Europe’s aerospace upcycle is demand-rich but capacity-constrained, with supply bottlenecks preventing backlog conversion into deliveries. The constraint is structural, centered in sub-tier suppliers, certification timelines, and engine availability. As a result, airlines shift spending from new aircraft to maintenance, benefiting aftermarket and engine franchises. Value is accruing to players controlling installed fleets, repair rights, and technical data, rather than to final assemblers. Safran and Rolls-Royce are the clearest European beneficiaries, while MTU offers similar exposure with less pure but still attractive economics. Airbus and Boeing retain enormous backlogs, but their ability to monetize them remains constrained by supplier fragility, fixed-price contracts, and engine shortages.
Aerospace & Defense: Structure, Key Players, Value Chain, and Economics
Commercial aerospace and defense share much of the same industrial base - machining capacity, specialty metals, castings, forgings, electronics, engineering labor, and certified sub-tier suppliers - but they do not create value in the same way. Commercial aerospace is volume-driven and cyclical; defense is politically budgeted, slower-moving, and supported by longer contracts. In the current cycle, however, commercial aerospace is the sector exposing the industrial constraint most clearly, while higher defense demand adds an additional pull on the same scarce capacity.
The analysis therefore focuses on the commercial aerospace value chain, where the effects of these constraints are most visible.
The commercial value chain remains highly asymmetric. At the top sit the airframe OEMs, principally Airbus and Boeing, whose strengths are certification barriers, installed fleets, and customer lock-in once an airline is committed to a platform. Below them sit the engine OEMs and engine JVs, where the economics are fundamentally different: engines are often sold at low initial margins, but the installed base generates decades of recurring maintenance, spare-parts, and overhaul revenue. GE Aerospace’s 2025 Form 10-K is unusually explicit about this logic: Commercial Engines & Services represented about 73% of group revenue in 2025, and services alone represented roughly three-quarters of CES revenue. Rolls-Royce’s Civil Aerospace business and Safran’s propulsion activities operate on the same economic principle, albeit with different fleet exposures.
Tier 1 suppliers occupy an intermediate position. Some own proprietary systems and benefit from aftermarket pull-through; others remain exposed to original-equipment volumes and customer pressure. RTX’s Collins Aerospace, Honeywell Aerospace Technologies, and Safran Equipment & Defense all provide systems that generate provisioning, repair, and retrofit revenues, but their economics are still less protected than core engine franchises. The weakest point is the Tier 2 and Tier 3 base: specialized machine shops, materials processors, panel manufacturers, and component fabricators, many of them capital-constrained and operating under legacy pricing assumptions.
OEM margins on new aircraft are structurally low - and often negative in early program years - due to high development costs, customer discounts, and initial inefficiencies. The objective is to build a large installed base and monetize it through services over time. The aftermarket (MRO – Maintenance, Repair, and Overhaul) is where long-term value concentrates; it is the industry’s central profit pool. Maintenance is mandatory, recurring, and high-margin, making it the primary source of profitability across the sector. As a result, OEMs and engine manufacturers are increasingly moving downstream to capture this segment, putting pressure on independent providers.
GE’s 2025 filing shows CES services revenue of $25.0 billion out of $33.3 billion of CES revenue, alongside $156.1 billion of services-related remaining performance obligations. Rolls-Royce attributes its 2025 Civil Aerospace cash generation to continued LTSA balance growth and higher large-engine flying hours. Safran reported that 2025 civil-engine spare-parts revenue rose 17.6% and civil-engine services revenue rose 30.0%, driven by both the aging CFM56 fleet and the scaling LEAP installed base. MTU, although not a full engine OEM, generated almost €6.0 billion of commercial maintenance revenue in 2025 and processed around 1,500 engines across its MRO network.
Regional landscape
Within Europe, the commercial aerospace ecosystem is relatively concentrated. Airbus dominates airframes; Safran and Rolls-Royce dominate propulsion economics across different fleet segments; MTU plays a central role through risk-sharing and MRO. Defense names such as Leonardo, BAE Systems, and Thales remain important to the broader industrial base, but they are not where the current commercial bottleneck thesis is most visible. The core analytical question is narrower: who controls certified repair rights, parts availability, and installed-engine cash flows that airlines cannot avoid?
