Fortress Transportation and Infrastructure Investors LLC (FTAI) Q4 2020 Earnings Call Transcript

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Fortress Transportation and Infrastructure Investors LLC (FTAI)
Q4 2020 Earnings Call
Feb 26, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

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. [Operator Instructions] After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Alan Andreini. Thank you, please go ahead, sir.

Alan Andreini -- Investor Relations

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 P. Adams -- Chairman of the Board and Chief Executive Officer

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 23rd, based on the shareholder record date of March 12th.

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 non-recurring 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 [Technical Issues] $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 to 2020.

Turning now to Aviation. In this extremely challenging operating environment for pasture operations continued into Q4 2020 and will extend into Q1 2021. New travel restrictions in most geographies pushed down flying activity to very low levels. But the outlook for a strong snapback in 2021 is more evident today than ever before.

In Q4, results were negatively affected by one passenger aircraft maintenance reserve collections, which is driven off hours and cycles flown by our customers decreased approximately $6 million in Q4 from Q3. Two, $2 million of income was lost from a lease end of two 767 pasture aircraft that are now under a letter of intent to be sold to a cargo operator. And three, the failure of three airlines increased bad debt expense by approximately $2 million.

Cargo business remained strong, representing approximately 30% of our revenues and 2021 levels are robust due to surge in global trade and vaccine distributions. While we expect Q1 2021 to be very similar to Q4 2020, or modestly better, we expect aviation EBITDA for 2021 to total approximately $450 million, compared to $290 million in 2020. We also went through the entire portfolio of equipment and took a $20 million impairment over 31 individual aircraft and engines. While the aggregate appraised portfolio value completed by third-party appraisers as of 12/31/2020 exceeds book value by greater than 20%. Specific individual values have declined due to the limited market for sale and purchase.

And so we elected to writedown these specific assets to levels which we expect to be the lowest value in this cycle, and position our fleet for a strong 2021, '22 rebound. The assumptions underpinning the $450 million in EBITDA in 2021 are: number one, $320 million contribution from the existing portfolio, with strong recovery in Q3 and Q4; two, $280 million and EBITDA from new investments of approximately $300 million starting in Q2 and growing; three, engine leasing utilization of 60% to 70% in the first half of 2021 increasing to 70% to 80% in the second half; and four, $50 million in EBITDA contributions from our parts and maintenance joint ventures and partnerships with Chromalloy, Lockheed Martin, and AAR starting in Q2 and growing in Q3 and Q4.

We see substantial evidence of passengers increasingly booking travel, and airlines starting to add capacity, while still avoiding spending capital on expensive engine shop visits in numerous markets globally. Importantly, for us the demand for narrowbody engines is materially better than anytime in the last 12-months, and is forecast to exceed supply this year and into 2022. With our ability to deliver the lowest cost per flight cycle for CFM56 engines, and to offer capital efficient leasing to airlines, we are extremely well-positioned to grow EBITDA and earnings from the largest engine market in the world, through our proprietary products and exclusive partnerships with some of the leading aviation companies in the world for the next decade.

Let's turn to infrastructure now, starting with Repauno. Our state-of-the-art natural gas liquids rail translating system is now complete and in operation. The system allows for flexibility to load products directly to marine vessel or into our underground caverns for storage, creating unique opportunities for our customers. We loaded our first marine vessel directly from rail in early January. And during the fourth quarter, we saw continued utilization of our truck rack meeting local demand with direct access to the premium New York Harbor blending market. Negotiations have gone well with producers and off-takers and we are finalizing firm commitments for natural gas liquids throughput beginning in the second quarter of 2021. And we expect to commit a large portion of the facility's capacity to ratable term business this year, while maintaining the flexibility to capitalize on unique spot opportunities.

Now that the facility is open for business, discussions with off-takers for multi-year commitments for Phase 2 storage caverns and VLGC shipments are under way. We hope to have identified counterparties and commenced construction this year for delivery of that system in 2024. Long Ridge. The Long Ridge power plant construction is more than 80% complete and is tracking significantly ahead of schedule relative to the November 2021 completion date guaranteed by our construction firm. At this point, we expect that the plant will be generating cash flow from test operations by early summer and will be fully operational in August.

