Defence & Aerospace · Commercial Aerospace
Commercial Aerospace Sector Primer
A 40-page primer plus Excel valuation model on commercial aerospace equity analysis: backlog-years, OEM and aftermarket mix, FCF conversion, EV/EBITDA by model.
2026 Edition · data as of June 2026
- pages
- 40
- sections
- 15
- model sheets
- 12
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The full primer
£25 / ~$32
- 40 pages, 15 sections
- Worked examples and applied cases
- 2026 Edition, data as of June 2026
Excel model
Valuation template
£45 / ~$58
- 12 sheets (.xlsx)
- Runs the primer's worked valuations live
PDF + Excel model Best value
Both files together
£59 / ~$76
- The 40-page primer
- The 12-sheet Excel model
- £70 bought separately · £11 less
Complete Defence & Aerospace Library
All three Defence & Aerospace industries: three primers, three Excel models (Defence Primes, Commercial Aerospace, and Space & Satellites).
Inside the primer
The 15-section contents, a worked valuation page, and the Excel dashboard.
Contents
- 01 How Commercial Aerospace Makes Money
- 02 Listed Company Types
- 03 The Programme Lifecycle
- 04 Segments and Sub-Markets
- 05 Revenue Drivers: Illustrative Airframer Build
- 06 Cost Structure: Backlog and Margin Vocabulary
- 07 Valuation Frameworks
- 08 Worked Example: OEM Airframer Dual-Rate Sum-of-Parts (SOTP)
- 09 Worked Example: Engine OEM Dual-Rate SOTP
- 10 Applied Cases: Airframers
- 11 Applied Cases: Engines and Suppliers
- 12 Key Metrics and Screening
- 13 Risks, Benchmarks and Case Study
- 14 Glossary of Essential Terms
- 15 Quick Reference Cheat Sheet
Worked examples and applied cases · 40 pages · 15 sections · 2 worked valuations
The Excel model
Educational material. This primer and its model are not investment advice or a recommendation to buy or sell any security, and they are not personalised. Worked valuations use illustrative calibrations, not fair-value estimates for any company.
Commercial aerospace is a duopoly airframe cycle bolted to an aftermarket annuity. The first aircraft sale earns little; the margin arrives over decades in engines, spares and services on the installed fleet. Backlog-years set the volume ramp and aftermarket mix sets the margin. The two move on different clocks, so a single sector multiple misleads.
Aerospace valuation benchmarks by business model
Where the margin sits decides the multiple. These are the primer's EV/EBITDA bands by business model, anchored on filed peers, with the operating profile that goes with each.
| Business model | EV/EBITDA band | Typical margin | What sets the position |
|---|---|---|---|
| OEM airframer | 12-18x on normalised earnings | EBIT 8-12%; services 10-20% of revenue | Backlog-years (8-12 healthy) and where the rate ramp sits |
| Engine OEM / aftermarket | 18-25x | Operating margin 20-27%; services 60-75% | Installed-base growth and services mix |
| Proprietary content (sole-source parts) | 20-55x | EBITDA 30-55% | Spares pricing power, leverage and defence mix |
The primer's sum-of-the-parts discounts new equipment at 10.5% and the aftermarket at 6.0-6.5%, with 2.5% long-run fleet growth. The gap in rates follows the economics. Industry ranges put engine manufacturing gross margin at -5% to +10% against 20-35% for maintenance, repair and overhaul, and engines can sell at discounts of up to 80% or more off list price. A published US aerospace and defence sector aggregate of about 21.6x EV/EBITDA blends in defence names, so use it as context only.
Worked example: an aerospace sum-of-the-parts valuation
Take a hypothetical narrowbody airframer delivering 800 aircraft a year at $50 million each on an 8% EBITDA margin, with 10,000 aircraft in service each spending $0.8 million a year on the aftermarket at an 18% margin. The primer values each leg as a growing perpetuity after 21% tax: original equipment at 10.5%, the aftermarket at 6.5%, both growing at 2.5%.
| Step | Amount |
|---|---|
| Original-equipment EBITDA (800 × $50M × 8%) | $3,200M |
| Aftermarket EBITDA (10,000 × $0.8M × 18%) | $1,440M |
| Original-equipment value at 10.5% (10.12x EBITDA) | $32.4B |
| Aftermarket value at 6.5% (20.24x EBITDA) | $29.2B |
| Enterprise value | $61.5B |
| Less net debt | -$5.0B |
| Value per share (800M shares) | $71 |
| Implied EV/EBITDA | 13.3x |
The aftermarket is 31% of EBITDA but 47% of value, because the lower rate capitalises each recurring dollar at twice the multiple. Put a flat 15x on the same $4.64 billion of EBITDA and enterprise value comes to $69.6 billion, 13% higher, since one multiple overprices the thin new-equipment leg by more than it underprices the annuity. An engine maker shows the effect more strongly. With 36,000 engines in service at $0.40 million a year and a 28% aftermarket margin, the annuity is 63% of EBITDA and 79% of value, which lands the blend at about 18x.
