ASLE — Q2 2026 Financial Report Analysis

Overview

AerSale buys mid-life commercial aircraft and jet engines and makes money from them three ways: leasing them out, selling them whole, or taking them apart and selling the parts. It also runs repair hangars. In the second quarter of 2026 the lumpiest of those three, selling whole engines, collapsed against a big year-ago quarter. Total revenue fell 33.9% to $70.9 million and the company swung from an $8.6 million profit to a $5.6 million net loss. Leasing and repair revenue both grew. But the repair business earned almost nothing on its extra volume, because AerSale is paying to hire and train staff for its reopened Millington, Tennessee hangar.

At a glance

• Engine revenue: $26.1M, down 60.4%. The 10-Q attributes the drop to $33.0 million less in whole-equipment sales and $9.6 million less in used-parts sales on the PW4000 and CF6-80 engine lines. These are older engines for wide-body jets such as 767s and A330s.
• Leasing revenue: $12.4M, up 50.2%. This is the steadier, recurring part of the business. AerSale moved $36.3 million of inventory into its lease fleet in the first half, so this line should keep growing.
• Margin on MRO services: 2.0%, down from 23.6%. MRO is maintenance, repair and overhaul: the servicing work that keeps aircraft flying. The hangar business sold more ($26.5M, up 7.8%) but kept only $0.5 million of gross profit, versus $5.8 million a year ago.

Key metrics

Gross margin is the share of revenue left after the direct cost of the parts, engines and labour sold. Operating margin also deducts overhead, such as salaries, rent and commissions, before interest and tax.

Asset Management: a tough comparison, not a broken business

The Asset Management segment buys, leases, sells and dismantles aircraft and engines. Its revenue halved to $37.1 million. Almost all of the drop came from engines. The filing says Engine revenue fell "primarily attributable to lower activity in the PW4000 and CF6-80 product lines due to lower Flight Equipment sales in the amount of $33.0 million, and lower USM sales of $9.6 million, partly offset by higher leasing activity driven by growth in the engine leasing portfolio." USM (used serviceable material) means parts pulled from retired engines and airframes, certified and resold.

The drop says more about Q2 2025 than about Q2 2026. Whole-engine sales are a few large deals that land in some quarters and not in others. A year ago, products revenue of $74.6 million made that the company's best quarter of 2025's first half. Q1 2025 revenue had been only $65.8 million, with an operating loss. Revenue this quarter ($70.9M) was roughly flat with Q1 2026 ($70.6M).

Margins within the segment went opposite ways:

• Engine gross margin rose to 37.3% from 34.3%. Management attributes this to "higher leasing revenue which, historically, tend to generate higher margins."
• Aircraft gross margin fell to 26.0% from 42.0% because of "lower margin contribution from leasing revenue and USM sales." Aircraft revenue still rose 6.0%, helped by $1.0 million more rent from Boeing 757 freighters as more of them went on lease.

Segment operating income fell to $5.2 million from $19.5 million.

TechOps: more work, almost no profit on it

TechOps (the hangars, component shops and engineered products) is where the quarter's quality problem sits. Revenue grew 8.7% to $33.8 million, "driven by higher volume in our heavy MROs as our facility in Millington, Tennessee expands operations," plus more volume at the Hialeah Gardens aerostructures shop and the Rio Rancho landing-gear shop.

Cost of sales grew faster, up 32.5% to $30.1 million. Segment gross profit fell 56.1% to $3.7 million. The filing blames "higher labor costs, which includes non-recurring hiring and training expenses associated to the return to service of Millington, Tennessee." Gross margin on MRO services fell from 23.6% to 2.0%. Product sales, mostly AerSale's own certified add-on systems (AerSafe fuel-tank safety kits and the AerAware vision system), were the bright spot: gross profit rose 22.0% to $3.1 million.

The pressure is not new this quarter. Across the first half, TechOps gross margin was 9.2% against 24.8% a year earlier, and service margin was 1.5% against 21.4%.

What the headline numbers hide

• Cash is going into inventory, funded by the credit line. Operating cash flow for the first half was -$33.5 million, against a net loss of $9.0 million. Most of that went into a $52.1 million build in inventory ("primarily for feedstock acquisition and improvements to flight equipment"). Feedstock is the used engines and aircraft AerSale buys to lease or dismantle. A $15.1 million rise in accounts payable, meaning bills not yet paid, cushioned the outflow. Total inventory (current plus long-term) rose to $376.0 million from $363.8 million at year-end, even after $36.3 million was moved into the lease fleet. Revenue fell, so inventory is growing while sales shrink.
• Liquidity is thin. Cash at quarter-end was $2.2 million. The revolving credit facility, a bank line it borrows against and repays as needed, had $146.2 million drawn, up from $110.1 million in December. Only $31.8 million remained available. AerSale says it was in covenant compliance and believes its resources are sufficient for the next twelve months. Its cushion is now much smaller than six months ago.
• The 'non-recurring' Millington costs are not separated out. Management calls the hiring and training costs non-recurring but gives no dollar figure. The 10-Q contains no adjusted (non-GAAP) figures, so all numbers here are GAAP. There is no way to tell from the filing how much of the 21.6-point drop in service margin will reverse.
• Overhead fell, but not enough. SG&A (selling, general and administrative costs) fell 7.9% to $21.0 million, on lower sales commissions and the end of double rent at the aerostructures unit. That did not offset a $19.1 million drop in gross profit.
• No help from buybacks or tax. Diluted share count was 47.3 million, up slightly from 47.1 million. The $45 million buyback of March 2025 was already in last year's Q2 share count. Net interest expense was flat at $2.5 million. The EPS swing is all operational.

Takeaway: AerSale is deliberately moving from lumpy one-off engine sales toward steadier leasing (rent up 50%, $36M of inventory shifted into the lease fleet), but the switch is being funded on the credit line with $2.2M of cash and $31.8M of headroom left, while its second engine of growth, the Millington hangar, is currently running at a 2% service margin.

Outlook

The 10-Q gives no financial guidance. Points to watch:

• Millington margins. Management describes the labor costs as start-up costs of reopening the hangar. If that is right, TechOps service margin should start moving back toward the low-20s levels of 2025 (23.6% in Q2 2025) as staff come up to speed. Another quarter near zero would suggest the problem is pricing or productivity, not training.
• Engine sales timing. The $52.1 million inventory build is feedstock bought to sell or lease later. The second half should show whether it turns into whole-asset sales and USM revenue. AerSale's results swing hard on whether a few large deals close in a given quarter.
• Balance sheet capacity. With $31.8 million of revolver availability against a quarterly operating cash burn running near $17 million in the first half, the company has limited room to keep buying feedstock. It either needs asset sales to convert inventory back to cash or a larger facility. The revolver is sized at $180 million, expandable to $200 million, and matures July 2028.

Our read: the recurring base (leasing plus MRO) is growing. Whether it is profitable depends on Millington margins recovering, and cash depends on the inventory turning into sales. Until one of those shows up, expect Q3 to look more like Q1 and Q2 2026 than like the strong Q2 2025.

All figures from AerSale's Form 10-Q for the quarter ended June 30, 2026, filed August 7, 2026.