Earnings Call Transcript
FTAI Aviation Ltd. (FTAI)
Earnings Call Transcript - FTAI Q4 2020
Operator, Operator
Ladies and gentlemen, thank you for standing by and welcome to the Q4 and Full Year Fortress Transportation and Infrastructure Investors LLC Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Alan Andreini. Thank you. Please go ahead, sir.
Alan Andreini, Speaker
Thank you, Cindy. I would like to welcome you all to the Fortress Transportation and Infrastructure's fourth quarter and full year 2020 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 and our press release on our website, which we encourage you to download if you've 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 FAD. The reconciliations of those measures to the most directly comparable GAAP numbers 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 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, CEO
Thank you, Alan. To start, today I'm pleased to announce our 23rd dividend as a public company and our 38th consecutive dividend since inception. The dividend of $0.33 per share will be paid on March 23, based on the shareholder record date of March 12. Now let's turn to the numbers. The key metrics for us are adjusted EBITDA and FAD, or funds available for distribution. Adjusted EBITDA for Q4 2020 was $46.2 million compared to Q3 2020 of $58.6 million and Q4 2019 of $234 million. On a normalized basis, excluding the gains or losses from the sales, Q4 2020 adjusted EBITDA was $44.3 million compared to $59.7 million in Q3 2020 and $92.1 million in Q4 2019. FAD was $54.2 million in Q4 2020 versus $39.9 million in Q3 2020 and $288.6 in Q4 2019. On a normalized basis, excluding sale proceeds and nonrecurring items, Q4 2020 FAD was $35.7 million compared to $23.9 million in Q3 2020 and $58.1 million in Q4 2019. During the fourth quarter, the $54.2 million FAD number was comprised of $89.9 million from our aviation leasing business, negative $1.8 million from our infrastructure business, and negative $33.9 million from corporate and other. Now let's look at all of 2020 versus all of 2019. Adjusted EBITDA in 2020 was $243.3 million versus $503.4 million in 2019. Normalized FAD in 2020 was $147.9 million versus $192.4 million in 2019. And by far, the dramatic reductions in passenger air travel due to COVID-19 drove the negative financial impact in 2020.
Alan Andreini, Speaker
Thank you, Joe. Cindy, you may now open the call to Q&A.
Operator, Operator
Thank you. And your first question comes from Josh Sullivan with Benchmark & Company.
Josh Sullivan, Analyst
Hey, good morning. And thank you for taking the questions here. I'm wondering if we could start off just with some color on how airline customers are responding to the FAA certification of the PMA engine parts? Has it been as you expected? You know, what is the inbound inquiries? Like since the approval, and I guess, you’ve seen any customers you didn't think maybe you might see?
Joseph Adams, CEO
Yes, I think the response has been even better than we expected. We've known that PMA has been in use for a long time by many airlines. But I think the combination of this being one of the largest engine markets in the world and also the emphasis that all the airlines have now on cost savings, maintenance expenses—the third largest P&L category for an airline after fuel and labor—has led to tremendous focus. The OEMs continue to raise parts prices every year, including this year, when you have a tremendous downturn. So you're either very, very focused on that. And PMA is a solution that we haven’t found anybody that wasn't interested in hearing about it. There has been a lot of inbound inquiry. And then getting the approval is a big step just because it's now real products shipped this week, one to an airline and one set to us. So they're out there now. And there'll be more to come. So I think that it's been a great reception and we couldn't ask for, you know, sort of a better backdrop.
Josh Sullivan, Analyst
Got it. And then just as you mentioned, kind of more to come, what do you think the timeline looks like for any additional parts to make it through the FAA? You know, do you think getting this first one over the line improves the timeline to maybe get those approved? Or just what are you thinking about on those other parts?
Joseph Adams, CEO
I think it will, it should pave the way and I think it should get easier. The second part, we expect to have approval in the second quarter. So right behind it. And then there are three additional parts that we didn't start work on until 2019. So we're expecting 2022. But there's potential for that to move up a little bit, given that there will be a pattern, sort of a more paved path to getting there.
