Ryan Kirby, junior partner at Alderman & Company offers and end-of-year assessment of the mid-market aviation sector and sees factors that are expected to persist into next year that bode well for mergers and acquisitions
Global commercial travel demand has remained stable while production has struggled to fully recover.
This has resulted in the commercial aviation aftermarket remaining robust despite many in the industry during COVID believing in an aftermarket taper off one or two years after the pandemic.
In this article, I’ll cover the continued commercial aviation aftermarket momentum as well as valuation indicators, potential buyer interests and platforms, and what this means for the middle-market of the aviation industry.
Airports Council International reports that 2025 global passenger traffic is estimated to reach 9.8 billion passengers, reflecting a 3.7% Year-on-Year growth from 2024.
International traffic is expected to grow 5.3% in 2025, compared to 2.4% for domestic traffic. Per the latest TSA Passenger traffic statistics, US commercial travel demand remained strong.
The TSA reported that from January to November of 2025, approximately 828 million total passengers were screened in the US, an increase of 6.9% from the same period in 2019.
2025 passenger screenings are only a ~0.3% increase from January to November of 2024. The plateau, or equilibrium, of commercial travel can primarily be attributed to economic conditions, pricing, capacity constraints, and shifting travel habits.
While travel demand remains high and stable, the production (supply side) of new aircraft is a different story.
The latest IATA Sustainability and Economics Report states that commercial jet output (production) remains well below historic norms.
“The order backlog has surpassed 17,000 aircraft, equal to almost 60% of the active fleet. Before 2019, this ratio had held steady at around 30-40%” of the active fleet at that time.
While currently engine availability seems to be the primary bottleneck for new aircraft production, there are still many issues plaguing new production.
The IATA report goes on to state that “there is a structural mismatch between production capacity and airline requirements and normalisation is unlikely before 2031 to 2034”.
These market dynamics are increasing the average age of airlines’ fleets, now up to 15.1 years from 11.1 years in 2019.
During the COVID pandemic, this supply-side constraint was expected by many to be resolved within a few years after the end of the pandemic, and, in turn, the aftermarket industry would taper off.
However, production issues, safety failures, and delivery delays have continued to plague the OEMs in new production aircraft for commercial jets.
In this continued environment of strong demand, aging fleets, and constrained supply, the commercial aircraft aftermarket continues to be robust.
After establishing compelling aerospace MRO industry dynamics, we’re now focusing on valuations and buyer interest in this sector.
At the time of writing this article, a sample of Trailing Twelve Month (TTM) Price-to-Earnings (P/E) ratios are quoted here (rounding used):
| Company | P/E |
| AAR Corp (AIR) | 103 |
| Heico Corp (HEI) | 68 |
| StandardAero Inc. (SARO) | 49 |
| TransDigm Group Inc (TDG) | 40 |
| Indices
U.S. A&D Sector Average S&P 500 Index |
38 28 |
The four publicly traded companies in the table are representative of what we are seeing in the private market, in terms of relative levels, adjusted for DLOM.
As you’ll see in the table, those publicly traded firms have higher P/E ratios than the US A&D sector average and the S&P 500 index. These higher P/E ratios likely represent investor expectations for sustained high future earnings.
What does this mean for middle-market US MRO companies? We are seeing a trickle-down effect in work, as a rising tide lifts all boats.
As middle-market A&D sell-side bankers, our clients aren’t these Tier-1s, but rather the smaller competitors, often niche players in these markets. What we see with our clients and hear from our prospects is that demand has not been this strong in decades.
In addition to seeing strong P/E ratios and hearing that MRO companies are seeing record demand, we’re also receiving a high number of financial and strategic buyer inbound inquiries for A&D MRO. The strategic buyers are specifically looking for capacity expansion and labor talent acquisition, as well as overall growth and new customers.
The financial buyers are keenly interested in A&D MRO for a few main reasons: industry dynamics and outlook are compelling, and there’s substantial recurring or predictable revenue.
Compelling industry dynamics were explained above, so this section will focus on the other two reasons for financial buyer interest we’re hearing as sell-side A&D M&A bankers.
A financial buyer ‘rolling up’ businesses is the acquisition strategy of buying a business in a fragmented market, then proceeding to acquire multiple similar businesses to grow the overall platform – much like rolling a snowball along the snow to collect and grow into a larger ball.
The Aeronautical Repair Station Association estimates there are more than 4,000 FAA certificated repair stations (Part 145s) in the US, and 80% are small business entities, proving the fragmented philosophy in the aerospace MRO sector.
While there are a handful of Private Equity owned platforms in segments of MRO, with a couple of examples including: STS Aviation Group, owned by H.I.G. Capital and Yingling Aviation, owned by AE Industrial, there’s still more consolidation potential in the years ahead.
Next, the financial buyers, with whom we regularly speak, tend to prefer recurring and predictable revenue with high-quality customers. Aerospace MRO offers this attribute.
Regulatory-driven maintenance cycles create a predictable stream of recurring revenue from the airlines.
Finally, switching costs from one MRO provider to another can be disruptive and costly to an airline, making MRO revenue ‘sticky’, a term that buyers use to refer to a business whose customers are less likely to switch suppliers over cost.
All of these factors create predictable revenue, which financial buyers find desirable.
The continued favourable momentum in the commercial aviation MRO industry is highly favorable to both the valuations of public and private companies.
As a result, in the year ahead, we expect to see an active M&A market in the MRO sector.