The primer adds delivery-rate and annuity-rate sensitivities and applies the split to two hypothetical parts suppliers before six applied cases on filed results. The Excel model runs both archetypes, with a 15-year installed-base DCF, on your own inputs.
Which aerospace valuation method fits which company
| Company type | Primary method | Check with | Why |
|---|---|---|---|
| OEM airframer | Dual-rate sum of the parts: new equipment plus installed-base aftermarket | Backlog-years; FCF trough | A rate ramp distorts last-twelve-month margins |
| Airframer in a loss-making ramp | Normalised margin at a steady production rate | FCF and net debt | Depressed EBITDA inflates the trailing multiple |
| Engine OEM / aftermarket | Dual-rate sum of the parts | EV/EBITDA on segment EBITDA; FCF conversion | The services annuity is visible and converts to cash |
| Proprietary content supplier | EV/EBITDA on the company-defined EBITDA | Leverage; defence mix | Pricing power sits in spares, often with no unit backlog to screen |
What the full primer adds
The primer builds the tools in order: how airframers, engine makers and proprietary suppliers make money, the aircraft lifecycle from order to retirement, then the mix and margin bridges. Two worked examples run a dual-rate sum-of-parts valuation from first input to value per share, an airframer and an engine OEM, discounting original-equipment and aftermarket cash flows at their own rates, before applied cases on Boeing, Airbus, GE Aerospace, Safran, Howmet and TransDigm. Screening closes with backlog-years bands, aftermarket mix and EV/EBITDA read by business model.
Free guides on the site cover the individual pieces, so you can revise one idea without reopening the PDF: OEM vs aftermarket margins, aftermarket revenue mix by company, backlog and the narrowbody ramp, firm backlog vs unfilled orders, aftermarket and the installed base, the Boeing and Airbus duopoly and EV/EBITDA and FCF for aerospace. Research profiles for Boeing, Airbus, GE Aerospace, Safran, Howmet and TransDigm run the same screens on filed results. The companion Excel model spans twelve sheets, from two archetype tabs through the backlog, installed-base and mix screens to a 15-year aftermarket DCF and a live sensitivity grid, so swapping in your own OEM rebuilds the valuation from the delivery schedule up.
Sheets: Quick Start, Instructions, Assumptions, OEM Airframer, Engine OEM, Valuation Summary, Backlog & Fleet, Installed Base & Aftermarket, 15yr Installed-Base DCF, OE vs Aftermarket, Sensitivity, Dashboard.
Aerospace valuation: free guides
Aerospace valuation FAQ
- How do you value a commercial aerospace company?
- Split it into original equipment and aftermarket, and value each at its own rate. New aircraft and engines earn thin, cyclical margins, so the primer discounts that leg at 10.5%. The installed-base aftermarket behaves like an annuity and is discounted at 6.0-6.5%. The two add up to enterprise value, and EV/EBITDA by business model is the cross-check.
- What EV/EBITDA multiple do aerospace stocks trade on?
- It depends on the business model. The primer's bands are about 12-18x for OEM-heavy airframers on normalised earnings, 18-25x for engine and aftermarket businesses and 20-55x for sole-source parts makers, and the highest-quality aftermarket franchises can sit above the engine band. Compare multiples only within a type and on the same EBITDA definition.
- Why is the aftermarket worth more than new aircraft sales?
- Because the margin arrives after the sale. Engines can sell at discounts of up to 80% or more off list price, and industry ranges put engine manufacturing gross margin at -5% to +10% against 20-35% for maintenance, repair and overhaul. The fleet then buys spares and services for decades, a recurring stream the primer values like a long bond.
- What is a healthy backlog for an aircraft manufacturer?
- Measure it in backlog-years: backlog units divided by annual deliveries, a figure you derive because manufacturers do not publish it. The primer treats 8-12 years as healthy for a narrowbody programme. Below 6 years flags a demand or execution gap, and above 14 years raises doubt about whether the deliveries will arrive on time.
- Why do loss-making airframers look expensive on EV/EBITDA?
- During a production ramp, depressed EBITDA inflates the trailing multiple. The primer normalises margin at a steady production rate and checks free cash flow and net debt first, since negative free cash flow on a stretched balance sheet is the leverage risk.
See this methodology applied to a real company:
Boeing (BA) →