AAR Corp. (AIR): BCG Matrix [Dec-2025 Updated]

You're digging into AAR Corp.'s business health following a record fiscal year where sales hit $2.8 billion, and you need a clear map of where the real value is sitting. We've taken their core segments and placed them on the Boston Consulting Group Matrix to show you, plainly, which areas are the high-growth Stars, which are the reliable Cash Cows generating $324 million in Adjusted EBITDA, and where the company is placing its big, expensive bets as Question Marks. Keep reading to see the full breakdown that separates the unit making up 71% of consolidated sales from the recent divestiture we've officially labeled a Dog.

Background of AAR Corp. (AIR)

You're looking at AAR Corp. (AIR), which stands as a premier independent provider of aftermarket support and services for the global aviation industry. Founded way back in 1951, AAR has grown into a major force, employing around 6,000 people across roughly 30 countries on six continents. The company focuses on serving commercial and government operators, MROs (Maintenance, Repair, and Overhaul organizations), and OEMs (Original Equipment Manufacturers). Honestly, their reach is pretty wide in the aerospace aftermarket.

Looking at the most recently completed fiscal year, which ended May 31, 2025, AAR Corp. delivered record results. Full fiscal year 2025 consolidated sales hit $2.8 billion (or $2.78 billion), marking a significant 20% jump from fiscal year 2024. That growth was largely fueled by the integration of the Product Support acquisition and increased volumes in their new parts distribution activities. On the profitability side, adjusted EBITDA for the year was $324 million, a 34% increase, pushing the adjusted EBITDA margin up to 11.8% from 10.4% the prior year. Sales to commercial customers accounted for 71% of those consolidated sales for the full year.

AAR Corp. organizes its operations into four main segments: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services. You should note they've been actively optimizing this portfolio; for instance, they substantially completed the integration of the Product Support business and also divested their Landing Gear Overhaul business during that fiscal year. The Parts Supply segment, in particular, has been a growth engine, with new parts Distribution activities showing an organic sales increase of over 20% in the fourth quarter of fiscal 2025.

To give you the absolute latest snapshot as of late 2025, the first quarter of fiscal year 2026 (ending August 31, 2025) showed continued momentum. Sales for that quarter were $740 million, representing a 12% increase year-over-year, with adjusted sales up 17% organically, driven heavily by Parts Supply. Management has been focused on converting a large pipeline of government opportunities and reducing net leverage, which stood at 2.72x at the end of FY2025. They are definitely investing to support the rapid growth they are seeing right now.

AAR Corp. (AIR) - BCG Matrix: Stars

You're looking at the business units within AAR Corp. that are dominating high-growth areas, meaning they need capital investment to maintain that lead. Stars are the leaders in the business but still need a lot of support for promotion and placement. If market share is kept, Stars are likely to grow into cash cows. The business units or products with the best market share and generating the most cash are considered Stars. Monopolies and first-to-market products are frequently termed Stars too. Still, because of their high growth rate, Stars consume large amounts of cash. This generally results in the same amount of money coming in that is going out. Stars can eventually become Cash Cows if they sustain their success until a time when a high-growth market slows down. A key tenet of a Boston Consulting Group (BCG) strategy for growth is to invest in Stars.

For AAR Corp., the full fiscal year 2025 saw consolidated sales hit $2.8 billion, a 20% increase over fiscal year 2024. This performance is heavily weighted by the units operating as Stars, which are characterized by high market share in expanding sectors of the aviation aftermarket.

New Parts Distribution activities are definitely a Star. These activities are rapidly gaining share in a high-demand market, showing over 20% organic sales growth for the full fiscal year 2025, with one report citing 25% organic growth for the full fiscal year 2025. This segment is leading the charge, driven by both market growth and market share gains.

Repair & Engineering (MRO) is also showing Star-like characteristics, capturing tailwinds from the aging global fleet. For instance, in the second quarter of fiscal year 2025, sales in Repair & Engineering grew 57% year-over-year, reflecting strong underlying demand for MRO services. The integration of the Product Support acquisition is bolstering capabilities here.

Component Services, which includes the recently integrated Product Support acquisition, is significantly expanding capabilities and market reach, acting as a key growth engine alongside MRO.

Commercial Aftermarket Services is a major contributor, benefiting from high flight utilization. For the full fiscal year 2025, sales to commercial customers made up 71% of consolidated sales. This high percentage underscores its dominant market position within the company's overall revenue base.