We continue to see a high level of interest from power intensive industries looking to sight new facilities in Long Ridge. We have been advancing our discussions with data centers and cryptocurrency miners, whose interest is driven in part by our recently announced initiative to blend hydrogen into our power plant by the end of this year. 2020 was a good year for our frac sand business despite the industry wide slowdown in natural gas drilling activity. We transloaded over 900,000 tons of frac sand, which was higher than budget not more than 15% year-over-year. So all in all, a good quarter for Long Ridge.

Jefferson. The Jefferson Terminal continues to make good progress in providing increased logistics optionality for its customers and consistent and profitable business revenues. Jefferson posted its fourth consecutive positive quarter with EBITDA of $4.2 million. The macro picture of Jefferson for Q4 was very similar to Q3 with positive EBITDA accomplished through the continued rationalization of costs during the pandemic, driven downturn and high occupancy in the terminal. This was accomplished with only three trains of heavy Utah crude in December, and no heavy Canadian crude trains during the quarter.

The more heavy Canadian -- heavy train moves due to the compression in the WCS WTI spread and the reluctance of refineries to increase refinery run rates due to uncertain consumer demand. With a higher and more stable WTI price environment, crude price environment, higher end market demand and higher pipeline, a portion in from pipelines out of Western Canada, we expect to see crude by rail economics improve for both Canada and Utah.

As such, we and our customers are planning for increased crude by rail volumes starting in Q2 of this year 2021. The all important pipeline construction projects are nearing completion and the first pipeline project connecting the Jefferson Terminal with the Exxon Beaumont refinery has been completed and put into service. Nearly a million barrels were moved through the pipeline in the first month of service in January. And we expect refined product volumes to steadily increase as a result of the more economic and ratable logistical solution.

Additionally, with product moving via pipeline instead of barge, the barge stock has new opportunities for future marine movements. The two additional pipeline projects connecting the Jefferson Terminal with Motiva owned by Saudi Aramco and the Jefferson Terminal with the Cushing, Oklahoma market via the [Indecipherable] line pipeline, remain on track to be operational in the second quarter. As we look down the road, we continue to develop several other large scale projects with our major customers.

Turning now to the topic of sustainability. We have been and will continue to look across existing businesses and add new investment opportunities to promote a more environmentally friendly approach, while at the same time driving long-term growth, profitability, and value creation. We believe sustainability to be both good business and the right thing to do for everyone. Everyone in our companies is involved and responsible for advancing FTAI to become a leader in sustainable investing and operations. As such, we will on a regular basis update investors on our progress. And we'll deliver our first annual sustainability report to our board and shareholders by the end of Q1 2022.

FTAI's ownership of three North American port and rail terminals with Jefferson Energy in Beaumont, Texas, Long Ridge Energy in eastern Ohio, and Repauno in the Philadelphia area affords us a somewhat unique ability to incubate and explore new technologies and approaches utilizing these properties. All have great logistics connectivity, rail, water, road, ample industrial land, and low cost energy resources. The first example of this and an exciting one for the industry is the introduction of hydrogen as a fuel for the Long Ridge energy power plant. We have recently signed an agreement with GE to install blending equipment for the power plants to be operational by the end of 2021 this year.

In addition, we signed a five-year hydrogen purchase agreement with a company that will deliver hydrogen from the nearby industrial facility that makes hydrogen as a byproduct of their industrial process. And by year-end, Long Ridge will be the first hydrogen burning large frame gas turbine in the United States, and the first worldwide to blend hydrogen in a GE H-class turbine.

In addition to this project, we are also actively engaged with several additional investment opportunities, including: one, partnering to build a bio refinery and gas liquids plant to produce renewable diesel and lubricants and green hydrogen. Two, building a plant to convert agricultural waste to produce biogas and green hydrogen. Three, building a plant to convert animal waste to produce organic fertilizer and bio gas. Four, building a facility to convert non-recyclable plastics to produce sustainable jet fuel. And five, invest in a company with patented air sterilization and filtration technology to commercialize products that create a safer environment and save fuel costs, with ready applicability for aviation and marine industries. So lots of progress and terrific opportunities with a lot more to come.