In the US and APAC, GE Aerospace and RTX dominate propulsion and systems. Boeing remains Airbus’s main competitor, although its industrial credibility has been challenged by the 737 MAX crisis and ongoing quality issues. In Asia, COMAC’s C919 is operational but still reliant on Western technology, while Japan’s MHI and KHI remain key Boeing partners.
The Supercycle That Can't Deliver
The demand backdrop remains exceptional. Airbus ended 2025 with a commercial backlog of 8,754 aircraft after delivering 793 jets and booking 1,000 gross orders. Boeing ended 2025 with a total backlog of $682 billion, including more than 6,100 commercial airplanes, after delivering 600 commercial aircraft. Taken together, Airbus and Boeing exited 2025 with more than 15,000 aircraft in backlog. Based on combined deliveries of 1,393 aircraft in 2025, this implies roughly 11 years of production, before accounting for additional orders. At the industry level, IATA and Oliver Wyman estimate a global backlog above 17,000 aircraft, equivalent to around 60% of the active fleet and close to 12 years of production capacity.
Despite this, the supercycle has not translated into normal manufacturing economics. Airbus reduced its 2025 delivery target to around 790 aircraft due to supplier-quality issues on A320 fuselage panels. EASA later formalized inspection requirements, and the issue affected hundreds of aircraft. Airbus has also highlighted ongoing Pratt & Whitney engine shortages, with unresolved supply allocations continuing to cloud the narrowbody ramp.
Boeing’s trajectory differs, but remains incomplete. The company delivered 600 aircraft in 2025 and 143 aircraft in Q1 2026, compared to Airbus’s 114 deliveries over the same period. First-quarter revenue reached $22.2 billion, with a record backlog of $695 billion. However, Boeing’s recovery still depends on restoring industrial stability after years of quality and execution issues. Recent performance should therefore be seen as progress, not normalization.
Figure 1: Airbus and Boeing deliveries, gross orders, and backlog in 2025 (units).
The broader data reinforce the same conclusion. Aircraft deliveries reached only 1,254 units in 2024, around 30% below pre-COVID peaks, while production at the end of 2025 remained roughly 24% below 2019 levels. Production is expected to remain constrained through at least 2030.
The sector therefore exhibits a paradox: demand is strong, order books are full, but supply cannot respond. The industry behaves like it is in a supply-constrained recession.
A key structural constraint is the fixed-price contract model. Much of the supply chain operates under long-term agreements signed when input costs were significantly lower. Post-COVID inflation has eroded supplier profitability, discouraging investment in additional capacity. The implication is clear: in a system where demand is abundant but capacity is constrained, value accrues not to those with the largest order books, but to those who control the bottleneck.
Anatomy and propagation of the Bottleneck
The bottleneck is structural because both supply restoration and regulatory adaptation are slow. At the lower tiers of the supply chain, labor and capital remain constrained. Roland Berger’s 2025 survey suggests some improvement versus 2024, but the underlying fragility is still clear: 65% of respondents cite labor shortages, 34% report insufficient capacity, and 49% lack adequate funding to support ramp-up. Those figures matter because lower tiers are where many sole-source and technically sticky components sit, and where inflation combined with legacy fixed-price contracts most directly discourages fresh investment.
Certification compounds the rigidity. EASA describes type certification for large aircraft as a four-step process in which the compliance-demonstration phase is the longest, and notes that for large aircraft the agreed certification basis is typically set over a five-year period and may be extended. EASA’s broader guidance indicates that certification for a large commercial aircraft usually takes five to seven years. The FAA provides similar guideposts: amended type certificates typically take three to five years, while a new aircraft type can take between five and nine years. IATA adds that some certification timelines which historically took 12 to 24 months now extend to four or even five years. This matters because, even when capital is available, substitution, redesign, and industrial requalification cannot happen quickly enough to relieve the current shortage.
The constraint then propagates quickly through the chain. The Airbus fuselage-panel issue is a clear example of how a single sub-tier quality problem can absorb months of delivery bandwidth. Pratt & Whitney’s GTF disruption illustrates the other side of the same equation: engines and engine parts are scarce not only because OEM delivery capacity is constrained, but also because maintenance demand has been pulled forward.
Airlines feel these shortages directly. The GAO found in 2024 that seven of the eight airlines it interviewed received fewer aircraft than expected in 2023, while all eight reported difficulty obtaining parts needed to maintain their fleets, ranging from structural hardware to cockpit windows and engine components.
