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    AIR
    Earnings call· Feb 2026(Q3 FY26)

    AAR Q3 FY26 earnings call AIR

    Mar 24, 2026 Source

    Executive summary

    AAR Corp. Q3 FY26 — Strong Growth Across Segments, HAECO Integration Ahead of Schedule

    AAR Corp. delivered robust Q3 FY26 results, driven by strong organic growth in parts distribution and effective integration of recent acquisitions. Despite short-term margin impacts from the HAECO Americas integration, the company's strategic focus on aftermarket solutions and balanced commercial/government exposure continues to yield positive momentum. Management remains confident in the outlook, preparing for a busy summer travel season and advancing key initiatives.

    Highlights

    5

    • Total sales grew 25% year-over-year to $845 million, including 14% organic adjusted sales growth.

    • Adjusted operating income increased 31% to $86.2 million, with adjusted operating income margin improving 50 basis points to 10.2%.

    • Parts Supply sales grew 45% to $392.5 million, with new parts distribution achieving 36% organic growth.

    • Adjusted diluted EPS was up 26% year-over-year to $1.25 per share.

    • HAECO Americas integration is ahead of schedule, with full integration expected at the earlier end of the 12-18 month window.

    Concerns

    1

    • Repair & Engineering adjusted EBITDA margin decreased 190 basis points to 11.0% due to HAECO Americas integration and the exit of the Indianapolis facility.

    Guidance & targets

    11
    CategoryTargetConfidence
    Q4 FY26 Total Adjusted Sales Growth
    19% to 21%
    high materiality
    High
    Q4 FY26 Organic Adjusted Sales Growth
    6% to 8%
    medium materiality
    High
    Q4 FY26 Operating Margin
    10.2% to 10.5%
    high materiality
    High
    Full Year FY26 Total Sales Growth
    approximately 19%
    high materiality
    High
    Full Year FY26 Organic Sales Growth
    approximately 12%
    high materiality
    High
    HAECO Americas Integration Completion
    earlier part of the 12- to 18-month window
    medium materiality
    High
    Repair & Engineering Margins (post-HAECO integration)
    return to pre-acquisition levels
    high materiality
    High
    Trax Parts Marketplace Launch
    go live
    medium materiality
    High
    Oklahoma City Hangar First Revenues
    first revenues
    low materiality
    High
    ART Acquisition Closing
    close
    medium materiality
    High
    Cash Flow
    cash flow positive
    high materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Parts Supply
    Higher margins driven by existing business performance and the addition of ADI. Adjusted EBITDA was up 59% to $59 million. Adjusted operating income rose 56% to $53.6 million.
    New parts distribution growth: 62% totalNew parts distribution organic growth: 36%Government distribution organic growth: 55%Adjusted operating margin: 13.7%
    		$392.5 million45%—Adjusted EBITDA margin 14.9%
    Repair & Engineering
    Sales growth driven by existing hangar operations, component repair shops, and HAECO Americas acquisition. Margins negatively impacted by HAECO Americas integration and transition of work out of Indianapolis facility. Adjusted EBITDA margin decreased 190 basis points, and adjusted operating margin decreased 150 basis points.
    Adjusted operating margin: 9.6%
    		$265 million23%—Adjusted EBITDA margin 11.0%
    Integrated Solutions
    Sales increased driven by Trax and government programs. Improved margins driven by mix shifts towards higher-margin contracts within government programs and growth/higher margins at Trax. Adjusted EBITDA was up 18% to $19 million. Adjusted operating income was 25% higher at $15.5 million.
    Adjusted operating margin: 9.2%
    		$167.8 million3%—Adjusted EBITDA margin 11.4%
    Commercial Customers
    Sales to commercial customers increased year-over-year.
    73% of total sales
    		—27%——
    Government Customers
    Sales to government customers increased year-over-year, benefiting from increased operational readiness.
    27% of total sales
    		—19%——

    Operational metrics

    9
    Adjusted EBITDA
    $102.1 millionup 26% year-over-year
    Q3 FY26

    Adjusted EBITDA margin increased from 12.0% a year ago.

    Adjusted Operating Income
    $86.2 millionup 31%
    Q3 FY26

    Adjusted operating income margin improved 50 basis points.

    Adjusted Diluted EPS
    $1.25up 26% year-over-year
    Q3 FY26

    Driven by strong operational performance.

    Organic Adjusted Sales Growth
    14%
    Q3 FY26

    Led by 36% organic growth in new parts distribution activity.

    Net Leverage
    2.17x
    Q3 FY26

    Comfortably within target range of 2.0x to 2.5x.

    Adjusted EBITDA Margin (excluding HAECO Americas)
    12.8%70 basis points higher
    Q3 FY26

    Excluding HAECO Americas, adjusted EBITDA margin would have been 70 basis points higher.

    Trax Business Size
    north of $50 milliondoubled since acquisition
    current

    Company was a $25 million business when acquired, now pacing north of $50 million.

    Trax Business Growth Path
    doubling again from $50 million to $100 million
    future

    Based on customer updates, upgrades, and new customers.

    Trax Delta User Deployment
    2,000 users
    current

    Deployment of basic functionality for the first module of a three-year implementation.