So in conclusion, 2020 will be a year remembered and discussed for a long time to come, a year when we all learned that we have a lot less control over our environment than we had come to believe. A year of stresses beyond any worst case scenario we have ever contemplated. But on the bright side, we are all better managers today, more empathetic, more flexible, more resilience, more appreciative. Our businesses are in much better shape today. And our team of employees is a tremendous strength. And for that we are proud and grateful.

So with that, I'll turn the call back to Alan.

Alan Andreini -- Investor Relations

Thank you, Joe. Cindy, you may now open the call to Q&A.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And your first question comes from Josh Sullivan with Benchmark & Company.

Josh Sullivan -- Benchmark & Company -- 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, I think the response has been even better than we expected. We've known -- you know, 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, the largest engine market 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. So there's tremendous focus and 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 -- I don't think we've found anybody that wasn't interested in hearing about it. So-and 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 to one set-sets 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 couldn't ask for, you know, sort of a better backdrop.

Josh Sullivan -- Benchmark & Company -- 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 P. Adams -- Chairman of the Board and Chief Executive Officer

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, you know, 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 you know, that there will be a sort of a pattern -- sort of a more paved path to getting there.

Josh Sullivan -- Benchmark & Company -- 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 P. Adams -- Chairman of the Board and Chief Executive Officer

It's an original part. And it's been -- it's actually been installed in some business jets and some commercial jets, but not very widely. And it has been proven to be extremely effective and save as much as 2% on fuel. So something that could, you know, have wide application. But it hasn't -- I think that what has been missing is the commercial development around that, and so that's I think, where we can add value. And that's what we're hoping to do.

Josh Sullivan -- Benchmark & Company -- Analyst

Got it. Thank you for the time...

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

One thing, about HEPA filters are effective, but HEPA filters effectively trap germs and viruses and then they have to be removed. And that's by -- that sort of dangerous hazardous waste when it comes off the airplane. This product actually destroys them. So they're no longer viable. And there's a tremendous savings there as well in terms of the handling.

Josh Sullivan -- Benchmark & Company -- Analyst

Great. Thank you for the time.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question comes from Guiliano Bologna with Compass Point.

Guiliano Bologna -- Compass Point -- 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 that are going into service under the river to Exxon. And you also have the power plant coming online. Is there a sense of kind of what EBITDA the intra-country [Phonetic] segment as a whole to generate in 2021? And how that could ramp throughout the year?

Scott Christopher -- Chief Financial Officer

Yes, I would say $50 million, $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, full-year, which would be better. And then we've got expansion projects, numerous ones that could add substantial to that.

Guiliano Bologna -- Compass Point -- 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 kind of what -- representing something what the magnitude could be?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, there's a long list of projects. You know, I think, the goal was always once you get the pipeline connectivity, then you have many opportunities to add business. And, you know, that's evident with Exxon six pipelines, only one of which today is being used. And so there's five other ones that could include crude, could include refined products, export, could include intermediates, vacuum, gas oils. We sold jet fuel for them at one point before the COVID crisis. So there's a range -- there's a long list of, you know, opportunities that we're in discussions on and pursuing just with them.

And then there's -- I mentioned, 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 is -- recovery in it, which means that crude will always moved by rail. And so we've seen more DRUs on the horizon, and that's very good for the Motiva crude movement opportunities. And then we have some Canadian producers that are also in the terminal and have looked at expansion. So those are probably the big three customer groups -- groupings and there's an active list with all of them, and it keeps usually every time you meet it ends up -- you end up adding to the list instead of subtracting.

Guiliano Bologna -- Compass Point -- 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 million to $80 million. And then Repauno is kind of in the $10 million to $15 million range if I remember correctly?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, $15 million.

Guiliano Bologna -- Compass Point -- Analyst

That sounds good. I really appreciate the time. And I'll jump back into queue.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Thank you.

Operator

Your next question comes from Chris Wetherbee with Citi.

