Defence & Aerospace · Commercial Aerospace
Valuing Aerospace (EV/EBITDA, FCF)
How to compute EV/EBITDA for aerospace peers: match the EBITDA basis to the filer, business-model bands, and why Boeing's and GE's FCF diverge.
Selborne Research · Commercial Aerospace coverage: 7 guides, 6 company profiles, a primer and Excel model
Educational analysis. This guide is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
On this page
- Split the Business Model Before You Apply a Multiple
- Boeing and GE Post FY2025 Cash Flow at Opposite Ends
- One Filer's Arithmetic Shows the Method; It Doesn't Transfer Directly
- No Two Filers Report Profit on the Same Basis
- Aftermarket Mix Drives the Multiple
- The Same Aftermarket Story Carries Very Different Balance-Sheet Risk
- Model Defaults and Rates
- Classify the Business Model Before Any Multiple Means Anything
Split the Business Model Before You Apply a Multiple
Commercial aerospace names do not belong on one peer-multiple line. OEM airframers in ramp trough can show negative segment margins and negative FCF while engine and proprietary-parts suppliers print high-teens to mid-50s EBITDA margins and strong cash conversion. EV/EBITDA only works after you match the EBITDA basis to the filer and classify the revenue mix.
FY2025 filed cash flow makes the point: Boeing ($1.9B) FCF on 600 deliveries; GE Aerospace $7.7B FCF on 71% services revenue. Same industry, different valuation lens.
Boeing and GE Post FY2025 Cash Flow at Opposite Ends
| Company | FY2025 FCF | Business-model read |
|---|---|---|
| GE Aerospace | $7.7B | Aftermarket-heavy engine/services |
| Airbus | €4.8B | OEM leader at positive margin; net cash |
| Safran | €3.9B | Engine OE + aftermarket blend |
| Howmet | $1.4B | Components; OE-heavy, spares growing |
| TransDigm | ~$1.8B | Proprietary parts; high leverage |
| Boeing | ($1.9B) | OEM ramp trough |
GE targets >100% FCF conversion through 2028 (Investor Day). That framing fits services-weighted engine economics. Boeing’s negative FCF with ~1.96× unit book-to-bill (new orders against units delivered) is the ramp/working-capital story, not a demand collapse.
One Filer’s Arithmetic Shows the Method; It Doesn’t Transfer Directly
Market caps as of 9-10 Jun 2026; EUR filers converted at stated FX dates.
GE Aerospace shows the method. Operating profit* $9.1B plus D&A $1.1B gives EBITDA of about $10.1B. Enterprise value is the valuation-date market cap plus net debt, and dividing it by that EBITDA gives the multiple.
The same arithmetic will not work for every filer without adjustment. Boeing does not report EBITDA, so the closest proxy is operating income $4.3B plus D&A $2.0B, about $6.2B, but FY2025 was a BCA segment-margin trough at −17.1%. Dividing enterprise value by that depressed proxy prices a temporarily low earnings base. GE’s proxy carries no such distortion because it sits on a 71%-services revenue mix. The two need normalising differently before their multiples mean the same thing.
Typical valuation bands on filed EBITDA:
| Business model | EV/EBITDA band |
|---|---|
| OEM-heavy airframers | ~12-18× |
| Engine / aftermarket | ~18-25× |
| Proprietary sole-source parts | ~20-55× |
Computed multiples on filed or proxy EBITDA ranged from the high teens to the mid-40s across the four non-OEM filers; the two OEM airframers need earnings normalisation, as above, before a multiple is informative. Damodaran US Aerospace/Defense sector aggregate 21.58× (Jan 2026) blends in defence, so treat it as context only.
No Two Filers Report Profit on the Same Basis
| Filer | Reported profit measure | FY2025 value |
|---|---|---|
| Boeing | Operating income + D&A (proxy) | $4.3B + $2.0B ≈ $6.2B |
| Airbus | EBIT Adjusted | €7.1B |
| GE | Operating profit* + D&A | $9.1B + $1.1B |
| Safran | Adjusted EBITDA | €6.3B |
| Howmet | Adjusted EBITDA | $2.4B (29.3% margin) |
| TransDigm | EBITDA As Defined | $4.8B (53.9% of net sales) |
Do not divide EV by Boeing GAAP operating income during a BCA loss year without normalising to mid-ramp margin. Airbus 10.4% Commercial EBIT Adjusted margin and €12.2B net cash are the through-cycle inputs a normalised OEM-heavy multiple would use; Boeing needs the equivalent normalisation before the two are comparable.
Non-USD filers: Airbus at EUR/USD 1.1554 (10 Jun 2026); Safran at 1.1549 (10 Jun 2026). State FX date when screening USD peers.
Aftermarket Mix Drives the Multiple
Revenue mix explains why multiples cluster by model type:
| Company | Aftermarket / services share | Key margin |
|---|---|---|
| GE | Services 71% (CES 75%) | CES 26.6% |
| Safran Propulsion | Aftermarket 64.6% | 23.0% recurring OM |
| TransDigm | Commercial aftermarket 31.8% (+ defence 42.6%) | 53.9% EBITDA As Defined |
| Howmet | Spares ~21% | Engine Products 33.3% Adj. EBITDA |
| Boeing | Services 16% (BGS) | BCA −17.1% / BGS ~18.5% |
| Airbus | Services 11% | Commercial 10.4% EBIT Adjusted |
Higher aftermarket mix goes with higher filed margins, and that recurring revenue is why the aftermarket bands above sit higher than the OEM band. The OEM vs aftermarket guide covers how those segment margins compare across the peer set; the installed-base guide covers GE ~45,000 engines and CES backlog ~90% services.