Josh Sullivan, Analyst
Got it. And then just one last one, on the air sterilization product you just mentioned for the aviation market. Can you just expand on that opportunity? Is that an original part, is that a PMA part? Just some color on that would be great.
Joseph Adams, CEO
It's an original part. And it's been installed in some business jets and some commercial jets, but not very widely. It has been proven to be extremely effective and save as much as 2% on fuel. So probably something that could have wide application. But I think what's been missing is the commercial development around that, and that's where we can add value. That's what we're hoping to do.
Josh Sullivan, Analyst
Got it. Thank you for the time…
Joseph Adams, CEO
One thing, about HEPA filters—are effective—but HEPA filters effectively trap germs and viruses and then they have to be removed. That’s dangerous hazardous waste when it comes off the airplane. This product actually destroys them. So they're no longer viable. There's a tremendous savings there as well in terms of the handling.
Josh Sullivan, Analyst
Great. Thank you for the time.
Joseph Adams, CEO
Thanks.
Operator, Operator
Your next question comes from Guiliano Bologna with Compass Point.
Guiliano Bologna, Analyst
Good morning, and thanks for taking my questions. I guess starting out on the infrastructure side to pivot a little bit. You obviously have Repauno going live and you also have Jefferson with the new pipelines service under the river to Exxon. And you also have the power plant coming online. Is there a sense of kind of what EBITDA do you segment as a whole to generate in 2021? And how that could ramp throughout the year?
Scott Christopher, CFO
Yes, I would say $50 million to $60 million of EBITDA this year from the three you mentioned, and the largest being Jefferson, followed by Repauno and then Long Ridge, just because Long Ridge, we will not have a lot of history—it's not a lot of time once it comes on, and we own 50% of that, so in that order. And obviously, it's more back-end loaded. So—but I think that's a reasonable goal. And obviously, then next year, they'll all be in service, you know, a full year, which would be better. And then we've got expansion projects, numerous ones that could add substantially to that.
Guiliano Bologna, Analyst
That makes sense. And thinking about Jefferson, more specifically, I think the prior discussion was—you might go and get that into a range of about $70 million to $80 million for the annualized EBITDA. Going from there, what kind of other projects could you explore for Jefferson and what the magnitude could be?
Joseph Adams, CEO
Yeah, there's a long list of projects. The goal was always to get the pipeline connectivity so that you have many opportunities to add business. And that’s evident with Exxon—six pipelines, only one of which today is being used. There are five others that could— which could include crude, refined products, export, intermediates, vacuum, gas oils. We sold jet fuel for them at one point before the COVID crisis. So there's a long list of opportunities that we're in discussions on and pursuing just with them. Additionally, I mentioned that the Canadian market is picking up and the Utah markets for crude by rail, there's a DRU that's going to come online this summer, which means that crude will always move by rail. So we've seen more DRUs on the horizon, and that's very good for the Motiva crude movement opportunities. We also have some Canadian producers that are also in the terminal and have looked at expansion. Those are probably the big three customer groupings and there's an active list with all of them, it just keeps growing.
Guiliano Bologna, Analyst
That’s great. And I am just making sure, from EBITDA range perspective, that the power plant is supposed to generate roughly $120 million a year before any data centers, and you own half of that, so about $60 million. Then you have Jefferson at $70 to $80 million, and then Repauno is kind of in the $10 to $15 range if I remember correctly?
Joseph Adams, CEO
Yeah, $15 million.
Guiliano Bologna, Analyst
That sounds good. I really appreciate the time. And I'll jump back into queue.
Joseph Adams, CEO
Thank you.
Operator, Operator
Your next question comes from Chris Wetherbee with Citi.
Unidentified Analyst, Analyst
Good morning. James on the Chris. I wanted to ask about the EBITDA walk you went through in kind of $50 million to $80 million, you called out from the JV, acknowledging that. But looking a bit further out, what does that growth look like in 2022 and beyond, frankly? Like essentially, how do you think about the market share, and that ability to sort of pick it up over time?