James -- Citi -- Analyst

Hey, guys. Good morning. James [Phonetic] 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 like looking a bit further out, what is that growth look like in 2022 and beyond frankly, like essentially, how -- what can that grow to like, how do you think about market share, and that ability to sort of pick it up over time, essentially, year-on-year, I know, I think you might not have the most clarity to, but just kind of wanted to understand how you think about the growth of that business?

Scott Christopher -- Chief Financial Officer

Sure. So I think if you take -- if you look ahead to 2022 and your starting point and say roughly $1.8 billion you've invested in equipment that actually generate $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.

James -- Citi -- Analyst

Got it. And within that -- in the walk within that $50 million to $80 million, what sort of puts you at the higher end of that range or is the lower end, just a faster recovery? Or is it some uncertainty about how much growth you can get initially, just kind of wanted to understand what like we should be watching for across the years to understand the number around that?

Scott Christopher -- Chief Financial Officer

I'm sorry, I wasn't sure -- what's the $50 million to $80 million?

James -- Citi -- Analyst

I believe in your walk you had at the bottom there was essentially -- the last item was essentially a range in the EBITDA walk, if I'm not mistaken. I think just the [Indecipherable] that might not have been the case, but just wanted to know what will be putting you at the low end versus the high end of it?

Scott Christopher -- Chief Financial Officer

Yes, so it wasn't actually a range, there was -- it was a build up and starting with the existing portfolio, producing $320 million this year. And then adding $80 million to that from new investments of approximately $300 million of new investments, generating $80 million this year. And that, obviously -- that's only three quarters of the year, because most of those are closed or we should be closing soon. And then on top of that $50 million from the joint ventures and partnerships that we've had. So that's the $320 million plus $80 million plus $50 million, is the fourth.

James -- Citi -- Analyst

Got it. And then one other question, you've done a great job of sort of like addressing, or making FTAI basically, a better investment over time, moving some of the like [Indecipherable] building out a services business. As you like 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, we have talked about it. And we do realize that being a publicly traded partnership, and having Q -- K-1 is a negative, and some investors just want to look at -- well, look at -- take you out of the universe. And in particular, some of the index funds do that. So the solution to that is for us to separate, you have to create two companies potentially spin-off infrastructure. And 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. So we think that, that's an objective that we have that and sort of moving up the priority list we don't have a specific timeline on that. But it's something we believe will add value, create value and make the story simpler.

Chris Wetherbee -- Citi -- Analyst

Yes, Joe. Its Chris Wetherbee. I just jumped on. I apologize for hopping on here. But I was able to join that here. As a follow-up to that, do you think that the businesses are at size or is there a size, fees, or scale on the infrastructure that you would need to get you to be able to do that?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

We think it's very close. We'd always sort of said arbitrarily, we'd like each company to have at least a $1 billion market cap, we don't want to be too small. And today, we can achieve that. And we think that there's some interesting things on the horizon that we'll add on the infrastructure side, that will add to that. So yes, I think we're very close, if not there.

Chris Wetherbee -- Citi -- Analyst

Okay. That's super helpful. I appreciate it. Thank you.

Operator

Your next question comes from Justin Long with Stephens.

Justin Long -- Stephens -- 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 -- in the 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 -- Chief Financial Officer

Yes. So part of the income from the power plan is a payment for capacity, which PJM has a capacity payment, and I believe it's about $20 to $25 million a year. And I don't think that 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. So there will be a little bit of a lag on the -- getting to a $120 million right away.

In terms of selling it. You know, I would say not much has transpired since the last time we spoke. I think we're still thinking about it. We do -- it does feel like we have more upside with that and then we would have said previously, this hydrogen initiative, and you know, the data center opportunities are both very real and would provide, I think, substantial upside. And so we wouldn't do anything until we felt like we've -- you know, at least gotten those to a point where we can -- the value is obvious.

Justin Long -- Stephens -- 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 -- Chief Financial Officer

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 -- Stephens -- Analyst

Okay, perfect. That's helpful. I appreciate the time.

Scott Christopher -- Chief Financial Officer

Yes. Thanks.

Operator

Your next question comes from Devin Ryan with JMP Securities.

