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AIR

AAR CORP., NYSE ticker AIR, CIK 0000001750, Delaware incorporation, USD reporting currency, Wood Dale, Illinois headquarters, and a May 31 fiscal year-end are verified against the FY2026 Form 10-K and official AAR investor materials.

AAR Corp.

AAR is the largest independent (non-OEM, non-airline) aviation aftermarket platform in North America, capturing aircraft-aftermarket scarcity directly through parts distribution (new OEM plus used serviceable material) and airframe/component maintenance, repair and overhaul (MRO). Roughly 80% of record FY2026 sales of $3.3 billion (up about 19% year over year) came from the Parts Supply and Repair, Engineering & Software segments, supported by a $777 million firm backlog and expanding OEM distribution and repair capacity. FY2026 set records (adjusted diluted EPS $5.05, up 29%; adjusted EBITDA $401.1 million, up 24%). The case is evidence-grounded but conditional on continued air-traffic and fleet strength, sustained used-serviceable-material feedstock access, and deleveraging after the HAECO Americas acquisition.

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Reviewed company research · researched 2026-07-29 · not an individual investment recommendation
Listing
public
Ticker
AIR
Exchange
NYSE
HQ
United States
Currency
USD
SEC CIK
0000001750
Investment case

How this company captures the theme economics

Competitive position

AAR describes itself as the leading independent provider of aviation aftermarket parts, repairs and software and the number-one MRO provider in North America. It competes against OEM service divisions (which the filing notes have substantially greater financial resources), airlines' in-house MRO operations and independent suppliers; its stated edge is an integrated, connected model spanning parts, repair and software, breadth of certificated repair capacity, and responsiveness to customer needs.

Scarce assets

Hard-to-replicate assets include roughly 15 FAA-certificated repair stations across the U.S., Canada, Asia and Europe; authorized distribution rights for 30-plus OEM product lines plus exclusive distribution arrangements; a skilled certificated workforce of about 7,100 employees and 700 contract workers; specialized MRO hangar and component facilities; proprietary aftermarket software (Trax, Aerostrat, Airvoyant, Airinmar); and established relationships for sourcing used serviceable material from operators, lessors and trading companies. Certification, OEM authorizations and hangar capacity are the principal bottlenecks that protect the franchise.

Products, segments, and customers

Four FY2026 segments: Parts Supply ($1,487.7M sales) distributes new OEM parts and used serviceable material across 30-plus authorized product lines; Repair, Engineering & Software ($1,080.8M) provides airframe and component MRO plus cloud software (Trax, Aerostrat, Airvoyant); Government Solutions ($502.3M) delivers fleet management and performance-based logistics for the U.S. Department of State and Department of Defense and manufactures mobility systems; and Legacy Commercial Programs ($237.2M) runs flight-hour component pools and is being wound down over roughly three to four years. Commercial customers were 72.1% of sales and government/defense 27.9%; operations span more than 20 countries.

Theme capture

AAR sits at the aftermarket bottleneck: it aggregates scarce serviceable parts (new OEM distribution plus used serviceable material recovered from teardowns) and certificated repair capacity, then channels them to operators, lessors and governments that must keep aging fleets flying while OEM new-build and spares lead times remain extended. About 80% of sales flow through this parts-plus-MRO channel; a $777 million firm backlog and new engine-parts distribution agreements (for example a multi-year Woodford agreement covering CFM LEAP, GEnx and CF34 engine parts) extend the franchise into next-generation aftermarket demand.

Conditions

What must be true

  1. The global commercial fleet continues to age and/or expand so aftermarket parts and MRO demand stays structurally supported, and air traffic does not enter a sustained downturn.
  2. AAR retains access to used-serviceable-material feedstock and OEM distribution authorizations needed to supply the Parts Supply segment.
  3. The HAECO Americas acquisition integrates on plan and cash conversion improves enough to deleverage the balance sheet.
  4. U.S. government funding for Department of State/Defense programs (about 28% of sales) remains stable.

Identifiable catalysts

  • Completion of the Legacy Commercial Programs wind-down, improving segment mix and margins.
  • Ramp of new and expanded OEM distribution agreements, including the multi-year CFM LEAP/GEnx/CF34 engine-parts deal.
  • Continued growth in Trax and other software recurring revenue.
  • HAECO Americas integration synergies and progressive deleveraging.
  • Aging of next-generation engine fleets (LEAP/GTF) expanding used-serviceable-material teardown feedstock over time.
  • Execution against the long-term strategy outlined at the May 2026 Investor Day.
Theme materiality

1 mapped theme

Exposure statements are evidence-qualified. Materiality is only claimed where disclosure supports it.

Independent aftermarket intermediary combining new-parts and used-serviceable-material distribution with airframe/component MRO, connecting OEMs, operators, lessors and government fleets (packet role: mro and parts distribution).

Aircraft aftermarket scarcity

Direct and very high. In FY2026 the Parts Supply segment ($1,487.7M) and the Repair, Engineering & Software segment ($1,080.8M) together were roughly 80% of $3.3 billion consolidated sales, so the large majority of the business is aftermarket parts distribution and MRO, the core of the aircraft-aftermarket scarcity theme.

