costs. So.
A logical swap would allow you to exchange the fan LPT and put a new core and keep the fat and the LPT and not have to touch does so that's.
That's the target market for that product and its substantial I mean, it's.
We've met with many airlines over the last three to six months and it's their stated goal is to try to reduce the number.
Full restorations, they do and modules fit perfectly into being able for them to to sort of achieve that objective. So.
And so the question is who does that and so if you look at in the industry today.
Big Airlines that have their own MRO shop due to this internally so it could be a delta United.
American <unk>.
Damage module exchanges right now in terms of their own fleet, because they have enough airplanes and they have an MRO shop.
The market that debt.
Doesn't have access to that as all other airlines of which there are hundreds and if you went out today and said who can I buy a fan who can I buy an LPT from its no one for us.
So we are the first to sort of create this.
Storefront, where people can do that.
And it's a very powerful for a lot of these airlines are just learning about the opportunity and so we.
We're seeing airlines start with one or two modules.
Leasing companies that are trying to do it too.
Minimize return compensation and maintenance shops that are trying to win business in the entire ecosystem is open to this and today. There is no one else offering this product so.
So we think it's <unk>.
Very beneficial to the airlines very beneficial in the maintenance shops beneficial the whole industry and opens everybody up to have that capability.
Yeah.
Okay, Great Yeah, that's super helpful. I appreciate that and then.
Second question I wanted to dig in on the PMA parts.
And I apologize you may have gone through this <unk> call it.
Got sick kids I was a little bit late getting on.
But can you sort of reiterate the timeline on the remaining parts approval and then specifically around the second part.
Obviously, that's been delayed.
What's changed.
From when you first kind of contemplated getting approval on that part relative today.
Sort of walk us through why that's been so delayed.
Yeah, I think as I mentioned previously there is two things going on there's a natural process.
Of.
Designs here.
Yes.
Standby.
Okay.
Yeah.
Ladies and gentlemen, please standby.
Las connections.
Please standby.
Go ahead, Mr. Adam Hi, can you hear me again, yes, Sir.
Alright, sorry.
So where did I drop off.
Okay.
Just starting the beginning of the PMA question, Okay. So.
There is a natural process in all of these were.
Designs or tweak and test results are coming in and there's modifications made so that's part of the process that occurs in every one of these so.
That's that's part of the delay the second is FAA responsiveness in turnaround time, and the FAA has been unusually slow in terms of.
Getting back to people with answers.
Responding having the right people in the meeting they have personnel vacancies that have not been filled so that part of it is.
Out of our control.
Unusual it's never happened that way before so all of those.
Those are the two reasons for delays, but.
As I mentioned at all all the parts in process are proceeding.
Theyre doing very well and that it is expected that all of the remaining parts that are under development will be submitted for approval next year in 2023.
Okay. That's helpful and I got another question if I could.
Around chrome alloy.
Veritas is looking or is going to be buying that company I just wanted to.
Confirm that Scott no affect on F&I from operations perspective, and then sort of.
Second around that and this is maybe a bit premature but.
<unk>.
Given where we stand and where you guys stand on the PMA approval process, but can you sort of talk about.
That's sort of the duration of the competitive advantage.
With the PMA business.
Right.
The PMA business only is for the.
CFM 50, 675 B engine.
What can <unk> do from a competitive advantage perspective.
Kind of in the out years, yes.
Yes, so so I can confirm that there's no effect on the chromite.
Chromite joint venture there there is no change of control provision no termination right and we are in the agreements and we look forward to the.
Working with <unk>. So I think it is a very significant positive for chromalloy.
It was quite robust auction in price, which I think reflects.
Very well on the quality of the management team and the future opportunities. So I think it's a positive from our point of view.
That the transaction happens and we look forward to that.
Terms of the duration there is a yes, we are focused on the CFM 56 engine.
<unk>.
Really exclusively we started working with Chromalloy on the CF 680 engine, we've had a great partnership on that.
We've been reducing our exposure in the CF 680 engine so that.
That is becoming more mature so the sweet spot of the CFM 56 engine from a number of shop visits point of view.
Really runs from probably 2023 to a minimum of 2030 and it by lighter than extended I think by these.
New delivery delays as well that are coming out and also by.
The total maintenance cost of some of this new technology is still an unknown so.
So we feel very good about at least the next six to seven years, having 3000, plus shop visits a year, which is a huge huge market opportunity.
After 2030, I'm not quite sure yet.
But I feel like we have a lot of time to come up with some new ideas. We all we already have some ideas on the drawing board for next year in terms.
And Vasily.
Thanks Ross.
Did I lose you.
Sir go ahead.
Okay.
Yeah, I'm not sure if you had any additional.
You said you had something on the drawing board.
But that sort of answers my question.
I appreciate the taking the question thanks for Hi.
Back.
Okay.
Can you hear me.
Yes, we can hear you.
You had said something about we have things on the drawing board.
Yes, we've we have some ideas about other maintenance related products that we're developing for next year or so I think it's.
It's not going to be static, we're not going to sit and wait till 2030 and do nothing.
Great. That's all I had really appreciate it. Thank you. Thanks.
Thank you we have time for one more question.
Our last question for today comes from the line of Mr. Greg Lewis from <unk>. Mr. Lewis Your line, Thanks, and good morning, everybody, Yes, Joe I just had one question.
Yeah.
Realizing that it's still early days, we got it we got to get it.
The C Corp conversion, but I guess as we think about this bigger picture like right.
Right now that advertise clearly trading at a nice discount to its peers.
I heard a lot about.
Continuing to deploy cash for assets you did touch on the dividend.
I mean at a certain point do we need to start thinking about buying back stock.
Sure I think.
When we have the decision with excess cash flow I think we're going to look at all three alternatives, which is pay down debt increase the dividend or buy back stock. So.
I don't have any preset.
Answered that it'll be a function of.
What the outlook is what the opportunities are aware this various securities are trading so we'll take a look at all of that.
Okay Super helpful. Thank you very much thanks.
Thank you.
At this time I would like to turn the conference back over to Mr and dreamy for any closing remarks.
Thank you Howard. Thank you all for participating in today's conference call. We look forward to updating you after Q4.
Thank you.
Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day speakers standby.
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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