Devin Ryan -- JMP Securities -- Analyst

Hey, great. Good morning, Joe. Most questions have been asked. I want to follow-up just on kind of the last conversation on aviation and the outlook and love to maybe just dig in a little bit around 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 the airline level appetite to do deals? And what are you guys seeing in the market are expecting over the next few quarters in terms of just larger maybe idiosyncratic opportunities?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, so great question. And you know, 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 writedown the sweet spot for us. And 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. And so I think that's our sweet spot.

And I think the difficulty, you know, we've talked about this before, and the deals are taking longer, for two reasons: one is, a lot of airlines have been getting money from governments. And so 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. So that's been a bit of a delay. And then the second thing we've heard from people is, no one really wants to sell, right now, if you can avoid it, it's -- everyone knows, this is probably the worst market timing. So people are kind of a little bit dragging their feet saying, well, it's going to get better. So I should slow down a little bit. And I won't look like, you know, the biggest fool.

So I think that there's some of -- there's some of both of those things there. But I do think the macro is the airlines need money, and they're going to need money, it be negative cash flow this year in 2021. And they're tapping every source of capital. And so one of the sources of capital is selling some of your fleet. So I do think the deals are there. But the reason I mentioned that just -- it's a little frustrating and slow, but I think we're getting there.

Devin Ryan -- JMP Securities -- Analyst

Appreciate that, Joe. And I guess, just 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 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 seeing prior returns with the additional capabilities?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Well, we'll be competitive for deals that we want to win, so we're not fixed on a specific price because of the market moves, as you said, the market moves and market moves, and we have a lot of savings and other people can't generate. So we'll be competitive. And I haven't -- we haven't felt like we've lost anything because we were rigid on our price. So I think it's really just more of the other factors that have caused deals to just languish a little.

Devin Ryan -- JMP Securities -- Analyst

Yes. Okay, terrific. If I can, just a quick follow-up here. First off, congratulations on the completion of the cross channel pipeline, with Exxon, just a lot of activity right now, at Jefferson. And so 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's a lot of additional projects coming on. And so just love to think about the capacity for those? And also just how you're structuring those with partners in terms I guess, just we're thinking about modeling and cost outlay, etc?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, so it's a great question. And, 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. So 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. And then the other half would be -- come back up to FTAI. So we take some investment out of Jefferson, and have it as liquidity for FTAI. So, very low cost financing availability, and two good uses of proceeds in my mind.

Devin Ryan -- JMP Securities -- Analyst

Got it. Very interesting. Okay. Well, thank you. Appreciate it.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes.

Operator

Your next question comes from Ari Rosa with Bank of America.

Ariel Rosa -- Bank of America -- Analyst

Great. Hey. Good morning, Joe, and good morning, Alan. So, 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 still sitting on the sidelines for the market as a whole? And thinking about -- and I know you kind of touched on this in one of the earlier questions, but just thinking about how the aviation leads the business, maybe changes, kind of 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Yes. Great question. I think two interesting statistics I heard, one is that, there's now more airlines that are start-ups, more new airlines in the last 12 months than airlines that have gone out of business. So, it's kind of an 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 the -- what's happened and you could argue that 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. So it's incredible. And maybe this is a great time to start an airline because you can get everything cheaper.

So, I think there's that and then quite a few airlines I've been -- recently, I've been hearing in saying that they expect third quarter flying activity to be equal to or higher than 2019. So there's another sort of -- as a matter of a rebound, that's a pretty stunning fact, too. But there is tremendous pent-up demand. I think in Europe, when Boris Johnson announced the reopening plan in UK, the bookings went up 3% to 500%. And people were grabbing their flights to Spain and Greece for the summer. So, I think there is -- I think you'll see the airlines come back pretty quickly and there won't be -- I don't know how long people have short memories, but this one feels like that could happen again.

In terms of structural, the airline business is incredibly risky. So, the capital is expensive, and I think everybody is expecting leasing to be more of a capital provider. So I think 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. So -- and you have a lower cost of capital by the leasing company. So I think that benefits. And then our pitch really is, let us manage your engines. You don't need to manage an engine shop visit, when we can do it more efficiently, cheaper, and we could save an airline capital. So 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 bill, 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 terms of capital efficiency and cost savings.