Evidence
Supported by issuer segment disclosure (FY2026 segment sales of $1,487.7M Parts Supply and $1,080.8M Repair, Engineering & Software), a $777 million firm backlog (management expects about 70% recognized in FY2027 and about 20% in FY2028), authorized distribution across 30-plus OEM product lines, roughly 15 FAA-certificated repair stations, a new multi-year CFM LEAP/GEnx/CF34 engine-parts distribution agreement, and disclosed reliance on sourcing used serviceable material from operators, lessors and trading companies.
Materiality
disclosed — Issuer FY2026 segment reporting explicitly names and quantifies the exposure: Parts Supply (new OEM parts plus used serviceable material) and Repair, Engineering & Software (airframe and component MRO) each carry disclosed segment-level sales, so the aftermarket exposure is disclosed rather than merely estimated.
Financial evidence

Official SEC filing evidence

Reference period: FY2026.

  • Revenue (net sales)$3.3 billion (up ~19% year over year)
    FY2026[2]
  • Gross profit$622.0 million
    FY2026[1]
  • Diluted EPS (GAAP)$4.86
    FY2026[1]
  • Operating cash flow$98.7 million
    FY2026[1]
  • Capital expenditures$36.6 million
    FY2026[1]
  • Free cash flow (derived: operating cash flow less capex)$62.1 million
    FY2026[1]
  • Cash and equivalents$84.0 million
    FY2026 year-end[1]
  • Diluted share count38.4 million shares
    FY2026[1]

Limitation: The packet's structured 10-K metric set left revenue, operating income, EBITDA, total debt, net debt, net-debt/EBITDA, interest coverage and return on invested capital flagged unavailable. Revenue here ($3.3 billion, up ~19%) is taken from AAR's fetched FY2026 results press release; adjusted operating margin (10.2%) and adjusted EBITDA ($401.1 million, 12.1% margin) are company-defined non-GAAP measures from that release. Valuation multiples (EV/EBITDA, free-cash-flow yield) are unavailable because no market-price observation was provided and licensed market data was not accessible. Free cash flow is derived (operating cash flow minus capital expenditures).

Risks

Material risks and break conditions

Material risks

  • Aftermarket demand is cyclical: sales are affected by the number, type and average age of aircraft in service and by broader air-traffic and economic conditions, so a downturn would compress Parts Supply and MRO volumes.
  • Used-serviceable-material feedstock is a constraint: AAR depends on sourcing used aircraft and engines from operators, lessors and trading companies, and newer-generation fleets can delay teardown availability and raise input costs.
  • Government-contract dependence: about 27.9% of FY2026 sales are government/defense (U.S. government $787.8M, roughly 23.8%), subject to competitive bidding, appropriations and funding risk, and termination for convenience.
  • Leverage and integration risk from the HAECO Americas acquisition, with covenant and deleveraging constraints if cash conversion stays low (FY2026 operating cash flow was only about $98.7M).
  • Competition from better-resourced OEM service divisions and potential OEM restrictions on parts distribution and repair licenses could pressure the used-serviceable-material and aftermarket channel.

Thesis-break conditions

  • A sustained decline in global air traffic or fleet utilization that drives consecutive-quarter organic sales declines in the Parts Supply and Repair, Engineering & Software segments.
  • The $777 million firm backlog failing to convert at roughly the disclosed 70% into FY2027 revenue.
  • Adjusted operating margin reversing back below about 8%, or adjusted EBITDA margin compressing materially from the FY2026 level near 12%.
  • Cash conversion staying weak so net leverage fails to decline after the HAECO Americas acquisition.
Investability conclusion

Where the evidence lands

The evidence supports a direct, disclosed and material exposure to aircraft-aftermarket scarcity: roughly 80% of record FY2026 sales sit in parts distribution and MRO, backed by a $777 million firm backlog and expanding OEM distribution and repair capacity. The thesis rests on continued fleet and air-traffic strength, sustained used-serviceable-material access, and successful HAECO Americas integration and deleveraging. Valuation cannot be assessed here because market-price data (EV/EBITDA, free-cash-flow yield) is unavailable in the packet and licensed market data was not accessible. This is an evidence assessment of exposure and its limits, not trading advice.

Next diligence

  1. Obtain the full FY2026 Form 10-K financial statements to confirm total revenue, operating income, EBITDA, total and net debt, and net-debt/EBITDA following the HAECO Americas acquisition (unavailable in the packet metric set).
  2. Quantify used-serviceable-material feedstock availability, pricing trends and next-generation (LEAP/GTF) teardown timing.
  3. Assess HAECO Americas integration progress, purchase accounting and synergy realization.
  4. Model backlog conversion (the disclosed ~70% into FY2027) and the trajectory of operating and free cash flow and cash conversion.
  5. Acquire licensed market data to compute valuation multiples and complete the balance-sheet and valuation gates.
Source ledger

Identity and evidence sources

Identity was verified against official issuer, filing, exchange, or regulator sources where available.

  1. AAR CORP. FY2026 Form 10-K (annual report, fiscal year ended May 31, 2026)U.S. Securities and Exchange Commission (EDGAR) · primary · published 2026-07-22 · accessed 2026-07-22
  2. AAR reports fourth quarter and fiscal year 2026 resultsAAR CORP. · primary · published 2026-07-21 · accessed 2026-07-29
  3. About AARAAR CORP. · primary · published n/a · accessed 2026-07-29
  4. AAR hosts 2026 Investor Day and provides updates on long-term strategy and three-year financial frameworkAAR CORP. · primary · published 2026-05-12 · accessed 2026-07-29