Reported Company:

FTAI Aviation

Researcher Company:

Snowcap

Price at Report Date:

Close Price Day after report date:

143.82

% Decline Day after Report Date:

% Decline vs Yesterdays Date:

-10.089

Summary

Activist short-seller Snowcap Research has published a critical report on FTAI Aviation (NASDAQ: FTAI), alleging that the company has misrepresented its aerospace business model and inflated its financials. Snowcap’s investigation, which aligns with prior allegations from Muddy Waters Research, claims that FTAI’s aerospace segment is built on misleading accounting practices and one-time COVID-era gains rather than sustainable operations

Who is FTAI Aviation?

FTAI Aviation is an aircraft and engine leasing company that also operates a maintenance, repair, and overhaul (MRO) business. The company specializes in CFM56 and V2500 engine modules, providing exchange and leasing solutions to commercial airlines. FTAI Aviation has positioned itself as a high-growth aviation services provider, commanding a significant valuation premium relative to traditional lessors

Key Points from Report

Aerospace Business Model: A House of Cards?

• Snowcap alleges that FTAI’s aerospace segment is largely a fabrication, with a former executive claiming that the company does not actually perform third-party module swaps at its Montreal facility, despite public claims to the contrary.
• The report suggests that FTAI’s total addressable market (TAM) is overstated by a factor of eight, misleading investors about the scale of its aerospace operations​.

Inflated Profits and Accounting Gimmicks

• Snowcap estimates that 50% of FTAI’s aerospace EBITDA is derived from one-time gains on discounted engines acquired during the COVID-19 downturn.
• The company is accused of misrepresenting whole engine sales as individual module sales, which could inflate revenue figures.
• Inventory accounting irregularities suggest that FTAI has overvalued its engine stocks, with its aerospace inventories appearing 50% more expensive per module than its cost of goods sold (COGS)​

Financial Engineering to Maintain Illusions of Growth

• The report claims that FTAI uses aggressive cost allocation strategies to shift losses to its leasing segment while keeping aerospace profits artificially high.
• A key concern is that 80% of FTAI’s aerospace EBITDA comes from “sales credits”—a non-cash accounting adjustment applied to used engines received in exchange sales.
• Snowcap also highlights a lack of free cash flow, stating that FTAI systematically under-reports maintenance capital expenditures (capex), giving the illusion of stronger profitability​

FTAI Trades at an Extreme Valuation

• Unlike traditional aircraft lessors, which trade at 0.6x to 2.4x book value, FTAI commands a valuation of 87x book value, primarily because investors believe it operates a high-margin aerospace business.
• Snowcap argues that this premium is unjustified, as FTAI is fundamentally a leasing business engaging in creative accounting, rather than a truly differentiated aerospace services provider​

Activ8 Finance Analysis

The Snowcap report raises significant concerns about FTAI Aviation’s financial reporting and business model. Key allegations include inflated aerospace EBITDA, overvalued inventories, and aggressive accounting practices. The report also suggests that a large portion of FTAI’s aerospace profits stem from one-time gains on discounted engine purchases during COVID, rather than sustainable operations.

Additionally, FTAI trades at a much higher valuation compared to traditional aircraft lessors, largely due to its positioning as an aerospace services company. If the claims regarding its accounting methods and profit sources hold true, this could lead to further scrutiny. These findings present important factors for industry watchers and market participants to consider when evaluating FTAI’s business model and financial health.