Ariel Rosa -- Bank of America -- Analyst

That's a great answer, Joe, and 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. And as we think about the different revenue sources, obviously, it looks like the narrative around crude by rail is maybe picking up some steam. Obviously, now pipeline connectivity is -- has a lot of potential. Obviously, storage has been always an interesting piece of the story. Maybe you can think about the total revenue of Jefferson as a percent of revenue, how you think about each of those buckets end up materializing?

And then, additionally, if you could give maybe 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 P. Adams -- Chairman of the Board and Chief Executive Officer

So, on the first question, I wouldn't -- I mean, I would envision that we would have probably about two-thirds of our revenue at Jefferson from crude and about one-third from refined products. And then another goal we have is to also add sustainable fuel to the mix at some point. So, we had a number of projects looking at that. But figure that two-thirds crude and one-third refine products.

In terms of the pipeline economics, it's good, because short pipelines don't cost a lot of money, and if you move a lot of volume through it, it's an incredibly high return. So, that's why we put -- when we were deciding how many pipes to build, and the cost of building six is not much more than the cost of building one. I mean, realistically, it's like, if you build a house, you would -- you 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, and it's enough. 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.

Ariel Rosa -- Bank of America -- Analyst

Got it. Okay. That's terrific color and thanks for the time.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

There's just a tariff, you get paid cents per barrel tariff for the move. That's all. It's very simple.

Ariel Rosa -- Bank of America -- Analyst

Got it. And can you give any color around what the EBITDA margin looks like for that move to FTAI?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Well, you've got --- I mean, on a pipe, you have almost no costs. I mean, it's -- once you've built it, the operating costs are de minimis.

Ariel Rosa -- Bank of America -- Analyst

Yeah. Okay. Makes sense.

Operator

Your next question comes from Brandon Oglenski with Barclays.

Brandon Oglenski -- Barclays Capital -- 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 for infrastructure that's full-year 2021. Or is that like a exit run rate expectation?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

No, that's 2021, full-year.

Brandon Oglenski -- Barclays Capital -- Analyst

Okay. I appreciate that. And all the way at the beginning of call, you did talk about utilization assumptions. Could we come back to that, the engine and the fleet portfolio?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes. For the first half of this 2021 for engine utilization, I said 60% to 70%. We're probably beginning the year around 60% and I expect that to trend up in the second quarter. And then for the second half of the year, we believe it will be 70% to 80% utilization. We sort of -- I think the highest utilization we ever had was about 85%. And it's usually in the third quarter, that's when everyone's flat out. So, that's what's underpinning that as the return assumption. And for the aircraft fleet, it should be in the low-90s utilization or even maybe higher market if that market picks up. But it's easier to lease an engine than an airframe today.

Brandon Oglenski -- Barclays Capital -- Analyst

Okay. I appreciate that. And then when you provided the $50 million from the PMA and the Lockheed Martin and AAR partnerships, does that includes 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Incremental EBITDA, that's not -- does not include any savings for our own fleet. As I mentioned, we've already started buying PMA this week.

Brandon Oglenski -- Barclays Capital -- 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 million 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Yes. And I think we did -- 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. And we could also access, the preferred markets are open again, the preferreds have come back to 25. So that's where they were issued. So, that's another possibility as we look at the balance sheet. So, lots of -- and that's without doing anything else that would be cash generative or selling anything.

Brandon Oglenski -- Barclays Capital -- Analyst

Okay. Thank you, Joe.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yeah.

Operator

Your next question comes from Rob Salmon with Wolfe Research.

Robert Salmon -- Wolfe Research -- Analyst

Hey. Good morning, Joe, and thanks for taking the question. I guess, to piggyback on the last line of questions. Clearly, that the module factory is going to be very transformative for FTAI. Can you remind us just as I think about your engine portfolio, what percentage of engines are CFM56 represents today?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes. I think I have that.