Scott Christopher, CFO
Sure. If you take a look ahead to 2022 and your starting point, say roughly $1.8 billion you’ve invested in equipment that actually generates $450 million of EBITDA, and then on top of that, I think the last time we discussed the opportunity from both the parts business, as well as managing third-party fleets, adding an incremental $100 million to that number. And so I would say $550 million to $600 million for 2022 is—it may sound a little aspirational, but I do think it's reasonable, it's a reasonable goal.
Unidentified Analyst, Analyst
Got it. And within that—within that $50 million to $80 million, what sort of puts you at the higher end of that range or is the lower end? Is it just a faster recovery? Or is it some uncertainty about how much growth you can get initially? Just kind of wanted to understand what we should be watching for across the years to understand the number around that?
Scott Christopher, CFO
I'm sorry, I wasn't sure—what's the $50 million to $80 million?
Unidentified Analyst, Analyst
I believe in your walk you had—at the bottom there was essentially—the last item was a range in the EBITDA walk, if I'm not mistaken. I just wanted to know what will put you at the low end versus the high end of it?
Scott Christopher, CFO
Yeah, so it wasn't actually a range; there was a build-up starting with the existing portfolio producing $320 million this year. Then adding $80 million from new investments of approximately $300 million, generating $80 million this year. That’s obviously $50 million from the joint ventures and partnerships that we've had. So that's the $320 million plus $80 million plus $50 million.
Unidentified Analyst, Analyst
Got it. And then one other question, you've done a great job of addressing or making FTAI a better investment over time, moving some of the like building out a services business. As you look forward, are there any specific maybe structural issues to FTAI as a unit that you think might make sense to address that could unlock any value? Or is it like, how are you thinking about sort of the company structure longer term, if at all?
Joseph Adams, CEO
Yes, we have talked about it. We do realize that being a publicly traded partnership and having K-1s is a negative, and some investors just want to take you out of the universe. In particular, some of the index funds do that. The solution to that is for us to separate, create two companies, and potentially spin off infrastructure. In addition to getting rid of K-1s, you’d create more of a pure-play for two stocks, as opposed to, you know, combining them. We believe that's an objective that we have that’s moving up the priority list. We don’t have a specific timeline on that, but it's something we believe will create value and make the story simpler.
Chris Wetherbee, Analyst
Yeah, Joe. It's Chris Wetherbee. I just jumped on. I apologize for hopping on here, but I was able to join. As a follow-up to that, do you think that the businesses are at size or is there a scale on the infrastructure that you would need to get you to be able to do that?
Joseph Adams, CEO
We think it's very close. We'd always sort of said arbitrarily that we'd like each company to have at least a $1 billion market cap, we don't want to be too small. We think today we can achieve that. There are some interesting things on the horizon that will add to the infrastructure side. So yeah, I think we're very close, if not there.
Chris Wetherbee, Analyst
Okay. That's super helpful. I appreciate it. Thank you.
Operator, Operator
Your next question comes from Justin Long with Stephens.
Justin Long, Analyst
Thanks. And good morning. I wanted to start with a question on the power plant at Long Ridge, just wanted to clarify in August, when it's up and running, will it be generating $120 million of EBITDA kind of day one when we start? And then secondly, I know you've talked about potentially divesting your 50% ownership in that power plant. Where are you in terms of that thought process? And what are the big swing factors that you have in mind, as you contemplate what to do?
Scott Christopher, CFO
Yes. So part of the income from the power plant is a payment for capacity, which PJM has a capacity payment, and I believe it's about $20 to $25 million a year. I don't think we would be booking that right away. Very likely that comes in the auction, first auction, which I think will be in this 2022 period. Therefore, there will be a little bit of a lag on getting to $120 million right away. In terms of selling it, I would say not much has transpired since the last time we spoke. I think we're still thinking about it. We do feel like we have more upside with that now than we would have said previously—this hydrogen initiative and the data center opportunities are both very real and would provide, I think substantial upside. We wouldn't do anything until we felt like we’ve gotten those to a point where we can show the obvious value.