How the Bottleneck Propagates Through the Value Chain
These structural constraints do not remain confined to manufacturers; they translate directly into operational disruption across the entire value chain.
The most immediate effect is the growing number of undelivered aircraft. Production is often substantially complete, but final delivery is delayed by missing or defective components, most notably engines and cabin equipment. The same dynamics are now feeding directly into fleet aging. The average global fleet age is estimated at 15.1 years, compared with 13.6 years over the 1990–2024 period. Fleet renewal rates have slowed materially, and the active backlog is now equivalent to almost 60% of the global fleet, versus a historical norm of 30–40%.
The commercial consequence is a forced shift from capex to opex. Airlines are keeping older aircraft in service for longer, burning more fuel, spending more on maintenance, and relying more heavily on leased engines and spare aircraft to preserve schedules. In other words, spending is shifting away from new aircraft purchases and toward maintenance, repair, leasing, and inventory.
The financial impact is substantial. IATA and Oliver Wyman estimate that supply-chain disruption imposed costs of more than $11 billion on airlines in 2025, including $4.2 billion in additional fuel costs, $3.1 billion in higher maintenance expense, $2.6 billion in elevated engine-leasing costs, and $1.4 billion in spare-parts inventory accumulation.
Those costs do not disappear; they are redistributed. The bottleneck is therefore not only constraining production, but also reshaping the distribution of value across the industry. The owners of maintenance rights, spare parts, certified repair capacity, and leased engines are the direct beneficiaries.
Aftermarket economics (MRO)
The aftermarket is where aerospace becomes structurally attractive. Oliver Wyman’s latest forecast puts global MRO demand at $136 billion in 2025, up 8% year on year, and expects spending to approach $193 billion by the end of the decade.
Today’s manufacturing bottleneck is extending the MRO supercycle rather than suppressing it. Engine MRO is the most attractive part of that market because it is protected by three forms of scarcity. First, certification and technical-data control limit substitution. Second, engine shop visits are mandatory and recurrent. Third, OEMs and a limited number of authorized partners control tooling, parts, repair methods, and performance guarantees.
Safran is the clearest European expression of this dynamic. In 2025, it generated €31.3 billion of adjusted revenue, €5.2 billion of recurring operating income, and €3.9 billion of free cash flow. Propulsion grew organically by 17.6%, with aftermarket revenue up 21.0%. In Q1 2026, total adjusted revenue rose 18.8% to €8.6 billion; propulsion revenue rose 23.6%; LEAP deliveries increased 63% to 520 units; and within civil engines, spare parts rose 29% while services rose 43%. Safran is also investing heavily - more than €1 billion per year - to expand its LEAP MRO network toward 1,200 annual shop visits by 2028.
Rolls-Royce demonstrates the same principle in widebodies. The group reported underlying 2025 revenue of £20.1 billion, underlying operating profit of £3.46 billion, and free cash flow of £3.27 billion. Civil Aerospace margin reached 20.5%, supported by stronger large-engine aftermarket, contractual margin improvements, and spare-engine profitability. Rolls-Royce also reported £0.6 billion of Civil Aerospace LTSA balance growth, supported by 8% growth in large-engine flying hours. The company’s results presentation indicates that Civil Aerospace remains heavily service-weighted, with roughly 69% of underlying revenue derived from services, and management expects 1,480–1,550 total shop visits in 2026. This is precisely what pricing power looks like in aerospace: the engine choice effectively locks in a long-duration economics stream.
MTU sits one step below full OEM ownership, but still on the right side of the bottleneck. In 2025, it reported €8.7 billion of adjusted revenue, €1.35 billion of adjusted EBIT, and €378 million of free cash flow. Commercial maintenance revenue reached €6.0 billion, equivalent to around 68% of adjusted revenue, while commercial-maintenance EBIT margin was 8.0%, versus 30.4% in the OEM business. That gap matters: access to proprietary technology and program economics is still where the strongest pricing power resides. Even so, MTU’s MRO network processed around 1,500 engines in 2025, GTF engines accounted for roughly one-third of shop visits, and the company states that its three GTF shops now perform about one-third of worldwide GTF shop visits annually. MTU is therefore a direct beneficiary of the bottleneck, even if its economics are less pure than those of full OEMs.