The Same Aftermarket Story Carries Very Different Balance-Sheet Risk
GE Aerospace (~$346.6B cap) carries 1.44×** book-to-bill and **$190B of backlog behind its FCF. The GE profile walks through what sits behind that backlog.
Safran (~€121.9B cap) holds €1.7B of net cash and LEAP deliveries of 1,802 units for FY2025. See the Safran profile.
TransDigm ($70.3B cap) runs the same high-margin aftermarket model on **$27.2B** of net debt instead. See the TransDigm profile for how that leverage is structured.
Airframers need normalised OEM earnings and backlog-to-rate screens before a consolidated multiple is informative. Start with FCF and segment margins, then reach for EV/EBITDA.
Model Defaults and Rates
Worked-example parameters (illustrative assumptions):
| Example | Parameter | Value |
|---|---|---|
| OEM airframer | Narrowbody backlog units | 7,000 |
| OEM airframer | Annual deliveries | 750 |
| OEM airframer | Book-to-bill | 1.1× |
| OEM airframer | Normalised EBIT margin | 10% |
| Engine aftermarket | Services mix | 70% |
| Engine aftermarket | Operating margin | 25% |
| Engine aftermarket | EV/EBITDA screen | ~22× |
DCF sensitivity uses illustrative planning rates: 10-year UST 4.50%, BBB OAS 150 bps, model discount rate 9.0% nominal. Check current rates when modelling.
Classify the Business Model Before Any Multiple Means Anything
- Classify business model (OEM ramp, engine aftermarket, proprietary parts).
- Match EBITDA basis to the filer’s filed measure.
- Check FCF before applying a peer multiple (Boeing vs GE divergence).
- Place the multiple inside the appropriate band for that model type.
- For OEM names, normalise margin toward ramp steady state (~10% illustrative example near Airbus 10.4%) before EV/EBITDA.
A single Damodaran 21.58× sector aggregate does not replace the split between ~12-18× OEM-heavy and ~18-55× aftermarket/proprietary screens.
Commercial Aerospace Sector Primer
Delivery rates and the aftermarket annuity are the inputs. This primer takes them to a dual-rate sum-of-the-parts and an EV/EBITDA you can defend.
- 15 sections, original equipment and aftermarket valued apart
- 40 pages
- OEM airframer and engine OEM, dual-rate sum-of-the-parts
- 2 worked valuations
- backlog-years, book-to-bill, aftermarket mix, free cash flow
- 6-company screen
The Excel model is the primer's two dual-rate sum-of-the-parts builds live across 12 sheets: original equipment capitalised at a cyclical rate, the installed-base aftermarket at a lower annuity rate, summed to enterprise value. Change the delivery rate, the aftermarket dollars per unit or either discount rate and the value per share moves.
See what's in the Commercial Aerospace Sector Primer →£25 PDF · £59 with the Excel model · £159 for all three Defence & Aerospace industries
Frequently Asked Questions
- Why can Boeing have negative FCF while GE prints $7.7B?
- OEM airframe ramps consume working capital, carry certification and quality-recovery costs, and can run negative segment margins (Boeing BCA −17.1% in FY2025). GE Aerospace's Commercial Engines & Services business is 75% services revenue at a 26.6% operating margin, on an installed base of ~45,000 commercial engines. FY2025 FCF was ($1.9B) at Boeing versus $7.7B at GE. Business model drives cash conversion more than delivery count alone.
- How do you compute an EV/EBITDA multiple for a commercial aerospace filer?
- Start from the filer's own profit measure. For GE Aerospace, FY2025 operating profit* $9.1B plus D&A $1.1B gives EBITDA of about $10.1B. Add net debt to the valuation-date market cap to get enterprise value, then divide by that EBITDA. Business-model EV/EBITDA bands run, on filed or proxy EBITDA: OEM-heavy airframers ~12-18×; engine/aftermarket ~18-25×; proprietary sole-source parts ~20-55×. These are general ranges rather than a placement for any one filer; where a filer's EBITDA proxy sits at a cyclical trough, such as Boeing's BCA segment during its FY2025 ramp, the multiple needs normalising before it means anything. Damodaran's US Aerospace/Defense sector aggregate was 21.58× (Jan 2026); that blends in defence names and serves only as outside context.
- What EBITDA basis should you use for each filer?
- Boeing does not report EBITDA; use operating income $4.3B + D&A $2.0B = ~$6.2B proxy. Airbus uses EBIT Adjusted €7.1B. GE uses operating profit* $9.1B + D&A $1.1B. Safran adjusted EBITDA €6.3B. Howmet adjusted EBITDA $2.4B. TransDigm EBITDA As Defined $4.8B. Match the filer's reported profit measure before computing EV/EBITDA.
- What is GE's FCF conversion target?
- GE Aerospace targets greater than 100% FCF conversion through 2028 (Investor Day). FY2025 FCF was $7.7B on a high-margin, services-heavy mix. Aftermarket-heavy names emphasise FCF conversion in screening; OEM-ramp names need normalised earnings and a rate-path assumption before multiple or DCF work.
Read next
OEM vs Aftermarket: Where Aerospace Makes Money
Why commercial aerospace margins split between loss-making OE ramps and high-margin aftermarket: Boeing BCA −17.1% vs BGS ~18.5%, GE 71% services at 26.6% CES margin, and the ~15-25 pp aftermarket premium.
Aftermarket Margins and the Installed Base
Razor/blade engine economics, GE ~45,000-engine installed base, CES backlog ~90% services, MRO revenue share benchmarks, and why filers rarely split aftermarket-only margins.
See it applied
These company profiles apply the concepts from this guide to real public companies.