What’s the Idea? Capitalizing on the MRO Capacity Crunch
The aircraft engine maintenance, repair, and overhaul (MRO) market has reached a critical tipping point. An aging global fleet and persistent supply chain delays for new aircraft have shifted pricing power decisively in favor of service operators like StandardAero.
The LEAP Super-Cycle: A 40-Year Runway
StandardAero is aggressively capturing the transition to Next-Gen LEAP engines, projected to be the backbone of aviation for decades. As these engines enter their first overhaul cycles, the company’s specialized backlog has surged to $1.5 billion, up 50% from late 2024.
Strategic Capacity Expansion
To monetize record demand, StandardAero has significantly scaled its operational footprint through 2025:
- CFM56 Expansion: New facility has doubled production capacity for the world’s most widely used commercial engine.
- HTF7000 Growth: Increased specialized repair capacity by 60% to serve the booming business aviation sector.
- GE Aerospace Partnership: Secured license renewal for CF34 engines, ensuring a steady stream of overhauls through the late 2020s.
Operational Leverage in 2026
The convergence of record backlogs and newly operational facilities creates massive operational leverage. As the company moves from the investment phase to the execution phase, we expect margin expansion to outpace revenue growth, driving the stock toward our $33.80 target.
The Takeaway: StandardAero is effectively “future-proofing” its revenue. By locking in long-term licenses and expanding capacity for both legacy and next-gen engines, the company ensures high utilization and pricing power regardless of new aircraft delivery rates.
About StandardAero (SARO)
StandardAero (SARO) stands as the world’s premier independent provider of aircraft engine aftermarket services. Founded in 1911 and headquartered in Scottsdale, Arizona, the company has built a century-long legacy of technical excellence, becoming a critical infrastructure partner for the global aviation industry.
Comprehensive Service Ecosystem
StandardAero’s end-to-end solutions cover the entire lifecycle of an aircraft engine:
- Maintenance & Overhaul (MRO): Scheduled and unscheduled major repairs for turbofan, turboprop, and turboshaft engines.
- Component Refurbishment: High-precision restoration of complex engine parts using proprietary technologies.
- Global Support: A robust network of ground and mobile service teams providing rapid on-site technical assistance worldwide.
Strategic Market Position
Unlike OEM-affiliated shops, StandardAero’s independent status allows it to serve a vast array of commercial, business, and military clients with greater flexibility. By holding critical licenses from major manufacturers like GE Aerospace, Pratt & Whitney, and Rolls-Royce, the company maintains a massive competitive “moat,” ensuring high-margin recurring revenue from a growing and aging global fleet.
Reason 1: Capturing the Global MRO “Supercycle”
StandardAero is the primary beneficiary of a structural shift in aviation. As the global fleet ages and engine complexity increases, the demand for high-precision MRO (Maintenance, Repair, and Overhaul) services has entered a multi-year growth phase.
An Aging Global Fleet
Supply chain disruptions have forced airlines to fly existing aircraft longer. According to Oliver Wyman, the average age of the global fleet has climbed to 13.4 years. Older engines require deeper, more frequent overhauls, directly expanding StandardAero’s addressable market.
Market Dynamics & Growth Drivers
- Increased Complexity: Modern engines (like LEAP) are more fuel-efficient but require more frequent technical interventions than legacy models, increasing the “service intensity” per aircraft.
- Passenger Surge: With global traffic projected to reach 22.3 billion by 2053, the operational fleet is expected to grow by 33% over the next decade.
- Capacity Shortage: StandardAero raised its 2025 growth forecast to 15%–20% as demand continues to outpace available repair slots worldwide.
Strategic Positioning
By operating in the high-margin niche between OEMs and airlines, StandardAero provides essential services for CF34, CFM56, and LEAP engines. In Q2 2025, commercial revenue jumped 14%, fueled by a record backlog that remains resilient regardless of new aircraft delivery rates. The total MRO market is projected to hit $77.8 billion by 2032, providing a massive tailwind for SARO’s expansion.
The Takeaway: StandardAero isn’t just a service provider; it is critical infrastructure for a world that is flying more on older, more complex equipment. This “supercycle” ensures high utilization and significant pricing power for the foreseeable future.
Reason 2: Dominating the LEAP Engine Service “Supercycle”
The aviation industry is transitioning from the legacy CFM56 to the Next-Gen LEAP engine, the primary powerplant for the Boeing 737 MAX and Airbus A320neo families. As the first wave of LEAP engines enters its major overhaul window, StandardAero is uniquely positioned to capture this high-margin demand.
A 40-Year Growth Runway
LEAP and GTF engines currently represent 9.6% of the market, but are projected to hit 41% by 2035. StandardAero was the first in North America to secure the CFM LEAP Premier license, granting them an early-mover advantage in a segment where capacity is severely limited.
Global Expansion and Backlog Surge
In 2025, StandardAero aggressively expanded its regulatory approvals, tapping into the world’s fastest-growing aviation markets:
- Strategic Hubs: New certifications in India, Japan, and the UAE allow the company to service a massive fleet of 1,200 active engines with 3,000+ more on order.
- Backlog Growth: The LEAP-specific backlog skyrocketed to $1.5 billion by mid-2025, a 50% increase in just six months.