RTX’s Pratt & Whitney is more complicated because it combines attractive aftermarket economics with the industry’s largest current disruption. RTX reported 2025 sales of $88.6 billion and free cash flow of $7.94 billion; Pratt & Whitney contributed $32.9 billion of sales and $2.73 billion of adjusted operating profit. In Q1 2026, Pratt sales rose to $8.17 billion and adjusted operating profit to $711 million, with commercial aftermarket up 19%. However, RTX’s 2025 annual report also makes clear that the powder-metal issue continues to depend on assumptions around shop-visit timing, turnaround time, parts availability, and overhaul capacity. Pratt has real pricing power, but part of its installed-base monetization in 2025–2026 is defensive rather than purely value-maximizing.
By contrast, aircraft manufacturers such as Airbus and Boeing remain under pressure, while more defense-exposed groups such as Leonardo occupy a more stable position. Defense electronics and helicopters are driving a large share of that resilience. In other words, defense players benefit from longer-duration contracts, more explicit cost protection, and pricing structures that are less exposed to the bottlenecks affecting commercial OE.
In this context, pricing power means controlling a certified product or repair ecosystem that the customer cannot readily substitute away from when the chain tightens. Engines, spare parts, technical data, authorized repair rights, and proven shop capacity all meet that test.
Company Snapshots and Valuation: Why the Market Is Paying Up - and Where It Isn’t
The supply-chain story has a direct read-through to valuation. Investors are paying premium multiples for businesses that generate recurring cash flow from keeping existing fleets flying. They are paying less for manufacturers whose earnings still depend on converting backlog into physical deliveries. The valuation gap between those two groups is meaningful - and in one case it appears too wide. The peer group spans four categories. Airbus and Boeing are the aircraft integrators responsible for final assembly, but they remain heavily dependent on supplier networks they do not control. GE Aerospace and Rolls-Royce are pure-play engine OEMs, designing and manufacturing the systems at the center of the bottleneck. RTX, through Pratt & Whitney, occupies the same space with substantial narrowbody exposure. Safran and Honeywell are Tier 1 suppliers providing critical systems across propulsion, equipment, avionics, and cabin content. MTU sits in a category of its own as an engine-focused MRO and risk-sharing specialist, making it the most aftermarket-weighted name in the group.
The sector therefore exhibits a paradox: demand is strong, order books are full, but supply cannot respond. The industry behaves like it is in a supply-constrained recession.
A key structural constraint is the fixed-price contract model. Much of the supply chain operates under long-term agreements signed when input costs were significantly lower. Post-COVID inflation has eroded supplier profitability, discouraging investment in additional capacity. The implication is clear: in a system where demand is abundant but capacity is constrained, value accrues not to those with the largest order books, but to those who control the bottleneck.
Anatomy and propagation of the Bottleneck
The bottleneck is structural because both supply restoration and regulatory adaptation are slow. At the lower tiers of the supply chain, labor and capital remain constrained. Roland Berger’s 2025 survey suggests some improvement versus 2024, but the underlying fragility is still clear: 65% of respondents cite labor shortages, 34% report insufficient capacity, and 49% lack adequate funding to support ramp-up. Those figures matter because lower tiers are where many sole-source and technically sticky components sit, and where inflation combined with legacy fixed-price contracts most directly discourages fresh investment.
Certification compounds the rigidity. EASA describes type certification for large aircraft as a four-step process in which the compliance-demonstration phase is the longest, and notes that for large aircraft the agreed certification basis is typically set over a five-year period and may be extended. EASA’s broader guidance indicates that certification for a large commercial aircraft usually takes five to seven years. The FAA provides similar guideposts: amended type certificates typically take three to five years, while a new aircraft type can take between five and nine years. IATA adds that some certification timelines which historically took 12 to 24 months now extend to four or even five years. This matters because, even when capital is available, substitution, redesign, and industrial requalification cannot happen quickly enough to relieve the current shortage.
The constraint then propagates quickly through the chain. The Airbus fuselage-panel issue is a clear example of how a single sub-tier quality problem can absorb months of delivery bandwidth. Pratt & Whitney’s GTF disruption illustrates the other side of the same equation: engines and engine parts are scarce not only because OEM delivery capacity is constrained, but also because maintenance demand has been pulled forward.
Airlines feel these shortages directly. The GAO found in 2024 that seven of the eight airlines it interviewed received fewer aircraft than expected in 2023, while all eight reported difficulty obtaining parts needed to maintain their fleets, ranging from structural hardware to cockpit windows and engine components.