Here's a quick look at the overall financial picture for the fiscal year 2025, which these Stars helped drive:

The performance of these high-growth areas is evident in the segment-level data, showing significant top-line expansion:

• New Parts Distribution: Organic sales growth over 20% for FY2025.
• Repair & Engineering: Sales grew 57% year-over-year in Q2 FY2025.
• Commercial Customer Sales: Constituted 71% of consolidated sales for FY2025.
• Q4 FY2025 Adjusted EBITDA Margin: Reached 12.4%.

Finance: draft 13-week cash view by Friday.

AAR Corp. (AIR) - BCG Matrix: Cash Cows

You're looking at the core engine of AAR Corp.'s current financial strength, the business units that generate more cash than they consume. These Cash Cows are market leaders in mature segments, and for AAR Corp. in Fiscal Year 2025, they provided the necessary fuel for growth elsewhere in the portfolio.

The overall financial performance in FY2025 underscores this strength. Consolidated Sales hit $2.8 billion, a solid 20% increase over the prior year. More importantly for a Cash Cow analysis, the company delivered $324 million in Adjusted EBITDA for the full fiscal year, demonstrating robust operational cash generation. This resulted in an Adjusted EBITDA margin of 11.8% for FY2025, up from 10.4% in FY2024. That margin expansion is exactly what you want to see when a business unit is being 'milked' efficiently.

Here's a quick look at the key financial results that define this cash-generating power:

The focus here is on maintaining market share and driving efficiency, not massive capital expenditure for growth. Investments are targeted, like those supporting infrastructure, to squeeze out even more cash flow.

Established Parts Supply Contracts

This segment remains the largest revenue contributor, and it's definitely a cash cow, especially as gross margins have expanded. For the full year of FY2025, the Parts Supply business grew by 14%. What's compelling is the margin profile; this segment has successfully expanded its gross margins from 15% historically to reach 19% in FY2025. That 19% gross margin is a key indicator of competitive advantage in a mature parts market. You're seeing the benefit of scale and strong contract execution here.

Airframe Maintenance (Core MRO)

The Airframe Maintenance, Repair, and Overhaul (MRO) business provides a stable, high-volume service base. While the Parts Supply segment is the growth engine within the supply chain, MRO provides the consistent, high-utilization cash flow from its wide network of facilities. Revenue contribution from the MRO business increased by 38% in FY2025, partly due to acquisitions, but the underlying airframe maintenance work is steady. To be fair, the MRO margin profile has compressed, now sitting in line with Parts Supply at 19%, down from historical highs of 25%. Still, the high volume keeps the cash flowing consistently.

The company is actively investing to support this segment's future cash generation, which is the right move for a Cash Cow. They launched two hangar expansions in Miami and Oklahoma City, which are expected to add 15% in capacity once they're done. That's supporting infrastructure investment to maintain productivity.

Government & Defense Logistics

The Integrated Solutions segment, which houses much of the government and defense work, provides reliable, recurring revenue streams through long-term contracts. Sales to government customers specifically increased by 21% for the full fiscal year 2025. This segment benefits from long-term commitments, which translates directly into predictable cash flow. For instance, the joint venture with KIRA secured a new business win with the U.S. Navy for the E-6B aircraft pilot training program. Furthermore, AAR Corp. signed a Supply Chain Alliance charter with the U.S. Defense Logistics Agency (DLA) to support the nation's warfighter. These long-term agreements are the definition of a low-growth, high-market-share anchor for the business.

You can see the stability in the segment's performance metrics, too. The Integrated Solutions segment saw its revenue contribution increase by 8% in FY2025. That steady, contract-backed revenue helps cover corporate overhead and fund the more speculative Question Marks.

• Parts Supply gross margin reached 19% in FY2025.
• MRO business margin is now aligned with Parts Supply at 19%.
• Government sales grew 21% in FY2025.
• Two MRO facilities are being built to add 15% capacity.
• The company secured a DLA Supply Chain Alliance charter.

Finance: draft the 13-week cash view incorporating the expected cash flow from these segments by Friday.

AAR Corp. (AIR) - BCG Matrix: Dogs

You're looking at the parts of AAR Corp. (AIR) that, despite the company's overall record sales of $2.8 billion in Fiscal Year 2025, represent areas where market share or growth is lagging, prompting strategic pruning.

Dogs are units that operate in low-growth markets and hold a small piece of that market. They tie up capital without generating significant returns, making divestiture a common, sensible action.

Portfolio Divestiture: Landing Gear Overhaul Business

The most definitive action taken against a Dog category was the sale of the Landing Gear Overhaul business. This unit was explicitly identified as non-core as part of AAR Corp.'s plan to optimize its portfolio and focus on accelerating growth and margin expansion initiatives.

