AerSale Corporation is a leading provider of aftermarket commercial aircraft and engine parts, servicing airlines, leasing companies, manufacturers, and maintenance providers worldwide. With a rich history spanning over a decade, the company has established itself as a trusted partner in the aviation industry, navigating through both periods of growth and market volatility.

Company Background and History

AerSale was founded in 2008 by Nicolas Finazzo and Robert B. Nichols, who envisioned a platform to serve the aviation aftermarket. In 2010, the company partnered with private equity firm Leonard Green Partners, L.P. to scale its business and finance the creation of a purpose-built and fully integrated aviation company. Since its inception, AerSale has expanded its global footprint and built a scalable platform for growth, comprising two reporting segments: Asset Management Solutions and Technical Operations (TechOps).

Over the years, AerSale has completed several strategic acquisitions to expand its capabilities, including Great Southwest Aviation, Aero Mechanical Industries, the Goodyear Maintenance Facility, Avborne Accessory Group, Qwest Air Parts, Q2 Aviation, and Aircraft Composite Technologies. These acquisitions have allowed the company to build out its MRO facilities, component repair capabilities, and engineered solutions offerings, further strengthening its position in the market.

Business Segments

The Asset Management Solutions segment focuses on monetizing mid-life commercial aircraft and engines, extracting value through leasing, trading, or disassembling for used serviceable material (USM) parts sales. This business model allows AerSale to maximize the financial returns on its Flight Equipment by cost-effectively placing such assets in the secondary market for the balance of their operating life and, upon retirement from service, extracting their greatest residual value by disassembling them for reuse as USM.

In 2024, the Asset Management Solutions segment generated $215.47 million in revenue, accounting for 62% of the company's total revenue. This segment's revenue was relatively flat compared to 2023, with a 0.10% increase. Within Asset Management Solutions, revenue from USM sales was $83.17 million, while whole asset sales generated $110.15 million. Leasing revenue for this segment was $22.15 million. The segment's gross profit margin improved to 34.8% for Aircraft and 39.1% for Engines, primarily due to higher margins on USM sales and Flight Equipment sales.

The TechOps segment, on the other hand, provides comprehensive maintenance, repair, and overhaul (MRO) services for aircraft and their individual components. Through its network of FAA-certified repair stations, AerSale offers a wide range of services, including airframe maintenance, structural modification, conversions, flight system upgrades, and component-level MRO for hydraulics, composites, pneumatics, and more. The company's engineering team also develops advanced technical repairs, modifications, and products, branded as Engineered Solutions, which are approved by the FAA through Supplemental Type Certificates (STCs).

In 2024, the TechOps segment generated $129.60 million in revenue, accounting for 38% of the company's total revenue, an increase of 8.6% compared to 2023. Revenue from MRO services was $107.97 million, while product sales, including Engineered Solutions, were $21.63 million. The segment's gross profit margin decreased to 16.6% in 2024, compared to 20.8% in 2023, due to lower margins on MRO services as a result of facility expansion projects, partially offset by higher margins on product sales.

Financials

AerSale's financial performance has been mixed in recent years, reflecting the cyclical nature of the aviation industry. In the fiscal year 2024, the company reported revenue of $345.1 million, representing a 3.2% increase compared to the prior year. Excluding whole asset sales, which can be volatile on a quarterly basis, revenue for the full year increased by 18.7%, driven by stronger USM volume, robust demand for MRO services, and an expanded lease pool. Full-year adjusted EBITDA rose to $33.4 million from $12.3 million in the previous year, attributable to higher volume, a favorable sales mix, and better cost controls, partially offset by lower whole asset sales.

For the fiscal year 2024, AerSale reported annual net income of $5.85 million. In the fourth quarter of 2024, the company achieved revenue of $94.74 million, representing a year-over-year growth of 0.32%. The quarterly net income for Q4 2024 was $6.33 million. The revenue increase in Q4 was primarily driven by higher USM sales and increased leasing revenue, partially offset by lower whole asset sales compared to Q4 2023.