Robert Salmon -- Wolfe Research -- Analyst

And I guess, 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 P. Adams -- Chairman of the Board and Chief Executive Officer

Yeah. So it's really -- the Lockheed Martin is really focused on the CFM engine, CFM56. There's a number of maintenance shops, they tend to specialize by engine type. And so, for the CF680 and Pratt 4000, we probably will 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's 160 engines right now, CFM. And it's roughly half of our portfolio value. As I mentioned, there's $300 million of new investments, almost all of that and substantial amount of that is going to be CFM engines adding to that. So, 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 really still quite small. So, we could see growth beyond that for many years in terms of adding to that if we decide to.

Robert Salmon -- Wolfe Research -- Analyst

Absolutely. And even 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. It's still well below the facilities throughput potential, which I believe is around 70 aircraft, so -- or engines. Can you give us a [Speech Overlap]

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

It's actually a lot bigger than that, it's about 300 engines a year. And we're assuming our needs are going to be probably in the 50 to 60 range in the near-term.

Robert Salmon -- Wolfe Research -- Analyst

And how quickly do you think you'll -- you can build up to getting to that that 300 engines? And as you get to that MAX throughput, how should we think about the sensitivity for FTAI from an earnings perspective?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Well, the -- I think that we could be at 300 engines next year. So, that feels doable. And that's 60 shop visits a year. And if we save $2 million per shop visit, that's $120 million in savings for our own fleet, just some shop visits. And that should show up, if you assume if that $120 million is amortized over three or four years, that's $30 million to $40 million a year there.

Robert Salmon -- Wolfe Research -- Analyst

Yeah. And clearly, you wouldn't have to get much of it back to the customer, which just means you're also going to be able to buy additional engine and improve the returns.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Right. I mean, that's -- that was one of the revelations when we talk 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 affected. But if you're leasing engines, which is what we do, nobody who leases an engine cares if there's PMA in the engine, they care if it's reliable, and it's got hours and cycles on it. So there's no discount, given on lease rate. So we have the ability to effectively keep that savings for ourselves.

Robert Salmon -- Wolfe Research -- Analyst

Got it. I guess -- but before I turn it over to someone else. Joe, can you give us -- clearly, there's a lot of opportunities at Jefferson, you've announced six pipelines. One you've already using to move, there's another that's going to be -- that you'd kind of put kind of some throughput around on a barrel per day. How should I think about the remaining four? And how quickly are you expecting those to be consumed to Exxon, as we're thinking about the Jefferson EBITDA that you had quoted for the year?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Well, I think that the opportunities are multiple. As I mentioned, we have a discussion ongoing about using a couple of those pipes for crude. So inbound crude into the Exxon refineries is an opportunity that we're talking about, and then refined products as well. So, for the balance, I would hope that we would be utilizing probably two or three of those this year.

Robert Salmon -- Wolfe Research -- Analyst

Got it. Appreciate the color.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question comes from Greg Lewis with BTIG.

Gregory Lewis -- BTIG -- Analyst

Yes, hi. Thank you, and good morning, everybody. I guess, I just had a couple quick ones. One, as we think about the pipeline in aviation, as you talked about, as I think about those LOIs. And, I guess, I can kind of back into it as I think about earnings guide ramp, but -- like is there any way to kind of think about, is it kind of like parceling out that maybe in first half versus second half versus longer, like, how we should think about the -- some of that burning into investment?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yeah. I expect very little in Q1. So, it's really is going off of a balance for the year and I would say Q3 and Q4 will be higher than Q2.

Gregory Lewis -- BTIG -- Analyst

Perfect. Okay. Thank you. And then just real quick, on the -- you touched a lot about potential opportunities on the infrastructure side, it seems like you're looking a lot at renewable gas and you mentioned bio diesel. As we think about that, are these projects something that are -- I'm realizing that they're in development stage, are these more like smaller scale pilot projects, where we're proving our concepts [Technical Issues] that was concepts that, hey, there's -- once we decide to FID we can move forward with these things maybe later this year or even next year?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, I would -- I mean, there's one that's potentially larger than the rest, but I think most of them are relatively small scale initially to develop the products and the economics are pretty attractive. So, it's not really doing something that's below market in terms of returns. But I think initially the scale of most of these is pretty small with the goal that if you prove it out, then you can expand it.

