Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) Q2 2020 Earnings Conference Call - Final Transcript
Jul 31, 2020 • 08:00 am ET
Thank you. [Operator Instructions] And our first question comes from the line of Brandon Oglenski with Barclays. Your line is open.
Brandon R. Oglenski
Yeah. Hey, good morning, Joe and good morning to Alan, and thanks for taking my question. So you mentioned that during the quarter, you had 20% deferral rate on some of your leases, but it does sound like your prospects are much more I guess relatively bullish looking ahead, can you just remind us again the utilization estimates that you're running in 3Q and any deferral or default rates that you're expecting going forward?
Joseph P. Adams Jr.
As I mentioned on the engine side, we expect Q3 utilization to be about 65% to 70% which is sort of a -- we always have targeted 50% to 75%. So we think that will be strong and improving. And as I also mentioned earlier with the lack of airlines doing shop visits, we expect over the balance of the year that the engine market is going to get even stronger. And sometime next year, we even think there'll be a shortage. So outlook is very good there. On the -- on the airframe side, the utilization -- we actually, as I mentioned in the remarks we took back seven aircraft early and it was because we felt like either the credits where weak and they weren't going to survive or there was a lease term coming up shortly. And it was advantageous for us to get those assets back early. And we took those seven narrow-bodies and we've scraped the airframe and put the engines in the engine lease business. Because overall I think the supply of airframe is going to take longer to use up than the supply of engines. So we think being in the engine market will be better quicker to get those assets deployed than in the -- than in the competitive airframe market.
On the deferral side, we did say 20% of our portfolio we gave deferrals. Most of those deferrals or the biggest portion of those were in the 757 and 76 market. Because as I mentioned a lot of those operators are just not flying. So that's were probably the highest stress, but it's only about 15% of our portfolio and ultimately, we think the value of 75 and 76's will be fine because cargo is still very strong and most of those planes, the excess of those planes will end up being converted to cargo.
Brandon R. Oglenski
Okay. Really appreciate that response. And then you did highlight, I think at the end of your prepared remarks that you're getting close on these engine products. I think one products coming up soon, then one towards the end of the year. Can you just update us on the approval process? And then how does that fit into your commentary about potential -- I think you said the JV partner and MRO structure. Is that something just for your own fleet or is this something you want to sell externally to so?