Justin Long, Analyst
Okay, that's helpful. And secondly, the breakdown on your expectations for aviation EBITDA was helpful. Going back to one of your answers to the 2022 question a moment ago, I think you said you expect around $100 million from the parts and service and partnership pieces. Anyway, you could kind of break that down a little bit more for us and provide some more color around the components of that $100 million as we get into 2022?
Scott Christopher, CFO
Yes, I would say it's probably equally divided between the part of business with AAR, the Chromalloy joint venture, and Lockheed Martin. If you took a third, a third, a third of that you would be pretty close.
Justin Long, Analyst
Okay, perfect. That's helpful. I appreciate the time.
Scott Christopher, CFO
Yes. Thanks.
Operator, Operator
Your next question comes from Devin Ryan with JMP Securities.
Devin Ryan, Analyst
Hey, great. Good morning, Joe. Most questions have been asked. I want to follow up on kind of the last conversation on aviation and the outlook and love to maybe just dig in a little bit around kind of expectations for maybe some additional large-scale asset purchases, and then kind of what the market conditions are right now. Obviously, you had a big benefit in 2020, given the backdrop. To the extent the backdrop is improving in the coming quarters, how is that shaping kind of the airline-level appetite to do deals? What are you guys seeing in the market or expecting over the next few quarters in terms of just larger kind of maybe idiosyncratic opportunities?
Joseph Adams, CEO
Yeah, great question. I think the deals are there. I think there are some larger transactions that we’ve been working on and that we see coming that I think are right down our sweet spot. We’re really focused—laser-focused—on buying CFM56 engines and doing that by buying either A320s or 727s, and then having the ability to either keep the airframe or scrap the airframe. I think that's our sweet spot. The difficulty we’ve talked about is that the deals are taking longer for two reasons. One is a lot of airlines have been getting money from governments. You get financial assistance from the government, but that comes with a cost, which is now you have a government partner. So the velocity of transacting slows down dramatically when you get a government in the mix. The second thing we've heard from people is that no one really wants to sell right now if they can avoid it. Everyone knows this is probably the worst market timing. So people are dragging their feet, saying, well, it’s going to get better, so I should slow down a little bit. I won’t look like the biggest fool. But I do think the macro is that the airlines need money, and they’re going to need money. They will be in negative cash flow this year in 2021. They’re tapping every source of capital. One of those sources is selling some of their fleets. I do think the deals are there. It's just a little frustrating and slow, but I think we're getting there.
Devin Ryan, Analyst
Appreciate that, Joe. And I guess just a follow-up within that, I mean, as the event enter repair ramps, you know, can you kind of change your bid in the market, if you will? I mean, obviously, your return profile goes up quite a bit with kind of the new capabilities in the vertical integration. So is that something that you're looking to do or is it more that you just will now be assuming prior returns with, you know, the additional capabilities?
Joseph Adams, CEO
We’ll be competitive for deals that we want to win. We're not fixed on a specific price because the market moves, as you said. We have a lot of savings; other people can’t generate. So we’ll be competitive. I haven’t felt like we’ve lost anything because we were rigid on our price. So I think it’s really more the other factors that have caused deals to just, you know, linger.
Devin Ryan, Analyst
Yeah. Okay, terrific. If I can, just a quick follow-up here. First off, congratulations on the completion of the cross-channel pipeline with Exxon. You know, just a lot of activity right now at Jefferson. It’s great to get the outlook there and hear about some of the additional developments. How are you guys thinking about financing at the asset level? I guess there are a lot of additional projects coming on, and so just love to think about the capacity for those and how you're structuring those with partners in terms—in terms of modeling and cost outlay, etc.
Joseph Adams, CEO
Yeah, it’s a great question. I mean, we did a tax-exempt financing at Jefferson, I guess it was two years ago now. Time flies, but those bonds are trading in the mid-twos in terms of interest rate yield. We’re looking at doing another tax-exempt bond offering at Jefferson for two things: one would be to expand the storage capacity for about—if we do a $250 million deal, roughly half would be for expansion. The other half would go back up to FTAI. So we take some investment out of Jefferson and have it as liquidity for FTAI. There’s very low-cost financing availability and two good uses of proceeds in my mind.
