Aviation MRO & Aftermarket

# Executive Summary The Aviation Maintenance, Repair, and Overhaul (MRO) and Aftermarket industry is currently experiencing unprecedented demand, driven by a structural "aircraft deficit" where aging fleets are flying longer due to multi-year delays in new aircraft production. This robust demand is significantly constrained by severe operational bottlenecks, primarily a shortage of MRO capacity, especially for engines, and persistent supply chain disruptions, leading to extended turnaround times and rising costs. A chronic shortage of skilled technicians further exacerbates capacity issues and drives labor cost inflation, compelling companies to invest in new training paradigms. The industry is bifurcating, with some companies investing heavily to expand capacity and capabilities, while others develop innovative, capital-light solutions to bypass bottlenecks. Digital transformation, leveraging AI and predictive maintenance, is emerging as a key long-term opportunity to improve efficiency, expand margins, and mitigate labor shortages. This dynamic environment is also ripe for consolidation, with strategically active players acquiring specialized capabilities to broaden their portfolios. ## Key Trends & Outlook The Aviation MRO & Aftermarket industry is defined by a powerful, long-term demand wave from an aging global fleet, but this is severely constrained by immediate shortages in MRO capacity, parts, and labor, creating a clear divergence between companies that can navigate these bottlenecks and those that cannot. The Aviation MRO & Aftermarket is experiencing a period of structurally robust demand, primarily fueled by the confluence of an aging global fleet and significant, ongoing production delays at major OEMs. Airlines are extending the economic life of workhorse aircraft like the 737NG and A320ceo to 30 years, up from a previous assumption of 25 years, creating incremental waves of heavy maintenance demand. This trend is amplified by a backlog of over 17,000 new aircraft orders and persistent delivery delays from manufacturers like Boeing and Airbus, forcing older planes to fill the capacity gap. This dynamic structurally increases the total addressable market for engine overhauls, component repairs, and used serviceable material (USM). This tailwind is not a short-term cycle but a decade-long opportunity for the entire aftermarket value chain, benefiting OEMs like GE Aerospace, which derives approximately 70% of its revenue from services, as well as independent specialists. Severe operational bottlenecks are preventing the industry from fully capitalizing on this demand. The most acute constraint is a lack of MRO capacity, particularly for high-demand engines, where wait times for modern engine repairs have surged by as much as 150%. This is compounded by persistent supply chain fragility for key parts and raw materials, which inflates costs, pressures working capital, and extends aircraft-on-ground situations. Companies are responding by aggressively investing in new facilities and capabilities, as evidenced by StandardAero's investment in its CFM56 Center of Excellence and GE Aerospace's commitment of over $1 billion in MRO and component repair facilities over the next five years, including a 40% expansion of LEAP aftermarket capacity in 2024. The primary opportunity lies in leveraging technology to mitigate these constraints; companies deploying AI and predictive analytics, such as GE Aerospace's AI-enabled Blade Inspection Tool that reduces inspection time by approximately 50%, can significantly improve throughput and gain a competitive edge. Conversely, the most significant near-term risk is the persistent shortage of skilled labor, which caps growth, inflates wages, and threatens the ability of MRO providers like AAR Corp to staff their expanding facilities. ## Competitive Landscape The Aviation MRO & Aftermarket landscape is a dynamic ecosystem where large OEMs, independent service providers, and niche specialists compete and partner, all while navigating an ongoing trend of consolidation. Original Equipment Manufacturers (OEMs) like GE Aerospace aim to control the aftermarket for their products by leveraging their intellectual property, original design, and massive installed bases. Their core strategy involves utilizing unmatched technical knowledge, control over replacement parts and repair procedures, and the ability to offer integrated "power-by-the-hour" service packages. GE Aerospace, with services accounting for approximately 70% of its revenue, exemplifies this model, using its deep engine expertise and global network to be the default service provider for its platforms, investing heavily in its own MRO capacity to support new engines like the LEAP. In contrast, large independent full-service providers compete with OEMs by offering a broader range of MRO services across multiple platforms, including airframe, engine, and components, often with greater flexibility and at a lower cost. StandardAero, as the world's largest independent provider of aerospace engine aftermarket services, competes by building "Centers of Excellence" for popular engines such as the CFM56 and investing in capacity to service platforms from multiple OEMs, positioning itself as a comprehensive alternative. A third strategic approach is adopted by alternative parts and niche specialists, who target specific, high-margin segments of the aftermarket. These companies provide alternatives to expensive new OEM parts, such as Parts Manufacturer Approval (PMA) parts or Used Serviceable Material (USM), or create innovative service models for specific assets. HEICO Corporation focuses on the PMA model, leveraging its regulatory expertise to engineer and certify lower-cost replacement parts. FTAI Aviation Ltd. specializes in the CFM56 and V2500 engine aftermarket, utilizing its proprietary Maintenance, Repair, and Exchange (MRE) model and asset ownership to provide unique, value-added solutions that minimize downtime for airlines. ## Financial Performance Revenue growth across the Aviation MRO & Aftermarket sector is broadly robust, with the fastest growth observed in companies with direct exposure to the most in-demand aftermarket segments. This strong growth, ranging from approximately +10% to over +40% year-over-year, is a direct result of the primary demand driver: aging fleets and delayed new aircraft deliveries. Companies with specialized, high-demand offerings are capturing outsized growth as airlines scramble for parts and service slots. FTAI Aviation's revenue growth of +43.2% year-over-year in Q3-25 exemplifies the hyper-growth in the mature engine segment, while StandardAero's +20.4% year-over-year revenue growth in Q3-25 represents the strong performance of the broader independent MRO market. {{chart_0}} Profitability demonstrates a clear divergence based on business model and pricing power. While revenue is strong across the board, profitability is highest for companies with proprietary products and less exposure to labor and parts inflation. The key differentiators are pricing power and cost structure. Parts specialists like HEICO Corporation command premium margins due to their proprietary, FAA-approved products. In contrast, MRO service providers such as StandardAero, which reported an Adjusted EBITDA margin of 13.1% in Q3-25, face more direct pressure from labor inflation and supply chain costs, which can compress margins despite strong revenue performance. {{chart_1}} Capital allocation in the industry shows a clear split between investing in capacity to alleviate bottlenecks and strategic mergers and acquisitions (M&A) to acquire new capabilities. Companies are deploying capital to address the most pressing market needs. The capacity crunch is forcing organic investment in facilities and capabilities, as demonstrated by GE Aerospace's investment of over $1 billion in MRO facilities. Meanwhile, the fragmented nature of the parts and repair market makes M&A an attractive growth vector, exemplified by HEICO Corporation's consistent, bolt-on acquisition strategy, including Wencor and Gables Engineering. Balance sheets across the industry are generally strong, supported by robust cash flow generated from the powerful demand environment. This healthy cash flow allows companies to fund growth initiatives, both organic and through M&A, and to manage debt effectively. However, supply chain issues can pressure working capital, requiring higher investment in inventory, as noted by Woodward, Inc.'s mention of increased working capital investment in inventory impacting free cash flow guidance. {{chart_2}}