How the Bottleneck Propagates Through the Value Chain
These structural constraints do not remain confined to manufacturers; they translate directly into operational disruption across the entire value chain.
The most immediate effect is the growing number of undelivered aircraft. Production is often substantially complete, but final delivery is delayed by missing or defective components, most notably engines and cabin equipment. The same dynamics are now feeding directly into fleet aging. The average global fleet age is estimated at 15.1 years, compared with 13.6 years over the 1990–2024 period. Fleet renewal rates have slowed materially, and the active backlog is now equivalent to almost 60% of the global fleet, versus a historical norm of 30–40%.
The commercial consequence is a forced shift from capex to opex. Airlines are keeping older aircraft in service for longer, burning more fuel, spending more on maintenance, and relying more heavily on leased engines and spare aircraft to preserve schedules. In other words, spending is shifting away from new aircraft purchases and toward maintenance, repair, leasing, and inventory.
The financial impact is substantial. IATA and Oliver Wyman estimate that supply-chain disruption imposed costs of more than $11 billion on airlines in 2025, including $4.2 billion in additional fuel costs, $3.1 billion in higher maintenance expense, $2.6 billion in elevated engine-leasing costs, and $1.4 billion in spare-parts inventory accumulation.
Those costs do not disappear; they are redistributed. The bottleneck is therefore not only constraining production, but also reshaping the distribution of value across the industry. The owners of maintenance rights, spare parts, certified repair capacity, and leased engines are the direct beneficiaries.
Aftermarket economics (MRO)
The aftermarket is where aerospace becomes structurally attractive. Oliver Wyman’s latest forecast puts global MRO demand at $136 billion in 2025, up 8% year on year, and expects spending to approach $193 billion by the end of the decade.
Today’s manufacturing bottleneck is extending the MRO supercycle rather than suppressing it. Engine MRO is the most attractive part of that market because it is protected by three forms of scarcity. First, certification and technical-data control limit substitution. Second, engine shop visits are mandatory and recurrent. Third, OEMs and a limited number of authorized partners control tooling, parts, repair methods, and performance guarantees.
Safran is the clearest European expression of this dynamic. In 2025, it generated €31.3 billion of adjusted revenue, €5.2 billion of recurring operating income, and €3.9 billion of free cash flow. Propulsion grew organically by 17.6%, with aftermarket revenue up 21.0%. In Q1 2026, total adjusted revenue rose 18.8% to €8.6 billion; propulsion revenue rose 23.6%; LEAP deliveries increased 63% to 520 units; and within civil engines, spare parts rose 29% while services rose 43%. Safran is also investing heavily - more than €1 billion per year - to expand its LEAP MRO network toward 1,200 annual shop visits by 2028.
Rolls-Royce demonstrates the same principle in widebodies. The group reported underlying 2025 revenue of £20.1 billion, underlying operating profit of £3.46 billion, and free cash flow of £3.27 billion. Civil Aerospace margin reached 20.5%, supported by stronger large-engine aftermarket, contractual margin improvements, and spare-engine profitability. Rolls-Royce also reported £0.6 billion of Civil Aerospace LTSA balance growth, supported by 8% growth in large-engine flying hours. The company’s results presentation indicates that Civil Aerospace remains heavily service-weighted, with roughly 69% of underlying revenue derived from services, and management expects 1,480–1,550 total shop visits in 2026. This is precisely what pricing power looks like in aerospace: the engine choice effectively locks in a long-duration economics stream.
MTU sits one step below full OEM ownership, but still on the right side of the bottleneck. In 2025, it reported €8.7 billion of adjusted revenue, €1.35 billion of adjusted EBIT, and €378 million of free cash flow. Commercial maintenance revenue reached €6.0 billion, equivalent to around 68% of adjusted revenue, while commercial-maintenance EBIT margin was 8.0%, versus 30.4% in the OEM business. That gap matters: access to proprietary technology and program economics is still where the strongest pricing power resides. Even so, MTU’s MRO network processed around 1,500 engines in 2025, GTF engines accounted for roughly one-third of shop visits, and the company states that its three GTF shops now perform about one-third of worldwide GTF shop visits annually. MTU is therefore a direct beneficiary of the bottleneck, even if its economics are less pure than those of full OEMs.
