AAR (NYSE:AIR) reported record quarterly sales and stronger adjusted earnings for its fiscal 2026 fourth quarter, with management citing continued demand across aviation parts, repair and software offerings and progress integrating recent acquisitions.
Chairman, President and Chief Executive Officer John Holmes said the company’s “connected platform approach to parts, repair, and software” helped drive higher growth and profitability in the period. For the quarter, AAR posted total sales of $928 million, up 26% from a year earlier, including 13% organic growth. Adjusted EBITDA rose 27% to $116 million, while adjusted diluted earnings per share increased 32% to $1.53.
“Our momentum continued with another strong set of results in the quarter,” Holmes said.
Full-year results reach records
For fiscal 2026, AAR said adjusted sales increased 20% to $3.3 billion, including 14% organic adjusted sales growth. Adjusted EBITDA grew 24%, while adjusted EBITDA margin rose 30 basis points to 12.1%, or 12.7% excluding the company’s Legacy Commercial Programs segment. Adjusted EPS rose 29% to $5.05, which Holmes said marked the company’s fifth consecutive year of mid-teens or greater adjusted EPS growth.
Holmes said the company completed four acquisitions during fiscal 2026 and has been working through integrations involving site consolidation, workforce repositioning and customer coordination. He also said AAR has completed and integrated six acquisitions over the last several years while building new airframe capacity and exiting activities that have become non-core.
The company generated $58 million in adjusted cash from operating activities during the fourth quarter and $94 million for the full year. Chief Financial Officer Dylan Wolin said AAR improved accounts receivable days and inventory turns both year over year and sequentially. Net leverage declined to 2.03 times net debt to adjusted EBITDA at quarter-end from 2.17 times at the end of the third quarter, despite funding the acquisition of Aircraft Reconfig Technologies during the period.
Parts Supply leads sales growth
In Parts Supply, fourth-quarter sales increased 39% year over year to $424 million. Wolin said new parts distribution grew 19% organically, excluding the impact of the ADI acquisition. Commercial distribution grew 28% organically, while government distribution rose 7% organically despite a strong year-earlier comparison.
Adjusted EBITDA in Parts Supply increased 18% to $61.7 million. Segment adjusted EBITDA margin declined 250 basis points to 14.6%, which Wolin said was primarily driven by a $6.5 million one-time gain in used parts activities in the prior-year quarter.
During the question-and-answer portion of the call, Holmes said commercial distribution demand has been “relatively consistent” and strong in recent quarters. He said growth in distribution has been roughly split between higher sales from existing agreements and ramping new agreements, with a smaller contribution from price increases.
Holmes also said AAR signed an exclusive distribution agreement with Woodward to provide high-demand parts for LEAP, GEnx and CF34 engines, expanding an existing relationship that began in defense distribution into commercial distribution.
Repair, software and government programs show mixed trends
Repair, Engineering and Software sales rose 35% to $314 million. Wolin said the increase was driven by the HAECO Americas acquisition, record growth in component MRO activity, higher volumes at airframe MRO facilities and growth in recurring revenue at Trax. Adjusted EBITDA rose 29% to $36 million, while segment adjusted EBITDA margin declined 50 basis points to 11.5%.
Wolin said HAECO Americas integration costs reduced segment adjusted EBITDA margin by about 130 basis points in the quarter, an improvement from the third quarter. He said certain component MRO costs that are not expected to continue also affected margins by about 90 basis points.
Holmes said the HAECO Americas integration is ahead of schedule and that the acquisition is expected to reach margins consistent with AAR’s other airframe MRO sites in the second half of fiscal 2027. He said the company is largely through right-sizing the acquired facilities and expects to complete the shift of work from Indianapolis to Greensboro by the end of the calendar year.
Government Solutions sales declined 8% year over year to $130 million, reflecting reduced activity on the WASP program supporting the U.S. Department of State. Adjusted EBITDA increased 58% to $20.8 million, and margin expanded 670 basis points to 16.0%. Wolin said the company partially offset the WASP decline with expansion of other government programs and strong pallet sales in its Mobility Systems operation.
AAR also received a $305 million follow-on contract with the U.S. Navy and Marine Corps to provide contractor logistics support for the C-40 fleet.
Software initiatives gain attention
Holmes said Trax continues to expand its relationship with Delta Air Lines and has reached phase 2 of implementation, with more than 10,000 Delta professionals using the platform. AAR also launched Airvoyant, an AI-driven procurement solution for airlines and MROs, in April. Holmes said the product is entering beta testing with launch partners and has generated broad interest.
During the Q&A, Holmes said airlines have not questioned the need for Airvoyant and are instead asking for additional capabilities. He said the platform is intended to help airlines use AI to source from the broader market and is not designed as an AAR-only product.
Holmes also highlighted AeroStrat, a long-range heavy maintenance planning tool acquired in fiscal 2026, saying it has exceeded the company’s expectations. In response to an analyst question, he said AAR has a clear path to grow Trax from $50 million in sales to $100 million, with a longer-term opportunity to reach $200 million across software offerings. He said margins could expand as the software business scales.
AAR guides for continued growth in fiscal 2027
Looking ahead, Holmes said demand remains strong across AAR’s portfolio. He cited resilient commercial passenger volumes, elevated aircraft fleet age, strong parts order volume, largely full airframe MRO facilities, increasing component MRO demand and momentum across Trax, AeroStrat and Airvoyant.
For the first quarter of fiscal 2027, AAR expects total sales growth, excluding Legacy Commercial Programs, of 21% to 23%. The company expects first-quarter adjusted EBITDA margin of 12.25% to 12.75%, also excluding Legacy Commercial Programs.
For fiscal 2027, AAR expects total sales excluding Legacy Commercial Programs to grow in the low double digits to low teens. Holmes said the Legacy Commercial Programs business is expected to wind down ratably over the next three to four years, though the timing could shift depending on how quickly the company exits inventory positions and customer contracts.
Holmes said the fiscal 2027 outlook supports the three-year revenue growth targets AAR presented at its investor day, adding that management is confident in its ability to meet or exceed those targets.
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.
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