Gregory Lewis -- BTIG -- Analyst

Okay. And I'm assuming that there's going to be partners in all of these?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes. I would think that's a good assumption.

Gregory Lewis -- BTIG -- Analyst

Okay.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yeah.

Gregory Lewis -- BTIG -- Analyst

Okay. Thanks. Thank you very much for the time, guys. Have a great day.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Thanks.

Operator

Your next question comes from Frank Galanti with Stifel.

Frank Galanti -- Stifel -- Analyst

Yeah. Thanks for taking my question. So, I wanted to ask about the managing other airline engines. First, does that $50 million EBITDA contribution from Chromalloy or Lockheed include managing other people's engines?

And then, I guess, you'd mentioned when somebody leases an engine, right, they don't care if PMA parts are in there, but airlines will have to own those parts. So, I guess, the question is around -- how does a transaction like that actually work? Do they -- will they care of that PMA parts in it if they own it? And then what are the economics around that from an FTAI perspective?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

So, no, I mean, airlines will be putting PMA and have been for years, PMA into their own engines. It's a sort of a misnomer that there's some residual value factors in it [Phonetic]. But airlines buy PMA directly today. They buy a lot of PMA from HEICO. They buy from Chromalloy. So there's PMA, all the major airlines, particularly ones that operate their own shop use PMA. So, it is already an airline, that's purchased the first product. So, there's no concern there with most airlines. If you stick with a OEM program, then you won't be using PMA. But that's a sort of a decision that each airline makes. But you don't need a lot of market share and PMA to make the math work. And so, it can be peaceful coexistence. And that if your goal is to have 10% market share, the OEM, by definition, still has 90% and it's not material.

There is some assumption on -- in the $50 million that we have an airline that we can manage their fleets and we have several proposals out right now. It's -- I would say, for this year, it should be a small contributor to that number. But the goal is to make that a big contributor. And when we have any particular win on that we'll certainly communicate that, but I think that the -- we have a framework and we have initiatives, and we have a good dialogue going on that front. So, I'm hopeful.

Frank Galanti -- Stifel -- Analyst

Okay. That's super helpful. And then, I guess, the second question I have, and this might be a little bit of an inside baseball. But you -- around the engine utilization assumptions, you said 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%, 80% assuming that people will actually use the engines when they lease them?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Yes, yes. So, it's not an assumption that it's on-lease, but sitting in a warehouse, it's actually flying.

Frank Galanti -- Stifel -- Analyst

Okay. That makes a lot of sense. And then, I guess, a smaller question, on the Jefferson pipelines, you have the -- can give us the capacity of those pipes? As I think in the press release, it said 168,000 for one for diesel, 150,000 for another for gasoline, and there should be four additional pipes going to Exxon, one to Motiva, one to Cushing. What are those capacities?

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

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 pay line [Phonetic] initially is 40,000 barrels a day but it can be expanded up to 60,000. And then the six pipe stacks on a varying capacities but if you assume the 150,000 barrels a day for each one of them that was -- it's pretty close. So, 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 -- Stifel -- Analyst

Okay. Great. Super helpful. Thanks so much.

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Which is a lot of capacity.

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 -- Investor Relations

Thank you, Cindy, and thank you all for participating in today's conference call. We look forward to updating you after Q1.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Alan Andreini -- Investor Relations

Joseph P. Adams -- Chairman of the Board and Chief Executive Officer

Scott Christopher -- Chief Financial Officer

Josh Sullivan -- Benchmark & Company -- Analyst

Guiliano Bologna -- Compass Point -- Analyst

James -- Citi -- Analyst

Chris Wetherbee -- Citi -- Analyst

Justin Long -- Stephens -- Analyst

Devin Ryan -- JMP Securities -- Analyst

Ariel Rosa -- Bank of America -- Analyst

Brandon Oglenski -- Barclays Capital -- Analyst

Robert Salmon -- Wolfe Research -- Analyst

Gregory Lewis -- BTIG -- Analyst

Frank Galanti -- Stifel -- Analyst

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