AAR (NYSE:AIR) reported fiscal third-quarter 2026 results that management described as “another outstanding quarter,” citing broad-based growth across commercial and government end markets and continued progress on strategic initiatives spanning parts distribution, maintenance operations, and its Trax software platform.
Quarterly growth driven by parts, repair, and software momentum
Chairman, President, and CEO John Holmes said the company delivered 25% growth in total sales, 31% growth in adjusted operating income, and 26% growth in both adjusted EBITDA and adjusted earnings per share. The total sales increase included 14% organic adjusted sales growth, led by 36% organic growth in new parts distribution activities.
Management comments on the operating environment and demand signals
Holmes said AAR is closely monitoring events in the Middle East and has remained in contact with customers. He noted that, according to customer feedback, “fundamental demand for air travel remains strong,” with bookings at record levels even after the start of the conflict, and that AAR is not anticipating a meaningful impact to maintenance schedules or parts needs at this time.
On the government side, Holmes pointed to increased operational readiness needs in the U.S. military. He said government customers comprise roughly 30% of AAR’s sales and span all segments, and he cited a 19% increase in government sales during the quarter as a contributor to results.
In the Q&A, Holmes said modest airline capacity adjustments have not meaningfully affected maintenance or parts demand and that customers are planning for a “very, very busy summer,” even while assuming elevated fuel prices. He added that AAR believes its service and quality positioning could help it retain priority with customers in a weaker demand scenario.
Financial results: sales up 25% with margin improvement despite HAECO dilution
CFO Dylan Wolin said total sales rose 25% year-over-year to $845 million, including 14% organic adjusted sales growth. Commercial sales increased 27% and government sales increased 19%. AAR’s sales mix was 73% commercial and 27% government for the quarter.
Adjusted EBITDA increased 26% to $102.1 million, with adjusted EBITDA margin of 12.1% compared with 12.0% a year earlier. Adjusted operating income rose 31% to $86.2 million, and adjusted operating margin improved 50 basis points to 10.2%.
Wolin said margin improvement was driven by parts supply and integrated solutions—including Trax and government programs—despite “expected short-term” margin pressure related to the HAECO Americas acquisition. Excluding HAECO Americas, he said adjusted EBITDA margin would have been 70 basis points higher, or 12.8%.
Adjusted diluted EPS increased 26% to $1.25 per share. Wolin also noted the company recorded a gain related to purchase accounting for the HAECO Americas acquisition, describing it as a bargain purchase gain that is excluded from adjusted results.
Segment performance: parts supply leads; repair margins pressured by integration actions
- Parts Supply: Sales increased 45% to $392.5 million. New parts distribution grew 62% in total and 36% organically (excluding ADI). Commercial sales rose 36% and government sales rose 86%, driven by 55% organic growth in government distribution sales. Adjusted EBITDA increased 59% to $59 million, and adjusted EBITDA margin expanded 130 basis points to 14.9%. Adjusted operating income rose 56% to $53.6 million, and adjusted operating margin increased 100 basis points to 13.7%. Wolin said margin strength reflected performance in the existing business and contributions from ADI.
- Repair & Engineering: Sales rose 23% to $265 million, driven by existing hangar operations, component repair shop growth, and the year-over-year impact of HAECO Americas. Segment margins declined as AAR rightsizes HAECO’s revenue base, adjusts costs, and improves processes, and due to the transition of work out of the Indianapolis facility. Adjusted EBITDA margin fell 190 basis points to 11.0%, and adjusted operating margin declined 150 basis points to 9.6%. Wolin said the quarter should represent the “low point” for margin impact, with sequential improvement expected going forward.
- Integrated Solutions: Sales increased 3% to $167.8 million, driven by Trax and government programs. Adjusted EBITDA rose 18% to $19 million, with adjusted EBITDA margin up 150 basis points to 11.4%. Adjusted operating income increased 25% to $15.5 million, and adjusted operating margin improved to 9.2% from 7.6%. Management attributed the margin gains to mix shift toward higher-margin government contracts and growth and higher margins at Trax.
Updates on ADI, Trax, HAECO integration, and balance sheet
Holmes said ADI is performing above expectations and that AAR continues to drive “outsized growth” in new parts distribution. In response to an analyst question, he said about two-thirds of new parts distribution growth came from same-store sales tied to existing contracts, with the remaining third mostly from new contract wins.
On Trax, Holmes said the platform delivered another record quarter, supported by new customers and existing customer upgrades. He also said Trax’s agreement with Delta continues to ramp, with the platform deployed to more than 2,000 users and expected to exceed 6,000 users in the coming months. In the Q&A, Holmes characterized the Delta implementation as a roughly three-year effort, with about one year completed. He said the first phase involves deploying an initial module broadly, while phases II and III will add functionality and drive a “material ramp-up” in activity and revenue beginning a few months from now and extending over “six or seven quarters.” He added that AAR expects to launch Trax’s parts marketplace this calendar year.
Regarding HAECO, Holmes said integration is ahead of schedule and that AAR expects full integration to be completed earlier within the previously provided 12- to 18-month window. He described actions underway to exit unprofitable work, resize the workforce to the new revenue base, transition work out of the Indianapolis facility (with much of it expected to move to the Greensboro site), and ultimately deploy AAR’s paperless systems across the HAECO facilities.
On cash flow and leverage, Wolin said AAR generated $75 million in operating cash flow during the quarter. Net leverage declined to 2.17x net debt to adjusted EBITDA, within the company’s stated 2.0x to 2.5x target range. Holmes said the company is planning to be cash flow positive in the fourth quarter and for the full fiscal year.
Holmes also noted AAR’s expeditionary services business was awarded a $450 million multiyear government contract to provide specialized pallets to forward-deployed military units, citing increased overseas operational tempo.
Looking ahead, AAR guided for fourth-quarter total adjusted sales growth of 19% to 21%, with organic adjusted sales growth of 6% to 8% as the company laps a strong prior-year quarter. The outlook excludes the divestiture of Landing Gear and the impact of fiscal 2026 acquisitions. Management expects fourth-quarter operating margin of 10.2% to 10.5% and said the fourth-quarter outlook improved versus what was implied in prior guidance. For the full year, AAR raised its expectations to approximately 19% total sales growth and approximately 12% organic sales growth.
The company also announced plans to host an investor day on May 12 in New York City, where it intends to discuss its strategic vision and positioning as an independent aviation aftermarket provider.
About AAR (NYSE:AIR)
AAR Corp. (NYSE: AIR) is a global provider of aviation products and services to commercial, government and defense customers. The company offers a comprehensive portfolio of maintenance, repair and overhaul (MRO) solutions, component repair and overhaul, and engineering services designed to support a wide variety of fixed-wing and rotary aircraft. Leveraging FAA and EASA certifications, AAR delivers turnkey maintenance programs and ad hoc repair services that enhance aircraft availability and reliability.
In its Aviation Supply Chain Services segment, AAR sources, stores and distributes parts for both commercial airlines and military operators.