RTX’s Pratt & Whitney is more complicated because it combines attractive aftermarket economics with the industry’s largest current disruption. RTX reported 2025 sales of $88.6 billion and free cash flow of $7.94 billion; Pratt & Whitney contributed $32.9 billion of sales and $2.73 billion of adjusted operating profit. In Q1 2026, Pratt sales rose to $8.17 billion and adjusted operating profit to $711 million, with commercial aftermarket up 19%. However, RTX’s 2025 annual report also makes clear that the powder-metal issue continues to depend on assumptions around shop-visit timing, turnaround time, parts availability, and overhaul capacity. Pratt has real pricing power, but part of its installed-base monetization in 2025–2026 is defensive rather than purely value-maximizing.
By contrast, aircraft manufacturers such as Airbus and Boeing remain under pressure, while more defense-exposed groups such as Leonardo occupy a more stable position. Defense electronics and helicopters are driving a large share of that resilience. In other words, defense players benefit from longer-duration contracts, more explicit cost protection, and pricing structures that are less exposed to the bottlenecks affecting commercial OE.
In this context, pricing power means controlling a certified product or repair ecosystem that the customer cannot readily substitute away from when the chain tightens. Engines, spare parts, technical data, authorized repair rights, and proven shop capacity all meet that test.
Company Snapshots and Valuation: Why the Market Is Paying Up - and Where It Isn’t
The supply-chain story has a direct read-through to valuation. Investors are paying premium multiples for businesses that generate recurring cash flow from keeping existing fleets flying. They are paying less for manufacturers whose earnings still depend on converting backlog into physical deliveries. The valuation gap between those two groups is meaningful - and in one case it appears too wide. The peer group spans four categories. Airbus and Boeing are the aircraft integrators responsible for final assembly, but they remain heavily dependent on supplier networks they do not control. GE Aerospace and Rolls-Royce are pure-play engine OEMs, designing and manufacturing the systems at the center of the bottleneck. RTX, through Pratt & Whitney, occupies the same space with substantial narrowbody exposure. Safran and Honeywell are Tier 1 suppliers providing critical systems across propulsion, equipment, avionics, and cabin content. MTU sits in a category of its own as an engine-focused MRO and risk-sharing specialist, making it the most aftermarket-weighted name in the group.
Figure 2: Latest Operating Snapshot Across Aerospace Peers (Q1 2026)
Figure 3: Aerospace Trading Comparables (NTM, April 2026)
GE Aerospace is one of the most expensive names in the peer group at 29.0x EV/EBIT and 36.1x P/E. In 2025, CES represented about 73% of GE revenue, and services accounted for roughly 75% of CES revenue; CES services-related RPO stood at $156.1 billion. GE therefore has the highest service intensity in the group. It is the clearest global expression of the installed-base model.
At 17.6x NTM EV/EBIT and 25.8x P/E, Safran is expensive, but the multiple reflects where the cash flow comes from. Q1 2026 implied a group services share of roughly 53% of revenue; within Propulsion, services represented 64.5% of divisional revenue. Civil-engine spare parts grew 29% in Q1 2026 and services rose 43%. The valuation reflects a business with durable, recurring, and increasingly visible cash generation.
Rolls-Royce trades at 22.1x EV/EBIT and 30.1x P/E. The premium is built on roughly 6,000 Trent engines operating under TotalCare contracts, under which airlines pay per flying hour in exchange for Rolls-Royce assuming maintenance responsibility. Civil Aerospace remains strongly service-led, with revenue split at roughly 69% services and 31% OE. FCF conversion at 92% is the strongest in the peer group. The stock is not cheap, but the issue is not quality; it is whether the market has already fully priced in the next leg of the recovery.
RTX trades at 21.3x EV/EBIT and 24.5x P/E. Pratt & Whitney accounts for 36.1% of RTX group revenue. The GTF disruption has added complexity, yet Pratt’s installed base still provides a structurally expanding shop-visit pipeline. Growth in 2025 was heavily led by commercial aftermarket, and Q1 2026 commercial aftermarket revenue rose 19%.
Honeywell trades at 17.1x EV/EBIT and 19.7x P/E, a modest discount to Safran despite significant aerospace exposure. Aerospace Technologies accounts for roughly 47% of group revenue. The remainder of the business, particularly Industrial and Building Automation, dilutes the pure-play aerospace premium. Honeywell remains a high-quality systems supplier, but it is not as direct an expression of the bottleneck thesis as Safran, GE, Rolls-Royce, or MTU.