Devin Ryan, Analyst
Got it. Very interesting. Okay. Well, thank you. Appreciate it.
Joseph Adams, CEO
Yes.
Operator, Operator
Your next question comes from Ari Rosa with Bank of America.
Ari Rosa, Analyst
Great. Hey, good morning, Joe. And good morning, Alan. So, you know, I wanted to ask, just stepping back and looking at the aviation market, maybe you could talk about kind of where the supply-demand picture looks like in terms of the amount of idle equipment that’s still sitting on the sidelines, you know, for the market as a whole. And thinking about, and I know you've kind of touched on this in one of the earlier questions, but just thinking about how the aviation leads to business, maybe changes, kind of in a post-COVID world. Obviously, a lot of people have been scarred. Do you think there are structural changes that have come down the pipeline in terms of how airlines think about leasing assets? And maybe how FTAI is positioned to capitalize on that?
Joseph Adams, CEO
Yes. Great question. I think two interesting statistics I heard: one is that there are now more startups in airlines—more new airlines in the last 12 months than airlines that have gone out of business. So it’s kind of interesting to think about that. Even in this market, there’s no shortage of people that are willing to invest in airlines, which is somewhat amazing given what’s happened. You could argue that’s a horrible use of money, but I’ve never seen a period in my career when there weren’t people that wanted to invest in airlines. It’s incredible. Maybe this is a great time to start an airline because you can get everything cheaper. There’s that, and quite a few airlines have said recently that they expect third-quarter flying activity to be equal to or higher than 2019. So there’s another sort of—a matter of a rebound—that’s a pretty stunning fact too. There is tremendous pent-up demand. I think in Europe, when Boris Johnson announced the reopening plan in the UK, the bookings went up 3% to 500%. People were grabbing their flights to Spain and Greece for summer. So I think you’ll see the airlines come back pretty quickly. I don’t know how long people have short memories, but this one feels like that could happen again. In terms of structural issues, the airline business is incredibly risky. So capital is expensive, and I think everybody is expecting leasing to be more of a capital rider. Some of the big leasing companies have said it's clearly north of 50% now and going up because if you try to start an airline, why buy equipment? Just lease it. You have a lower cost of capital by the leasing company. So I think that benefits. Our pitch really is, you know, let us manage your engines, we don't need to manage an engine shop visit when we can do it more efficiently, cheaper, and we could save airline capital. You don’t have to put $5 million into a shop visit or even worse, you send your engine in for a shop visit and you get a shock, where you thought it was going to cost $4 million and ends up costing $8 million. So we have a good pitch that I think will resonate as well in the area of capital efficiency and cost savings.
Ari Rosa, Analyst
That’s a great answer, Joe. Thank you for the color on that. So I wanted to turn to Jefferson quickly. Obviously, there are a lot of balls in the air at Jefferson. As we think about the different revenue sources, obviously, it looks like the narrative around crude by rail is maybe picking up some steam. Now pipeline connectivity has a lot of potential. Storage has always been an interesting piece of the story. Can you think about the total revenue of Jefferson as a percent of revenue how you think about each of those buckets end up materializing? Additionally, could you provide a little bit of color, to the extent possible, around what the economics look like for that pipeline arrangement with Exxon? How exactly is it that FTAI is getting paid and what are the economics around that look like in terms of EBITDA margins or something of that sort?
Joseph Adams, CEO
On the first question, I would envision that we would probably have about two thirds of our revenue at Jefferson from crude and about one third from refined products. Then another goal we have is to also add sustainable fuel to the mix at some point. We have a number of projects looking at that. But figure that, you know, two thirds crude and one third refined products. In terms of the pipeline economics, it's good because short pipelines don’t cost a lot of money. If you lose a lot of volume through it, it’s an incredibly high return. That’s why we put, you know, when we were deciding how many pipes to build, the cost of building six is not much more than the cost of building one. I mean realistically, it's like if you built a house, you would definitely want to put more conduit in the wall because you don’t want to reopen it. So we built six, and we're only using one right now. We’re getting a good return off one, so you can imagine what the return would be if we had product flowing on all of them.
