Executive Summary / Key Takeaways

• AerSale Corporation leverages a unique, integrated business model to maximize value from mid-to-end-of-life flight equipment, positioning it for more stable and diversified earnings.
• The company is strategically shifting towards recurring revenue streams through an expanding lease pool and higher-margin MRO services, mitigating the volatility of whole asset sales.
• Technological differentiators like AerSafe, addressing an FAA compliance deadline, and AerAware, an advanced Enhanced Flight Vision System, offer significant long-term growth potential and competitive advantages.
• Recent financial performance in Q3 2025 demonstrated improved profitability and operational efficiency, with adjusted EBITDA margins expanding despite a decline in whole asset sales.
• Management anticipates continued top- and bottom-line growth into 2026, driven by MRO capacity expansions, robust USM sales, and the increasing monetization of its substantial feedstock inventory.

AerSale's Integrated Approach to Aviation Aftermarket Dominance

AerSale Corporation (NASDAQ:ASLE) operates as a critical platform within the commercial aviation aftermarket, specializing in maximizing the value of mid-to-end-of-life flight equipment. Founded in 2008, the Doral, Florida-based company has cultivated a global, fully integrated business model, leveraging over three decades of executive experience in aircraft and engine management, sales, and maintenance services. This "multidimensional fully integrated value extraction approach" is a foundational strength, allowing AerSale to monetize assets through leasing, trading, or disassembling for used serviceable material (USM) parts.

The broader aviation industry currently presents a complex landscape characterized by insatiable demand for engines and parts, yet constrained supply due to ongoing OEM production issues, engine shop delays, and FAA-related challenges. These dynamics keep older aircraft in service longer, intensifying the need for aftermarket solutions. Against this backdrop, AerSale's integrated model allows it to acquire and derive value from complex, often run-down, flight equipment that many competitors cannot, securing deals even without being the most aggressive bidder.

AerSale's competitive positioning is distinct. While direct competitors like AAR Corp. (AIR) offer a broader global network and diversified services, and HEICO Corporation (HEI) excels in proprietary parts and engineering solutions, AerSale carves out its niche through comprehensive, end-to-end lifecycle support. This integrated service model fosters stronger customer loyalty and potentially higher efficiency in project turnaround, particularly in specialized markets such as rapid turnarounds for older aircraft fleets. The company's expertise in wide-body assets, honed since its 2010 acquisition of 21 Boeing 747s from Japan Airlines (JAL), further differentiates it in a segment many investors find challenging.

Technological Edge: AerSafe and AerAware Drive Future Value

AerSale's strategic initiatives are significantly bolstered by its proprietary Engineered Solutions, AerSafe and AerAware, which represent key technological differentiators. These solutions provide non-OEM alternatives to critical aviation challenges, often at reduced delivery times and costs.

AerSafe is an FAA-approved Supplemental Type Certificate (STC) designed for fuel tank flammability protection. This technology offers a tangible benefit by enabling airlines to comply with FAA airworthiness directives (ADs) efficiently. The company anticipates elevated demand for AerSafe through 2026, as the November 2026 compliance deadline for fuel tank wiring approaches. As of Q3 2025, AerSafe's 2025 deliveries plus current backlog totaled over $22 million, indicating its significant contribution to the company's financial plan. This steady revenue stream, driven by regulatory compliance, provides a predictable and high-margin component to AerSale's TechOps segment.

AerAware, AerSale's revolutionary Enhanced Flight Vision System (EFVS), integrates a wearable Head-Up Display (HUD) with advanced infrared imaging and synthetic vision, allowing pilots to "see through darkness, fog, smoke and other reduced visibility conditions". This system, which has received FAA approval for the Boeing (BA) B737NG product line and Transport Canada Civil Aviation validation as of July 18, 2025, offers a "50% visual advantage" to pilots. Ongoing product enhancements include a foldable SkyLens model and the integration of ADS-B In functionality, which will enable pilots to independently monitor the GPS broadcast positions of nearby aircraft directly on their SkyLens display. This capability is particularly critical given recent air traffic control incidents and increasing congestion, offering a significant safety enhancement and potential to alleviate air traffic delays. While AerAware's commercialization has taken longer than anticipated, its potential to address industry-wide challenges like airport congestion, air traffic control staffing shortages, and overall flight safety positions it as a long-term growth driver and a significant competitive moat.

Strategic Evolution and Operational Performance

AerSale's strategic evolution is marked by a deliberate shift to balance the inherent volatility of whole asset sales with the expansion of its lease pool, aiming for more predictable and recurring revenue streams. This strategy was evident in Q3 2025, where, despite the absence of engine or aircraft sales, the balance of the business (excluding whole asset sales) grew 18.5% to $71.2 million, driven by strong USM volume and higher leasing activity. As of September 30, 2025, the company had 15 engines and 1,757 freighter aircraft on lease, with a second 757 lease executed at quarter-end.

The company's feedstock acquisition strategy remains disciplined, targeting a 25% unlevered internal rate of return (IRR). In Q3 2025, feedstock acquisitions totaled $13.7 million, bringing the year-to-date total to $84.2 million, contributing to a robust inventory position of over $371.1 million. This substantial inventory, including 9 engines available for sale or lease and 10 undergoing repairs, underpins future growth across USM, leasing, and asset trading activities.