• Divestiture completed on April 3, 2025.
• Sale price to GA Telesis was $51 million.
• A pre-tax charge of $63.7 million was associated with this divestiture in the third quarter of fiscal year 2025.

Used Serviceable Materials (USM) Activities

Within the Parts Supply segment, which saw total sales increase 12% in Q3 FY2025, the USM activities specifically faced headwinds. While the overall segment is growing, USM showed only modest year-over-year growth in Q3 FY2025, which fell short of internal expectations.

This underperformance was tied to short-term timing issues, specifically maintenance deferrals by end customers, which impacted the demand for engine inductions.

Honestly, these timing issues suggest a low-growth environment for that specific product line until deferred maintenance catches up, likely in FY 2026.

Legacy Integrated Solutions Programs

The Integrated Solutions segment presented a mixed picture, characteristic of a unit that might contain both a Cash Cow and a Dog, or a unit in transition. In the third quarter of fiscal year 2025, the segment's sales showed a slight contraction.

However, by the fourth quarter, the segment was reporting double-digit growth, suggesting that older, lower-growth government activities might be declining while newer contracts or software offerings, like Trax, are taking over.

• Integrated Solutions Sales Decline (YoY): 1.6% (Q3 FY2025).
• Government Sales Growth (YoY): 21% (Q4 FY2025).
• Integrated Solutions Earnings: Posted meaningful earnings growth (FY2025).

The Q3 sales decline of 1.6% points directly to the low-growth/declining aspect that fits the Dog profile for certain legacy government activities within that segment.

AAR Corp. (AIR) - BCG Matrix: Question Marks

The Question Marks quadrant represents business units operating in high-growth markets but currently holding a low market share. For AAR Corp., these areas consume significant cash as the company invests heavily to capture future market dominance, with the risk of becoming Dogs if market share gains stall.

Trax eMRO Software Solution fits this profile as a digital offering in a rapidly modernizing aviation maintenance sector. While the eMRO market is expanding, Trax is making substantial investments to secure its position against competitors. The software, which supports digital signatures and paperless working, generated revenue exceeding $50 million in fiscal year 2025. This product is actively seeking broader adoption, evidenced by the November 2025 announcement that Pan Am selected the eMRO platform for its maintenance operations. Trax's solutions currently support approximately 5,000 aircraft globally.

Planned MRO Capacity Expansion is a major cash drain betting on future high-growth demand in the Maintenance, Repair, and Overhaul space. The MRO market itself is expected to grow to $199 billion in 2025. AAR Corp. is investing in new facilities, specifically in Miami and Oklahoma City, which management estimates will add 15% in capacity once completed. The new Miami Airframe MRO facility, a 114,000-square-foot project, was targeted for operational status by October 2025. This expansion is critical because the existing hangars were at near capacity, which limited the MRO segment's ability to fully capitalize on the 38% increase in MRO revenue seen in the full year of 2025. Still, the MRO business margin profile contracted to 19% in FY2025, showing the high cost associated with this growth phase.

New Parts Manufacturing (PMA) represents a strategic pivot where AAR Corp. intends to produce its own parts under Parts Manufacturer Approval (PMA) designation from the FAA. This is a high-risk, high-reward move to compete with established players like HEICO by offering cost-efficient, non-OEM parts. Management has explicitly stated that digital and IP-enabled offerings, which include PMA, are a focus area for investment. This area requires heavy upfront investment in engineering and certification before generating meaningful returns, fitting the Question Mark profile perfectly.

The Large Government Pipeline Conversion involves significant effort to turn a large pipeline of defense opportunities into realized revenue. While the government and defense sector contributed significantly to 2024 revenue, the focus is on converting future wins. The Integrated Solutions segment, which includes government support, accounted for 24% of revenue in Q1 CY2025. A concrete example of a recent win is the defense logistics mobility contract, which has a total potential value of up to $85 million over its base period and options. Converting this pipeline is necessary to move these government-facing activities out of the Question Mark quadrant and into a more stable category.

Here's a quick look at the investment and growth metrics associated with these potential Question Marks:

These initiatives require capital deployment now to secure future market share in high-growth areas. You're looking at significant cash burn today for the potential of tomorrow's Stars. The success hinges on quickly scaling these operations, especially the MRO capacity, to match market demand.

• Invest heavily in Trax to secure more enterprise contracts.
• Ensure the Miami MRO facility is fully operational by the October 2025 target.
• Establish a clear path for PMA parts to move from development to revenue generation.
• Convert the $85 million-potential government pipeline to firm orders.

Finance: draft 13-week cash view by Friday, factoring in the MRO expansion capital expenditure schedule.