Ari Rosa, Analyst
Got it. Okay. That's terrific color. And thanks for the time.
Joseph Adams, CEO
There’s just a tariff; you get paid a cents-per-barrel tariff for the move that’s all. It’s very simple.
Ari Rosa, Analyst
Got it. And can you give any color around what the EBITDA margin looks like for that move to FTAI?
Joseph Adams, CEO
Well, you’ve got almost no costs on a pipeline. I mean, it’s once you’ve built it, the operating costs are de minimis.
Operator, Operator
Your next question comes from Brandon Oglenski with Barclays.
Brandon Oglenski, Analyst
Good morning, and thanks for taking my question. So Joe, just want to clarify the $450 million of EBITDA explication in aviation and $50 to $60 million for infrastructure—that’s full-year 2021? Or is that like, exit run rate expectation?
Joseph Adams, CEO
No, that’s for 2021, full year.
Brandon Oglenski, Analyst
Okay, I appreciate that. At the beginning of the call, you did talk about utilization assumptions. Could we come back to that, the engine and the fleet portfolio?
Joseph Adams, CEO
Yes. For the first half of this 2021, I said engine utilization is expected to be 60% to 70%. We're probably beginning the year around 60%. I expect that to trend up in the second quarter. For the second half of the year, we believe it will be 70% to 80% utilization. I think the highest utilization we ever had was about 85%, usually in the third quarter, that's when everyone's flat out. So that's what's underpinning the return assumption. For the aircraft fleet, it should be in the low 90s utilization or even higher if that market picks up. It's easier to lease an engine than an airframe today.
Brandon Oglenski, Analyst
I appreciate that. And then when you provided the $50 million from the PMA and the Lockheed Martin and AAR partnerships, does that include savings that you're expecting on the current lease book? Or is that incremental EBITDA from third-party sales and activities within these ventures?
Joseph Adams, CEO
Incremental EBITDA, that does not include any savings for our own fleet. As I mentioned, we’ve already started buying PMA this week.
Brandon Oglenski, Analyst
Okay, appreciate that. And then last one for me, it does look like based on this potential aircraft deal for $300 million, that you'll need incremental funding this year of about $200 to $300 million. I think you talked a little bit about some potential bond offerings at Jefferson, but is that what you're looking at this year?
Joseph Adams, CEO
Yes. If we get Jefferson as a source of capital of $125 million, we have an undrawn revolver of $250 million. So we have adequate funds today to cover all of that. We could also access the preferred markets are open again—preferreds have come back to 25. That’s where they were issued. So that’s another possibility as we look at the balance sheet. So lots of options without doing anything else that would be cash-generative or selling anything.
Brandon Oglenski, Analyst
Okay, thank you, Joe.
Joseph Adams, CEO
Yeah.
Operator, Operator
Your next question comes from Rob Salmon with Wolfe Research.
Rob Salmon, Analyst
Hey, good morning, Joe. And thanks for taking the question. I guess to piggyback on the last line of questions. Clearly, the module factories are going to be very transformative for FTAI. Can you remind us just as I think about your engine portfolio, what percentage of engines do CFM56 represent today?
Joseph Adams, CEO
Yes. I think I have that.
Rob Salmon, Analyst
As you’re digging that number, when we think about kind of the Lockheed Martin module factory, is this something you're just going to use with the CFM56 engine? Or can you use it with the entire FTAI portfolio?
Joseph Adams, CEO
Yeah, so it's really—the Lockheed Martin is focused on the CFM engine, CFM56. There’s a number of maintenance shops; they tend to specialize by engine type. For the CF680 and the other engines, we’ll probably use other shops, that's not a strength of Lockheed Martin. So I think it's really going to be focused on the CFM56 market. In terms of narrow-body engines, it's about half the fleet—there are 160 CFM engines right now. It's roughly half of our portfolio value. There’s about $300 million of new investments, almost all of that, and substantial amounts will go towards CFM engines, adding to that. I expect to be over 200 engines by the end of this year for CFM56. And then 200 engines is 1% of the total world fleet of 22,000, so it's still quite small. We could see growth beyond that for many years in terms of adding to that if we decide to.