- Asset Leasing: New short-term rental contracts for LEAP units reduce aircraft downtime, making SARO the preferred partner for major leasing firms.
Scaling to $1 Billion in Revenue
The company is currently transitioning its San Antonio facility to full-scale serial production to handle the tripling order volume seen in 2025. Management expects annual LEAP-related revenue to surpass $1 billion by 2030, securing a dominant share of the most critical engine lifecycle in aviation history.
The Takeaway: By locking in exclusive licenses and expanding into key global markets early, StandardAero has created a massive competitive moat. The LEAP “supercycle” isn’t just a trend—it’s a 40-year foundation for predictable, high-margin revenue growth.
Reason 3: Expanding Dominance in Mature Engine Markets
While LEAP engines represent the future, StandardAero is simultaneously fortifying its leadership in “legacy” platforms. Strategic investments in the CFM56, HTF7000, and CF34 markets provide a massive, stable foundation of recurring revenue for the next decade.
The CFM56 Powerhouse
With over 34,000 units delivered, the CFM56 remains the most widely used engine in aviation history. StandardAero’s new Dallas facility (fully operational in 2025) has doubled its repair capacity, allowing the company to aggressively capture a market that will require overhauls well into the 2030s.
Innovative Solutions & Strategic Capacity
StandardAero is not just expanding floor space; it is innovating service models to reduce aircraft downtime and increase loyalty:
- Engine Exchange Program: Launched in July 2025, this program allows customers to swap engines for immediate pre-repaired units, eliminating weeks of downtime—a high-margin initiative that has gained significant traction among leasing firms.
- HTF7000 Business Aviation: Opened an expanded Georgia facility in August 2025, increasing repair capacity by 60% to meet surging demand in the private jet sector.
- CF34 Lifecycle Management: Secured a 10-year GE Aerospace license renewal ($50M investment) to capture the upcoming overhaul surge for regional jets, projected to add $10M annually to EBITDA.
Strategic Market Resilience
The “tail” of the CF34 and CFM56 platforms is longer than the market previously anticipated. Because new aircraft deliveries remain constrained, these legacy engines are undergoing more comprehensive “life-extension” overhauls. StandardAero’s organic investments in these areas ensure they remain the partner of choice for airlines that cannot yet transition to newer fleets.
The Takeaway: By doubling down on mature markets while scaling for the new LEAP generation, StandardAero is hedging its growth. The combination of “stable legacy cash flow” and “high-growth next-gen demand” makes the company’s business model exceptionally resilient through 2030.
Financial Performance: Scaling Profitability and Deleveraging
StandardAero’s latest financial results reflect a business in a high-growth phase, with net income surging as the company capitalizes on record demand in civil and business aviation.
Cash Flow & Strategic Investments
While TTM Free Cash Flow remained negative at -$76.84 million, this is a strategic byproduct of the company’s expansion. A twofold increase in capital expenditures in 2025 was directed toward doubling CFM56 capacity and launching LEAP service lines. Management maintains its forecast for positive FCF by year-end 2025 as these new facilities reach full utilization.
Balance Sheet Strength & Deleveraging
StandardAero has made remarkable progress in strengthening its financial foundation:
- Debt Reduction: The Net Debt/Adj. EBITDA ratio has been slashed from 5.9x in 2023 to 3.2x currently.
- Liquidity: With $91.5 million in cash and an interest coverage ratio of 3.5x, the company demonstrates solid financial stability.
- Efficiency: H1 2025 revenue growth of 14.77% YoY confirms that the company is effectively outperforming its own long-term targets.
The Takeaway: StandardAero is successfully transitioning from a debt-heavy private entity to a highly profitable public leader. The temporary pressure on FCF is an investment in future dominance, while the rapid improvement in net income and leverage ratios provides a clear path for valuation re-rating.
Stock Valuation: Attractively Priced Growth
Despite its dominant market position and accelerating profitability, StandardAero is currently trading at a notable discount to the aerospace industry average. As the market fully prices in its post-IPO earnings power, we expect a significant valuation re-rating.
While the trailing P/E (65.5x) looks elevated, the Forward P/E of 32.3x highlights the rapid earnings growth anticipated for 2026. Top-tier Wall Street analysts maintain a bullish consensus with a median target of $32.00, while our fair value estimate of $33.80 reflects the company’s superior backlog and margin expansion potential.
Key Investment Risks
OEM Dependency
StandardAero’s business relies on exclusive licenses from manufacturers (OEMs). Any failure to renew these agreements or changes in OEM service strategies could severely impact long-term revenue streams.
CAPEX Execution Risk
The company has invested heavily in CFM56 and HTF7000 capacity. If airlines transition to newer fleets faster than expected, these specialized facilities may see lower-than-projected utilization rates.
MRO Cycle Cooling
The current “supercycle” is driven by new aircraft delivery delays. If Boeing and Airbus resolve supply chain issues, demand for expensive overhauls on older engines could soften sooner than anticipated.
The Takeaway: StandardAero is a classic “picks and shovels” play on the aviation industry. At 2x EV/Sales, it offers a high-margin entry point into the structural growth of global air travel. With its debt levels falling and LEAP services scaling, SARO is well-positioned to outperform through 2026.