Integrators, by contrast, trade differently. Airbus sits at 16.1x NTM EV/EBIT, below the engine names. Its commercial backlog of 8,754 aircraft is clearly valuable, but the bottleneck limits how quickly that backlog can be monetized. Fixed-price contracts mean that rising costs compress margin, while the absence of a clearly disclosed aftermarket line underscores how little of the business is structurally recurring. Its 1.54x EV/revenue multiple is effectively the market saying it will believe the growth once it sees the deliveries.
Boeing trades at 56.1x EV/EBIT and 154.5x P/E, though those figures are distorted by depressed earnings following the 2024 strike and quality crisis. Global Services accounts for 23.3% of group revenue, but Boeing is not a conventional valuation comp at this stage; it is primarily a recovery story, and the market is pricing in a normalization that has not yet fully arrived.
Mispriced Opportunity
MTU is an interesting stock. Adjusted revenue was €8.72 billion, adjusted EBIT €1.35 billion, and free cash flow €378 million. Commercial maintenance revenue reached €5.96 billion, or roughly 68% of adjusted revenue. Yet MTU trades at just 11.9x NTM EV/EBIT and 15.9x P/E, roughly 35% cheaper than Safran on EV/EBIT, despite a higher aftermarket mix.
The discount reflects the Pratt & Whitney GTF issue disclosed in mid-2023, which required a large number of aircraft to be grounded for inspection. At the peak, around 720 aircraft were on the ground. That number has been declining as repair capacity catches up. FCF conversion at 38% looks weak, but it reflects disruption rather than structural impairment. The market appears to have priced in a permanent problem, while the operational data suggest a temporary one.
At 17.6x NTM EV/EBIT and 25.8x P/E, Safran is expensive, but the multiple reflects where the cash flow comes from. Q1 2026 implied a group services share of roughly 53% of revenue; within Propulsion, services represented 64.5% of divisional revenue. Civil-engine spare parts grew 29% in Q1 2026 and services rose 43%. The valuation reflects a business with durable, recurring, and increasingly visible cash generation.
Rolls-Royce trades at 22.1x EV/EBIT and 30.1x P/E. The premium is built on roughly 6,000 Trent engines operating under TotalCare contracts, under which airlines pay per flying hour in exchange for Rolls-Royce assuming maintenance responsibility. Civil Aerospace remains strongly service-led, with revenue split at roughly 69% services and 31% OE. FCF conversion at 92% is the strongest in the peer group. The stock is not cheap, but the issue is not quality; it is whether the market has already fully priced in the next leg of the recovery.
RTX trades at 21.3x EV/EBIT and 24.5x P/E. Pratt & Whitney accounts for 36.1% of RTX group revenue. The GTF disruption has added complexity, yet Pratt’s installed base still provides a structurally expanding shop-visit pipeline. Growth in 2025 was heavily led by commercial aftermarket, and Q1 2026 commercial aftermarket revenue rose 19%.
Honeywell trades at 17.1x EV/EBIT and 19.7x P/E, a modest discount to Safran despite significant aerospace exposure. Aerospace Technologies accounts for roughly 47% of group revenue. The remainder of the business, particularly Industrial and Building Automation, dilutes the pure-play aerospace premium. Honeywell remains a high-quality systems supplier, but it is not as direct an expression of the bottleneck thesis as Safran, GE, Rolls-Royce, or MTU.
Integrators, by contrast, trade differently. Airbus sits at 16.1x NTM EV/EBIT, below the engine names. Its commercial backlog of 8,754 aircraft is clearly valuable, but the bottleneck limits how quickly that backlog can be monetized. Fixed-price contracts mean that rising costs compress margin, while the absence of a clearly disclosed aftermarket line underscores how little of the business is structurally recurring. Its 1.54x EV/revenue multiple is effectively the market saying it will believe the growth once it sees the deliveries.
Boeing trades at 56.1x EV/EBIT and 154.5x P/E, though those figures are distorted by depressed earnings following the 2024 strike and quality crisis. Global Services accounts for 23.3% of group revenue, but Boeing is not a conventional valuation comp at this stage; it is primarily a recovery story, and the market is pricing in a normalization that has not yet fully arrived.