Rob Salmon, Analyst
Absolutely. If I'm using the 160, that would imply assuming engines going in for a shop visit every five years, about 32 visits. As you get to 200, that would be 40. Still, well below the facility's throughput potential, which I believe is around 70 aircraft or engines. Can you give us a little more…
Joseph Adams, CEO
It's actually a lot bigger than that. It's about 300 engines a year. We’re assuming, you know, our needs are going to be probably in the 50 to 60 range in the near term.
Rob Salmon, Analyst
And how quickly do you think you can build up to getting to that max throughput? How should we think about the sensitivity for FTAI from an earnings perspective?
Joseph Adams, CEO
I think that we could be at 300 engines next year. That feels doable. That’s 60 shop visits a year. If we save $2 million per shop visit, that’s $120 million in savings for our own fleet just in shop visits. If that $120 million is amortized over three or four years, that's $30 million to $40 million a year.
Rob Salmon, Analyst
Yeah, and clearly, you wouldn't have to give much of it back to the customer, which just means you're also going to be able to buy additional engines and improve the returns.
Joseph Adams, CEO
Right. That was one of the revelations when we talked about PMA. The manufacturers always say, well, it's not going to be widely used, it's not a big factor because the residual values affect. Most airlines buy PMA directly today. They buy a lot of PMA from HEICO, they buy from Chromalloy, there's PMA—all the major airlines, particularly ones that operate their own shop use PMA. So it is already an airline— that purchased the first product. So there's no concern there with most airlines. If you stick with an OEM program, then you won't be using PMA. But that's a decision that each airline makes. You don't need a lot of market share in PMA to make the math work. It can be peaceful coexistence. If your goal is to have 10% market share, the OEM by definition still has 90%. It's not material. There is some assumption in the $50 million that we have an airline that we can manage their fleets and we have several proposals out right now. It should be a small contributor to that number this year, but the goal is to make that a big contributor. We have a framework and initiatives and good dialogue going on that front.
Frank Galanti, Analyst
Okay, that’s super helpful. I appreciate the color. And then, I guess the second question I have, and this might be a little bit of an inside baseball. But you talked around the engine utilization assumptions, you mentioned you’d start the year hopefully at 60% and then ramp gradually 60%, 70% in the first half, 70%, 80% in the second half. But I guess you mentioned in the prepared remarks that for maintenance revenue it was going to remain relatively flat, maybe a little up as airlines aren't flying as much as they had been. How does that utilization turn into maintenance revenue? Is that 70% to 80% assuming that people will actually use the engines when they lease?
Joseph Adams, CEO
Yes, that’s an assumption that it's on-lease, not merely sitting in a warehouse.
Frank Galanti, Analyst
Okay. That makes a lot of sense. And then I guess a smaller question, on the Jefferson pipelines, you have the—can you give us the capacity of those pipes? I think in the press release it said 168,000 for one for diesel, 150 for another for gasoline, and there should be four additional pipes going to Exxon, one to Motiva, and one to Cushing. What are those capacities?
Joseph Adams, CEO
Yes, so the one to Motiva is the largest— that will be almost 300,000 barrels a day total capacity. So it's a big pipe. The inbound from the Payne line is initially 40,000 barrels a day but can be expanded up to 60. The six pipeline stacks of varying capacities; assuming 150,000 barrels a day for each one, it's pretty close. Some are a little bit less and some are a little bit more, but 150,000 is a good number for each one of those.
Frank Galanti, Analyst
Okay, great. Super helpful. Thanks so much.
Joseph Adams, CEO
Which is a lot of capacity.
Operator, Operator
I'm showing no further questions at this time. I would now like to turn the call back to Mr. Alan Andreini.
Alan Andreini, Speaker
Thank you, Cindy. And thank you all for participating in today's conference call. We look forward to updating you after Q1.
Operator, Operator
Ladies and gentlemen, this does conclude today's conference call. Thank you so much for participating. You may now disconnect.