Liquidity

The company's balance sheet remains strong, with $142.8 million in liquidity as of the end of 2024, consisting of $4.7 million in cash and $138.1 million in available capacity under its $180 million revolving credit facility, which can be expanded to $200 million. AerSale's net debt position stood at $31.69 million as of the same period, providing the company with ample financial flexibility to execute its growth strategies.

AerSale's financial health is further evidenced by its debt-to-equity ratio of 0.08, indicating a low level of leverage. The company's current ratio and quick ratio both stand at 3.79, suggesting strong short-term liquidity and the ability to meet its short-term obligations.

Market Challenges and Opportunities

One of the key challenges facing AerSale in recent years has been the tight feedstock market, primarily due to ongoing production issues at Boeing and Airbus, as well as engine and FAA-related challenges that have prevented the original equipment manufacturers (OEMs) from delivering new aircraft at a higher rate. This has resulted in a constrained supply of older aircraft and engines available for retirement and disassembly, which are crucial to AerSale's USM parts business.

Despite these market headwinds, the company has maintained a disciplined approach to acquisitions, prioritizing deals that align with its multidimensional, fully integrated value extraction strategy. In the fourth quarter of 2024, AerSale's win rate for feedstock acquisitions was 17.2%, surpassing its long-term average of 10%, demonstrating the company's ability to extract value from assets that require significant work.

Expansion and Growth Initiatives

Another area of focus for AerSale has been the expansion of its MRO capabilities and the growth of its Engineered Solutions business. The company has made progress on its facility expansion projects, although continued construction delays at its pneumatics and Miami Aerostructures facilities have pushed the opening dates to the second quarter of 2025. Once these facilities become operational, AerSale anticipates incremental revenue growth, with the potential to achieve $50 million in additional annualized revenue at full capacity.

In the Engineered Solutions segment, AerSale has seen a growing backlog for its AerSafe product line, which provides a solution for compliance with an FAA airworthiness directive concerning aircraft fuel quantity indication systems. The company expects quarterly revenue from this program to increase as the November 2026 compliance deadline approaches and more aircraft undergo routine maintenance.

Future Outlook

Looking ahead, AerSale is well-positioned to capitalize on favorable market conditions in 2025. The company expects to grow both its top and bottom lines compared to 2024, driven by multiple revenue streams, including an expanded lease pool, the monetization of its remaining 757 freighter aircraft, increased MRO revenue from facility expansions, and strong performance from the AerSafe product line.

Specifically, AerSale anticipates the following contributors to its top line in 2025:

1. Expanding the lease pool, which saw significant progress in 2024, ending the year with 17 engines and 1 757 freighter aircraft on lease.
2. Monetizing the remaining 757 freighter aircraft, with 6 additional aircraft available.
3. Generating additional MRO revenue from facility expansions and growth of the customer base at the Goodyear facility.
4. Anticipating strong performance for the AerSafe product in 2025 and 2026 as customers achieve compliance with the November 2026 FAA deadline.

Furthermore, AerSale has implemented an efficiency program aimed at optimizing its operations, which is expected to save the company $10.4 million annually, with the savings accumulating throughout 2025 based on demand. This is in addition to the $10 million saved in 2024. These cost-saving measures, combined with the company's diverse revenue streams and strengthened financial position, suggest a promising outlook for AerSale's future performance.

Overall, AerSale has demonstrated its ability to navigate the challenges of the aviation industry, leveraging its diverse business model, technical expertise, and disciplined approach to acquisitions. As the company continues to invest in its MRO capabilities, expand its lease pool, and capitalize on regulatory compliance opportunities, it appears well-positioned to deliver long-term value for its shareholders.

The company operates in the highly competitive aviation aftermarket, providing a variety of products and services to airlines, leasing companies, manufacturers, and MRO providers. While AerSale primarily serves the US market as a small-cap company, it has established a global platform and continues to invest in expanding its capabilities, such as facility expansions and new engineered solutions offerings. Notably, there have been no major scandals, short seller reports, or CEO departures reported, further underlining the company's stability and focus on sustainable growth.