Mispriced Opportunity
MTU is an interesting stock. Adjusted revenue was €8.72 billion, adjusted EBIT €1.35 billion, and free cash flow €378 million. Commercial maintenance revenue reached €5.96 billion, or roughly 68% of adjusted revenue. Yet MTU trades at just 11.9x NTM EV/EBIT and 15.9x P/E, roughly 35% cheaper than Safran on EV/EBIT, despite a higher aftermarket mix.
The discount reflects the Pratt & Whitney GTF issue disclosed in mid-2023, which required a large number of aircraft to be grounded for inspection. At the peak, around 720 aircraft were on the ground. That number has been declining as repair capacity catches up. FCF conversion at 38% looks weak, but it reflects disruption rather than structural impairment. The market appears to have priced in a permanent problem, while the operational data suggest a temporary one.
Figure 4: Valuation vs Cash Conversion Across Aerospace Players
Key Metrics to Track
Four metrics are worth watching to assess whether the thesis continues to play out.
Aftermarket revenue as a share of total gives the clearest indication of how much of a company’s earnings base is recurring and insulated from the delivery cycle. On a broadly defined service and aftermarket basis, MTU leads at 67.6%, ahead of Rolls-Royce at 51.8% and Safran at 50.2%. Airbus does not disclose a comparable figure.
Backlog duration is a proxy for pricing power: in a constrained system, a long order book gives suppliers greater leverage at contract renewal.
FCF conversion indicates whether profits are truly cash generative. Rolls-Royce at 92% and Safran at 72% set the benchmark, while MTU at 38% remains the key number to watch as the GTF issue normalizes.
Finally, capex as a share of revenue is the early warning signal for a future supply response. All four key engine and service names sit broadly between 4.6% and 5.9%, suggesting that no one is yet making the kind of large capacity bet that would eventually erode today’s scarcity economics.
Structural Winners and Structural Losers
The structural winners remain the bottleneck owners. In Europe, Safran is the strongest single expression of the thesis because it combines narrowbody installed-base exposure, strong civil-engine aftermarket growth, and active investment to widen its repair moat. Rolls-Royce is the highest-quality widebody analogue, with an LTSA model that converts flying hours into recurring cash flow. MTU is not as protected as a full OEM, but it still controls scarce technical capability and is benefiting directly from the GTF overhaul wave. GE Aerospace belongs in the same winner set globally, even if it sits outside the European focus.
The relative losers are more varied. Airbus is not a weak company - its 2025 results were strong - but its economics remain constrained by industrial timing, supplier quality, and late engines. Boeing remains a recovery story, not a clean bottleneck monetizer. Spirit AeroSystems has effectively ceased to exist as an independent thesis because its economics proved too strategically important and too fragile to remain outside OEM control. Airlines sit furthest down the waterfall: they absorb higher fuel, maintenance, leasing, and inventory costs while waiting for aircraft they ordered years ago.
Three plausible scenarios frame the next phase.
In the base case, supply conditions improve only gradually, with backlog compression still measured in years rather than quarters. That outcome favors engine OEMs, authorized MRO networks, and parts suppliers with proprietary content, while leaving Airbus and Boeing improving but without fully recapturing the economics currently enjoyed by service-heavy franchises. In a faster-recovery case, Pratt supply normalizes, lower-tier labor and financing constraints ease, and OEM rate ramps become more credible. That would help Airbus, Boeing, Collins, and other OE-linked suppliers more than pure MRO names, although it would not erase the long-duration value of installed-base contracts. In a prolonged-bottleneck case, certification drag, tariffs, labor scarcity, and defense-related capacity pull continue to constrain output through the decade. That would extend the MRO supercycle further and keep pressure on airlines, aerostructures, and manufacturers exposed to old fixed-price structures.
The strategic implication is therefore more durable than a simple cyclical call: until Europe’s aerospace supply chain regains slack, margin leadership is likely to remain downstream of final assembly. The market may celebrate delivery recoveries, but the superior economics still sit with the companies that keep the installed fleet flying when new aircraft cannot arrive on time.
By: Leonardo Rossini, Roméa Saraf-Lefebvre, Leo Shasha
Sources:
- Safran
- MTU Aero Engines
- RTX
- Rolls-Royce
- Airbus
- Boeing
- Leonardo
- FactSet
- Honeywell
- PR Newswire
- FAA aircraft certification guidance
- US GAO
- IATA
- Oliver Wyman
- Aviation Week
- AeroTime
- CAPA – Centre for Aviation
- Forecast International
- FlightGlobal
- Roland Berger