Jacob Rubin is flying with $FTAI

Episode Summary

Executive Summary: The episode opens with a brief postmortem on the disastrous ESGC/Eros investment, emphasizing humility, risk management, and learning from binary situations. Most of the discussion then centers on FTAI, where Jacob Rubin argues the upcoming split into two C-corps and removal of K-1 friction will broaden ownership, improve liquidity, and unlock value. He outlines an aviation platform built around engine leasing, aftermarket parts, MRO, and salvage economics, plus an infrastructure portfolio led by rail, Long Ridge, Jefferson, and Ropano.

Main Topics: ESGC postmortem and investing lessons (Priority: 5/5): Jacob admits the prior ESGC pitch was a major mistake, explaining that none of the key operational milestones arrived and the position was exited. He frames the loss as a lesson in binary risk, governance, sizing, and knowing when to move on. FTAI corporate structure and catalyst: split and K-1 elimination (Priority: 5/5): The conversation lays out FTAI as an LLC with substantial debt and explains that the planned split into two C-corps should remove K-1 complexity, broaden the buyer base, improve liquidity, and potentially attract index and institutional demand. Aviation platform and aftermarket engine strategy (Priority: 5/5): Jacob argues FTAI is not a normal aircraft lessor but an aviation aftermarket platform with used engine leasing, vertically integrated parts production, MRO capability, and salvage optimization centered on the CFM56 engine family. Infrastructure portfolio and asset-by-asset valuation (Priority: 4/5): The infrastructure segment is presented as a collection of separate assets—rail, Long Ridge power, Ropano, and Jefferson—each with distinct economics. Jacob argues the portfolio has meaningful standalone value despite near-term underperformance and COVID delays. Incentives, external management, and capital allocation (Priority: 4/5): The hosts debate whether FTAI’s external management structure creates alignment or conflicts. Jacob defends the fee structure and says the recent equity-funded rail deal was accretive and helped strengthen the spin-off narrative. Why these niches have few competitors (Priority: 4/5): Jacob explains that engine aftermarket work, MRO, and infrastructure transactions require specialized know-how, regulation, relationships, and capital, making it difficult for larger peers or new entrants to replicate FTAI’s strategy.

Key Arguments: ESGC failed because the expected 'if' conditions never materialized: no financials, no governance cleanup, and no investor-day-style transparency, so the position was rightly exited. The lesson from ESGC is that binary, opaque, foreign-governance situations require strict sizing and early risk management. FTAI’s planned move from LLC/K-1 to two C-corps should materially improve investability by removing a major tax/admin barrier and opening access to index funds, institutions, and retail platforms. The split is also logical because aviation and infrastructure have little operational synergy and are better valued as pure plays. FTAI’s aviation business is not just leasing; it is building an integrated aftermarket ecosystem around engines, parts, MRO, and salvage that can lower overhaul costs and raise margins. The CFM56 aftermarket opportunity is large and underpenetrated, with enough room for FTAI to grow without immediately drawing serious OEM retaliation. Management’s vertical integration into FAA-approved parts could create a durable moat because certification, know-how, and capital requirements deter follow-on competitors. The infrastructure segment is a collection of real assets with hidden value; Jefferson and Ropano are not yet mature but offer upside, while rail and Long Ridge provide the base economics. Concerns about external management and equity issuance are mitigated, in Jacob’s view, by the fact that good deals create net equity value and the incentive structure rewards actual value creation, not just AUM growth. COVID and industrial cyclicality explain some of the historical misses; Jacob argues the assets should be judged through the cycle, not on near-term quarters.

Data Points: ESGC outcome: Worst investment of the fund / career; bought high and sold low - Jacob’s retrospective on the prior podcast pitch ESGC deadlines missed: March, April, and July deadlines passed without financials - Used as evidence the thesis did not track FTAI shares outstanding: 99 million - Describing current capital structure FTAI equity market cap: $2.3-$2.4 billion - At roughly $24/share FTAI corporate debt: $2.3 billion - Current balance sheet overview Jefferson project debt: $700 million - Included in FTAI’s total leverage discussion Long Ridge debt: $294 million - Consolidated basis debt tied to power plant Preferred equity: $315 million - Part of the capital structure Avianca/Alitalia engine financing: ~$350 million debt funding - Recent engine acquisitions Implied enterprise value: ~$5.9 billion - Approximate total value before separation Historical average uplift after conversion: ~20% outperformance vs. SPY over 12 months - Jacob’s study of partnership-to-C-corp conversions Liquidity increase after conversion: 107% - Average increase in daily trading volume in Jacob’s sample Aviation fleet size: 439-449 engines - FTAI’s engine platform size discussed in the call CFM56 global installed base: 22,000 engines - Used to frame market penetration opportunity Current penetration: ~2% - FTAI’s current share of the installed base Target penetration for OEM attention: 8%-10% - Threshold discussed before becoming too large to ignore FAA-approved parts so far: 1 part approved - First of five hot-section parts in FTAI’s JV Parts economics at scale: $200 million EBITDA - At 5% market share for the aftermarket parts JV FTAI share of parts economics: 25% - FTAI’s ownership interest in the JV Estimated JV EBITDA to FTAI: $50 million - At 5% market penetration Engine overhaul cost today: ~$6 million - Current cost before FTAI’s parts/MRO initiatives Target overhaul cost: $2.5-$3 million - Projected cost after vertical integration and modularization Pre-COVID EBITDA per engine: $1.37 million - Used to scale the aviation business Normalized utilized fleet: ~375 assets - Based on 440-ish engines and utilization assumptions Aviation EBITDA estimate: ~$500 million - Normalized run-rate estimate before new initiatives Total aviation EBITDA target: ~$700 million - Including new parts/MRO/salvage initiatives over time Valuation multiple: 11x EBITDA - Blended multiple applied to the aviation business Rail deal value: ~$1 billion - Illustrative valuation for infrastructure rail asset Long Ridge value: ~$750 million - Value estimate for half-owned power plant interest Ropano investment: $325 million total; $25 million debt / $300 million equity - Valuation discussion for undeveloped terminal asset Jefferson capex/investment: $700 million - Phase one investment in multi-modal terminal Jefferson potential EBITDA: ~$140 million - Long-run capacity estimate FTAI stock price mentioned: ~$24/share - Current trading level during the discussion Aviation-only downside case: ~$20/share - Jacob’s rough valuation floor for aviation alone

Pivotal Quotes: "it was a spectacular debacle, worst investment of my career, worst investment of our fund" — Jacob Rubin: Postmortem on ESGC and acknowledgement of failure "K1 goes away, we split into two pure plays" — Andrew Walker: Clarifying the central catalyst for FTAI’s re-rating potential "They've built this platform. ... It's sort of this aftermarket aviation platform business that hasn't been done" — Jacob Rubin: Core thesis on FTAI’s aviation strategy

Implications: If the FTAI split and operational catalysts land, the stock could attract a much wider buyer base and re-rate on clearer segment economics. More broadly, the episode argues that niche, regulated industrial platforms can create value through vertical integration and structure changes, but only if execution keeps pace.