Operational excellence is further enhanced by strategic adjustments within its TechOps segment. The Roswell facility is transitioning to focus exclusively on higher-margin teardown and decommissioning work, moving away from heavy maintenance. Concurrently, AerSale has completed construction of its Aerostructures and pneumatics facilities, which are now transitioning to production and are expected to be significant drivers of revenue growth in 2026 and beyond. The Goodyear facility, after concluding a major contract, is stabilizing with a strong pipeline of recommissioning work expected to keep it near full capacity through 2026, while the company pursues long-term, predictable contracts.

Financial Performance and Liquidity

AerSale's recent financial performance reflects the impact of its strategic shifts and operational efficiencies. For the three months ended September 30, 2025, total revenue was $71.2 million, a 13.9% decrease year-over-year, primarily due to the absence of whole asset sales compared to five engine sales in the prior-year period. However, adjusted EBITDA for the quarter improved to $9.5 million, or 13.3% of sales, up from $8.2 million, or 10.0% of sales, in Q3 2024. This margin expansion was driven by stronger leasing contributions, higher USM activity, and cost reduction efforts that trimmed SG&A expenses and increased MRO profit margins.

Segment-wise, Asset Management Solutions revenue decreased by 22.2% to $39.2 million in Q3 2025, but excluding whole asset transactions, it grew nearly 40.9% year-over-year. Aircraft gross profit margins in this segment increased to 40.3% from 33.7% due to higher leasing revenue contributions. TechOps revenue saw a modest 0.9% decrease to $32.0 million, but its gross profit surged 84.6% to $8.1 million, with margins expanding to 25.3% from 13.6% due to a focus on higher-margin opportunities and process efficiencies. Selling, general and administrative expenses decreased by 14.1% to $18.6 million, benefiting from efficiency initiatives.

For the nine months ended September 30, 2025, total revenue was $244.3 million, a 2.4% decrease from the prior year. Net income for the nine months was $3.2 million, compared to $3.1 million in the prior year period. The company's liquidity as of September 30, 2025, stood at $58.9 million, comprising $5.3 million in cash and $53.6 million in available capacity on its $180 million revolving credit facility. Cash used in operating activities for the nine months was $34.3 million, primarily for feedstock acquisitions, while financing activities provided $40.3 million, partially offset by a $45 million stock repurchase in March 2025. AerSale remains in compliance with all debt covenants.

Outlook and Growth Catalysts

AerSale's management projects continued progress for the balance of 2025 and into 2026, with full-year revenue (excluding flight equipment sales) expected to exceed 2024 levels and EBITDA growth outpacing revenue growth. This optimistic outlook is underpinned by several key catalysts. The expanding lease pool, including the remaining 757 freighter aircraft, is expected to generate a more predictable and recurring revenue stream. Customer interest in the 757 freighter conversion program has significantly improved since 2023, with active discussions to place the remaining five aircraft.

The newly completed MRO facilities (Aerostructures and pneumatics) are expected to drive significant revenue growth in 2026, with management projecting approximately $25 million in revenue and $4 million to $5 million in margins from these three expansion projects in 2026. AerSafe is anticipated to maintain elevated volume through 2026, supported by the FAA compliance deadline. Furthermore, efficiency initiatives are expected to yield an additional $10.4 million in annual savings in 2025, building on $10 million saved in 2024, contributing to enhanced profitability. While AerAware deliveries are improbable for 2025, its ongoing development and increasing industry focus on safety position it as a long-term growth driver.

Risks and Competitive Dynamics

Despite the positive outlook, AerSale faces several risks. The tight feedstock market, exacerbated by OEM production and engine shop delays, continues to be a challenge, potentially impacting the availability and pricing of assets. The inherent volatility of whole asset sales, while being strategically managed, can still cause quarter-to-quarter fluctuations in revenue. The commercialization timeline for AerAware remains uncertain, as integrating complex new technology into airline operations has proven to be a longer process than initially anticipated. Geopolitical instability, trade policies, and potential government shutdowns also pose risks to supply chains and regulatory approvals.

In the competitive arena, AerSale's integrated model and ability to "squeeze the sponge" from complex assets allow it to win deals where competitors, often lacking the necessary infrastructure or capital, cannot close. However, the narrow-body engine market remains intensely competitive, with valuations often falling below AerSale's target IRR benchmarks. Indirect competitors, including digital platforms for parts procurement and AI-driven predictive maintenance solutions, could also impact demand for traditional MRO services, though AerSale's hands-on expertise and specialized offerings provide a buffer.

Conclusion

AerSale Corporation is strategically transforming its business model to deliver more stable and diversified earnings, moving beyond the inherent lumpiness of whole asset sales towards a robust foundation of recurring revenue. The company's unique, integrated approach to maximizing value from mid-to-end-of-life flight equipment, coupled with disciplined feedstock acquisitions and expanding MRO capabilities, underpins its investment thesis. Technological differentiators like AerSafe provide immediate, compliance-driven revenue, while AerAware holds significant long-term potential to address critical safety and efficiency needs in the aviation industry. Despite facing a challenging competitive landscape and supply chain constraints, AerSale's operational efficiencies and strategic focus position it for continued top- and bottom-line growth into 2026, making it a compelling consideration for discerning investors seeking exposure to the evolving aviation aftermarket.