    Industry KPIs

    1
    MetricValueDetails
    Defense program awards$450 millionUSD

    Deals & partnerships

    3
    HAECO AmericasIntegration of acquired MRO business12- to 18-month window

    Integration is ahead of schedule, with full integration expected in the earlier part of the 12- to 18-month window. This was the most critical integration quarter, involving rightsizing revenue, adjusting cost structure, and deploying proprietary processes.

    Aircraft Reconfig Technologies (ART)Acquisition of aircraft reconfig technologies

    Acquisition of ART is expected to close in the fourth quarter.

    U.S. GovernmentMultiyear contract for specialized talents to forward deployed military units$450 millionmultiyear

    Expeditionary Services business was recently awarded a $450 million multiyear government contract to provide specialized talents to forward deployed military units as a result of increased operational tempo overseas.

    Capital programs

    2
    Oklahoma City Hangar Expansioncompleted

    Benefit: expanded hangar capacity

    Facility completed its hangar capacity expansion in the quarter and began aircraft inductions in early March. Expect first revenues from these maintenance lines in Q4 FY26.

    I Am Hangar Expansionon track

    Benefit: expanded hangar capacity

    Expected to be operational later this summer.

    Risks & headwinds

    4
    Middle East conflictcurrent

    modest capacity adjustments by customers

    Mitigation: Fundamental demand for air travel remains strong; AAR is competitively positioned as an independent value-added aftermarket solution provider.

    Elevated fuel costscurrent

    customers may make modest capacity adjustments

    Mitigation: AAR is competitively positioned as an independent value-added aftermarket solution provider, making it a compelling solution for customers looking to reduce spending.

    HAECO Americas integration margin impactQ3 FY26

    expected short-term impact on margins

    Mitigation: Actions to rightsize the revenue base, adjust the cost structure, and deploy proprietary processes are underway; sequential margin improvement is expected, with margins returning to pre-acquisition levels by Q3 FY27.

    Indianapolis facility exitinto Q4 FY27

    transition of work out of our Indianapolis facility, which is our highest cost site

    Mitigation: Transition is ongoing, and further margin improvement is expected once complete.

    What to watch in Q4 FY26

    5

    Oklahoma City Hangar Revenue

    Q4 FY26
    CurrentHangar expansion complete, inductions began early March
    TargetFirst revenues

    Why it matters

    Indicates successful ramp-up of new MRO capacity and contribution to revenue.

    Our Oklahama City facility completed its hangar capacity expansion in the quarter and began aircraft inductions in early March. We expect first revenues from these maintenance lines in our fourth quarter.

    Q&A highlights

    6

    Given current oil prices and airline capacity trimming, what is the historical context for how this impacts AAR's business, and what is the current outlook?

    Fundamental demand for air travel remains strong, with record bookings. Modest capacity adjustments by airlines are not impacting individual fleets or demand for parts/maintenance. Customers are planning for a busy summer, factoring in elevated fuel prices, which is encouraging.

    “The #1 thing is that fundamental demand for air travel remains very strong. That's what you're hearing from all of our major customers. And obviously, we're hearing that from them every time we talk. And they've continued to see record bookings even after the conflict started.”

    asked by Michael Ciarmoli · answered by John Holmes

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Execution & Market Positioning

    AAR's focused business model is driving growth in both commercial and government end markets, delivering durable results. The company is competitively positioned as an independent value-added aftermarket solution provider, which is compelling for customers looking to reduce spending, especially with elevated fuel costs. The balanced exposure to government and commercial markets, with government sales comprising 27% of total sales, provides a strategic advantage and benefits from increased operational readiness in the U.S. military.

    02

    HAECO Americas Integration Progress

    The integration of HAECO Americas is progressing ahead of schedule, with the most critical quarter now complete. Management expects the full integration process to be finalized at the earlier end of the previously provided 12-18 month window. This involves rightsizing the revenue base, adjusting the cost structure, and deploying AAR's proprietary processes, including transitioning work from the Indianapolis facility and implementing paperless systems across HAECO facilities. Despite short-term margin impacts, sequential margin improvement is anticipated, with a return to pre-acquisition levels by Q3 FY27.

    03

    Trax Software Platform Momentum

    The Trax software platform achieved another record quarter, demonstrating strong momentum in growing its base of recurring revenue through new and existing customers. The implementation with Delta is ramping up, with 2,000 users already deployed and an expected increase to over 6,000 users for basic functionality in the coming months⏳. The full Delta implementation is a three-year process across three modules, with material revenue ramp-up expected in the subsequent phases. Additionally, the Trax parts marketplace is targeted to go live within calendar year 2026.

    04

    Government & Defense Sector Growth

    Government sales increased 19% this quarter, reflecting a general need for increased operational readiness in the U.S. military. The Expeditionary Services business secured a significant $450 million multiyear government contract. This award is for providing specialized talents to forward-deployed military units, driven by an increased operational tempo overseas. This highlights the strength and strategic importance of AAR's government segment across its various activities.

    05

    Capital Allocation & Balance Sheet Health

    AAR generated a strong $75 million in cash from operating activities during the quarter, contributing to a healthy balance sheet. Net leverage decreased to 2.17x net debt to adjusted EBITDA, comfortably within the company's target range of 2.0x to 2.5x. The company maintains a disciplined approach to capital allocation and anticipates being cash flow positive for both the fourth quarter and the full fiscal year, underscoring its financial flexibility.

    AI-generated summary of the company’s earnings call. Not investment advice.